

Note 3	Revenue Recognition

On January 1, 2018, we adopted the new revenue recognition standard by applying the modified retrospective approach to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue recognition standard.

We recorded a net decrease to opening retained deficit of $1.0 million as of January 1, 2018 due to the cumulative impact of adopting the new revenue recognition standard. This impact primarily related to licensing of our RealPlayer product and full recognition of non-recurring engineering fees, which were previously deferred and amortized over the life of the contract.

We generate all of our revenue through contracts with customers. Revenue is either recognized over time as the service is provided, or at a point in time when the product is transferred to the customer, depending on the contract type. Our performance obligations typically have an original duration of one year or less.

Napster revenue arrangements include subscription services to the Napster music streaming service sold either directly to end users (direct to consumer) or through partners (business to business), who are generally telecommunications companies, that bundle the subscription with their own services or collect payment for the stand-alone subscriptions from their end customers. Napster also sells subscriptions to third parties to provide access to the Napster platform that is typically embedded in the third party's branded or co-branded service. Such subscriptions are included in the business to business sales channel.

For services sold through third parties to end customers, we evaluate the presentation of revenue on a gross or net basis based on whether we control the service provided to the end-user and are the principal (i.e. “gross”), or we arrange for other parties to provide the service to the end-user and are an agent (i.e. “net”). In our Napster business to business revenue stream, we generally operate as a principal in arrangements with end customers as we maintain control over the service prior to being transferred to the end customer.

Certain business to business customer arrangements include variable consideration based on usage. We estimate variable consideration as part of the total transaction price that is allocated to performance obligations, or distinct service periods within a performance obligation, on a relative standalone selling price basis.

Revenues related to Napster subscription services are recognized ratably over the contract period, typically 30 days. Direct to consumer subscriptions are paid in advance, typically on a monthly basis. Subscription services offered to businesses are invoiced on a monthly basis and the timing of payment generally does not vary significantly from the timing of invoice.

Disaggregation of Revenue

The following table presents our disaggregated revenue by source and segment (in thousands):



	Quarter Ended March 31, 2019
	Consumer Media		Mobile Services		Games		Napster
Business Line
Software License	$	735	$	599	$	—	$	—
Subscription Services	1,088		6,340		2,985		24,337
Product Sales	219		—		1,988		—
Advertising and Other	444		—		737		—
Total	$	2,486	$	6,939	$	5,710	$	24,337

	Quarter Ended March 31, 2018
	Consumer Media		Mobile Services		Games		Napster
Business Line
Software License	$	3,337	$	1,335	$	—	$	—
Subscription Services	1,285		7,369		2,693		—
Product Sales	340		—		2,402		—
Advertising and Other	521		—		368		—
Total	$	5,483	$	8,704	$	5,463	$	—

The following table presents our disaggregated revenue by sales channel (in thousands):



	Quarter Ended March 31, 2019
	Consumer Media		Mobile Services		Games		Napster
Sales Channel
Business to Business	$	1,178	$	6,817	$	1,036	$	12,095
Direct to Consumer	1,308		122		4,674		12,242
Total	$	2,486	$	6,939	$	5,710	$	24,337

	Quarter Ended March 31, 2018
	Consumer Media		Mobile Services		Games		Napster
Sales Channel
Business to Business	$	3,858	$	8,530	$	751	$	—
Direct to Consumer	1,625		174		4,712		—
Total	$	5,483	$	8,704	$	5,463	$	—

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to our customers. We record accounts receivable when the right to consideration becomes unconditional, except for the passage of time. For certain contracts, payment schedules may exceed one year; for those contracts we recognize a long-term receivable. As of March 31, 2019 and December 31, 2018, our balance of long-term accounts receivable was insignificant and $0.7 million, respectively, and is included in other long-term assets on our condensed consolidated balance sheets. The decrease in this balance from December 31, 2018 to March 31, 2019 is primarily due to the timing of expected cash receipts. During the quarter ended March 31, 2019, we recorded no impairments to our contract assets.

We record deferred revenue when cash payments are received or due in advance of our completion of the underlying performance obligation. As of March 31, 2019, we had a deferred revenue balance of $6.3 million, an increase of $3.9 million from December 31, 2018, primarily due to deferred revenue associated with Napster.

Practical Expedients

For those contracts for which we recognize revenue at the amount to which we have the right to invoice for service performed, we do not disclose the value of any unsatisfied performance obligations. We also do not disclose the remaining unsatisfied performance obligations which have an original duration of one year or less. Additionally, we immediately expense sales commissions when incurred as the amortization period would have been less than one year. These costs are recorded within sales and marketing expense.