Related Party Transactions
|9 Months Ended|
Sep. 30, 2023
|Related Party Transactions [Abstract]|
|Related Party Transactions||
Related Party Transactions In the normal course of business, we enter into transactions with related parties such as Sirius XM Canada and SoundCloud.
As of September 30, 2023, Liberty Media beneficially owned, directly and indirectly, 83.5% of the outstanding shares of our common stock. Liberty Media has three of its executives and one of its directors on our board of directors. Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.
On February 1, 2021, Holdings entered into a tax sharing agreement with Liberty Media governing the allocation of consolidated U.S. income tax liabilities and setting forth agreements with respect to other tax matters. The tax sharing agreement was negotiated and approved by a special committee of Holdings’ board of directors, all of whom are independent of Liberty Media. Refer to Note 16 for more information regarding the tax sharing agreement.
On September 22, 2023, the special committee of independent directors of the board of Holdings (the “Special Committee”) received a non-binding proposal from Liberty Media regarding a potential transaction involving Holdings. The potential transaction would consist of the separation of the assets and liabilities attributed to the Liberty SiriusXM tracking stock group from Liberty Media through the split-off of a newly formed company (“Newco”) and the subsequent combination of Newco and Holdings. As a result of the potential transaction, the holders of Liberty SiriusXM tracking stock and Holdings common stock would all hold one class of common stock of the combined company (the “Proposal”). The Special Committee is evaluating the Proposal. There can be no assurance that the Proposal, or any other transaction, will be completed or of the terms and conditions of any such transaction.
Sirius XM Canada
Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, a privately held corporation. We own 591 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share.
Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our unaudited consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance.
On March 15, 2022, Sirius XM and Sirius XM Canada entered into an amended and restated services and distribution agreement. Pursuant to the amended and restated services and distribution agreement, the fee payable by Sirius XM Canada to Sirius XM was modified from a fixed percentage of revenue to a variable fee, based on a target operating profit for Sirius XM Canada. Such variable fee is expected to be evaluated annually based on comparable companies. In accordance with the amended and restated services and distribution agreement, the fee is payable on a monthly basis, in arrears, beginning January 1, 2022.
Our related party long-term assets as of September 30, 2023 and December 31, 2022 included the carrying value of our investment balance in Sirius XM Canada of $419 and $412, respectively, and, as of each of September 30, 2023 and December 31, 2022, also included $8, for the long-term value of the outstanding loan to Sirius XM Canada.
Sirius XM Canada paid gross dividends to us of less than $1 during the three months ended September 30, 2023, and $1 and less than $1 during the nine months ended September 30, 2023 and 2022, respectively. No dividends were paid during the three months ended September 30, 2022. Dividends are first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance exists and then as Other (expense) income for any remaining portion.
We recorded revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income of $27 and $29 during the three months ended September 30, 2023 and 2022, respectively, and $78 and $84 during the nine months ended September 30, 2023 and 2022, respectively.
We have an investment in SoundCloud which is accounted for as an equity method investment and recorded in Related party long-term assets in our unaudited consolidated balance sheets. Sirius XM has appointed two individuals to serve on SoundCloud's ten-member board of managers. Sirius XM's share of SoundCloud's net income (loss) was less than $1 and $(1) for the three months ended September 30, 2023 and 2022, respectively, and $(2) and $(4) for the nine months ended
September 30, 2023 and 2022, respectively, which was recorded in Other (expense) income in our unaudited consolidated statements of comprehensive income.
In addition to our investment in SoundCloud, Pandora has an agreement with SoundCloud to be its exclusive ad sales representative in the US and certain European countries. Through this arrangement, Pandora offers advertisers the ability to execute campaigns across the Pandora and SoundCloud platforms. We recorded revenue share expense related to this agreement of $14 and $13 for the three months ended September 30, 2023 and 2022, respectively, and $39 and $40 for the nine months ended September 30, 2023 and 2022, respectively. We also had related party liabilities of $19 as of each of September 30, 2023 and December 31, 2022 related to this agreement.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef