Significant Events

9 Months Ended

Nov. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Significant Events

Significant Events

Next Radio LLC - Sprint Agreement

On August 9, 2013, NextRadio LLC entered into an agreement with Sprint whereby Sprint agreed to pre-load the Company's smartphone application, NextRadio, in a minimum of 30 million FM-enabled wireless devices on the Sprint wireless network over a three-year period. In return, NextRadio LLC agreed to pay Sprint $15 million per year in equal quarterly installments over the three year term and to share with Sprint certain revenue generated by the NextRadio app. Emmis has not guaranteed NextRadio LLC's performance under this agreement and Sprint does not have recourse to any Emmis-related entity other than NextRadio LLC. Additionally, the agreement does not limit the ability of NextRadio LLC to place the NextRadio app on FM-enabled devices on other wireless networks.

Nearly all of the largest radio broadcasters and many smaller radio broadcasters have expressed support for NextRadio LLC's agreement with Sprint. Accordingly, NextRadio LLC has entered into a number of funding agreements with radio broadcasters and other participants in the radio industry to collect and remit cash to Sprint to fulfill the quarterly payment obligation. As part of some of these funding agreements, Emmis agreed to certain limitations on the operation of its NextRadio and TagStation businesses, including assurances of access to the NextRadio app and to TagStation (the cloud-based engine that provides data to the NextRadio app), and limitations on sale of the businesses to potential competitors of the U.S. radio industry. Emmis also granted the U.S. radio industry (as defined in the funding agreements) a call option on substantially all of the assets used in the NextRadio and TagStation businesses in the United States. The call option may be exercised in August 2017 or August 2019 by paying Emmis a purchase price equal to the greater of (i) the appraised fair market value of the NextRadio and TagStation businesses, or (ii) two times Emmis' cumulative investments in the development of the businesses. If the call option is exercised, the businesses will continue to be subject to the operating limitations applicable today, and no radio operator will be permitted to own more than 30% of the NextRadio and TagStation businesses.

NextRadio LLC made the first $3.75 million quarterly payment to Sprint on August 9, 2013. Emmis paid $0.8 million of the first quarterly payment amount, which was expensed over the three-month period ending November 8, 2013. Emmis determined that NextRadio LLC is a variable interest entity (VIE) and that Emmis is the primary beneficiary because the Company has the power to direct substantially all of the activities of NextRadio LLC, and because the Company may absorb certain losses and receive certain benefits from the operations of the VIE. Emmis does not record any revenue or expense related to the amounts that are collected and remitted to Sprint except the portion of any payment to Sprint that was actually contributed to NextRadio LLC by Emmis, which is recorded as station operating expenses, excluding depreciation and amortization expense. As of November 30, 2013, the carrying value of assets within NextRadio LLC totaled $2.1 million, which represents cash collected by NextRadio LLC from other broadcasting companies and other companies in the radio industry which is considered restricted for the purpose of the second quarterly payment. NextRadio LLC had $2.1 million of liabilities at November 30, 2013, which represents the obligation to remit cash received from radio industry participants to Sprint. On December 12, 2013, NextRadio LLC remitted $2.2 million of cash to Sprint, representing a partial payment of the second quarterly installment. Emmis did not fund any portion of the second quarterly installment. NextRadio LLC is in discussions with Sprint on its partial payment of the second quarterly installment; however, we believe Sprint has continued to pre-install the NextRadio application in accordance with the planned product rollout. NextRadio LLC is also in discussions with other radio broadcasters and companies involved in the radio industry to effect an equitable, long-term funding solution.