Fair Value Measurements

12 Months Ended

Dec. 31, 2021


Note 5.			Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following tables present information about our financial assets that have been measured at fair value on a recurring basis as of December 31, 2021 and 2020, and indicates the fair value hierarchy of the valuation inputs utilized to determine fair value (in thousands).


	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2021								December 31, 2021
	Level 1		Level 2		Level 3		Total

Cash and cash equivalents	$	27,109	$	—	$	—	$	27,109	$	27,109
Investments	—		—		1,755		1,755		N/A
Restricted cash equivalents	1,630		—		—		1,630		1,630
Total assets	$	28,739	$	—	$	1,755	$	30,494	N/A


	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2020								December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	23,940	$	—	$	—	$	23,940	$	23,940
Investments	—		—		9,965		9,965		N/A
Restricted cash equivalents	1,630		—		—		1,630		1,630
Total assets	$	25,570	$	—	$	9,965	$	35,535	N/A
Accrued and other current liabilities:
Napster acquisition contingent consideration	$	—	$	—	$	4,800	$	4,800	N/A
Other long-term liabilities
Simple Agreements for Future Equity	—		—		2,106		2,106		N/A
Total liabilities	$	—	$	—	$	6,906	$	6,906	N/A

Restricted cash equivalents as of December 31, 2021 and 2020 primarily relate to maintaining a minimum balance of unrestricted cash at the bank in connection with our Loan Agreement. See Note 9. Debt for additional details.

Investments as of December 31, 2021 and December 31, 2020 are comprised of Napster Group ordinary shares received as a portion of the consideration from our December 30, 2020 Napster disposition, as described in Note 4. Dispositions. The fair value of these equity securities was calculated using the closing price of the shares as of December 31, 2021. For reporting periods prior to December 31, 2021, the shares were discounted for a lack of liquidity due to the 12-month contractual restriction on selling or transferring the shares and were therefore considered to be within Level 3 of the fair value hierarchy. During the fourth quarter of 2021, Napster Group announced its intent to dispose of Rhapsody to a private company which was completed in late January 2022. We have concluded that it is appropriate to continue to consider the fair value determination of the shares as of December 31, 2021 as Level 3 because of the pending go-private transaction as of December 31, 2021, our holding a large amount of Napster Group shares, and the thinly traded nature of the shares. For the year ended December 31, 2021 for these shares, we recognized an unrealized loss of $7.0 million in Loss on equity and other investments, net on the consolidated statement of operations. For the year ended December 31, 2020 we recognized an unrealized gain of $0.7 million.

During the second quarter of 2021, the Company settled the Napster contingent consideration liability. Accrued and other current liabilities as of December 31, 2020 included the estimated fair value of the contingent consideration for the Napster acquisition, which was determined using a fair value measurement categorized within Level 3 of the fair value hierarchy. The valuation methodology of the contingent consideration at December 31, 2020 was based on RealNetworks' contractual obligation to pay the seller of the Napster interests acquired by RealNetworks in January 2019.

In the third quarter of 2020, Scener, received $2.1 million in cash in exchange for the issuance of convertible securities, each a Simple Agreement for Future Equity. The conversion of these securities, or SAFE Notes, was contingent upon the occurrence of specific future capital-raising events by Scener. The future contingent events also contemplated the possibility of Scener having to pay back the original cash investment to each investor. The SAFE Notes were recorded at fair value and within Other long-term liabilities on our consolidated balance sheets until June 30, 2021, the date of Scener's deconsolidation

from RealNetworks, as further discussed in Note 19. Related Party Transactions. The valuation analysis model for the fair value of the SAFE Notes as of December 31, 2020 used significant unobservable inputs that reflected our own estimates of assumptions that market participants would use. Significant unobservable inputs to the valuation analysis model included the underlying conversion date for the SAFE Notes, Scener's capitalization prior to conversion of the SAFE Notes, an 80% discount rate as defined in the SAFE Note agreements, conversion price, conversion shares and an annual present value rate. All of the inputs were subject to significant judgment.

Items Measured at Fair Value on a Non-recurring Basis

Certain of our assets and liabilities are measured at estimated fair value on a non-recurring basis, using Level 3 inputs. These instruments are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Other than as discussed in Note 15. Leases, we did not record any impairments on those assets required to be measured at fair value on a non-recurring basis in 2021 or 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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