10. COMMITMENTS AND CONTINGENCIES

Commitments

The Company has operating lease arrangements for office, research and development and sales and marketing space in the United States, the United Kingdom, or U.K., Denmark, and China, with various expiration dates up to 2030. In the second half of 2018, the Company entered into lease arrangements to acquire office space to house the Company’s new headquarters in San Jose, California. The lease commitments for the new headquarters are a significant portion of the future minimum lease payments as of December 31, 2018.

Future minimum lease payments under all operating leases as of December 31, 2018, are as follows (in thousands):

In connection with its leased facilities the Company recognized a liability for asset retirement obligations in 2015 representing the present value of estimated costs to be incurred at lease expiration. The liability for asset retirement obligations was $0.6 million and $0.5 million as of December 31, 2018 and 2017, respectively.

Rent expense for the years ended December 31, 2018, 2017 and 2016 was $9.7 million, $6.9 million and $4.6 million, respectively.

Manufacturing Purchase Commitments

The Company has various manufacturing contracts with vendors in the conduct of the normal course of its business. In order to manage future demand for our products and to ensure adequate component supply, the Company enters into agreements with manufacturers and suppliers to procure inventory based upon certain criteria and timing. Some of these commitments are con-cancellable. As of December 31, 2018 and 2017, the Company had $40.6 million and $75.2 million purchase commitments for inventory, respectively.

The Company records a liability for noncancelable purchase commitments in excess of its future demand forecasts. The Company recorded $0.1 million and $0.6 million for these purchase commitments in “Accrued liabilities” at December 31, 2018 and 2017, respectively.

Content License Purchase Commitments

The Company licenses certain content for users to access through The Roku Channel. An obligation for licensing of content is incurred at the time the Company enters into an agreement to obtain future titles and the cost of the content is known. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. At December 31, 2018, the amount recorded as obligations in “Accrued liabilities” for license purchase commitments were not material. As of December 31, 2018, the Company did not have any remaining performance obligations that are not reflected on the financial statements as they do not yet meet the criteria for asset and liability recognition.

Loss from Exit of Facilities

In January 2016, the Company moved its headquarters facilities to Los Gatos, California from Saratoga, California. The Company has entered into subleases for a portion of the former headquarters and expects to sublease the remaining portion for the remainder of the lease period. In connection with the move, the Company recognized a facility exit charge for the estimated loss on the sublease in its “Operating Expenses”. The estimated loss is comprised of the remaining fair value of lease obligations and related expenses for exited locations, as determined at the cease-use dates of those facilities, net of estimated sublease income that could be reasonably obtained in the future and will be paid out over the remaining lease terms, which end in the year ending December 31, 2020. Projected sublease income is based on management’s estimates, which are subject to change.

A summary of the Company’s exit liability activity for the years ended December 31, 2018, 2017 and 2016, is as follows (in thousands):

The Company recorded $0.6 million and $0.7 million of the above lease liability in “Accrued liabilities” and the remaining $0.2 million and $0.1 million in “Other long-term liabilities” at December 31, 2018 and 2017, respectively.

Letters of Credit

As of December 31, 2018 the Company had irrevocable letters of credit outstanding in the amount of $26.4 million for the benefit of landlords related to noncancelable facilities leases. The letters of credit expire on various dates in 2019.

Contingencies

The Company accrues for loss contingencies, including liabilities for intellectual property licensing, when it believes such losses are probable and reasonably estimable. During the three months ended June 30, 2018, the Company changed its estimate of certain liabilities previously recorded for intellectual property licensing and released $8.9 million as a result of its assessment that the likelihood of payment is now remote. The reversal of $8.9 million is recorded within cost of player revenue during the year ended December 31, 2018, in the consolidated statements of operations.

The Company is currently involved in, and may in the future be involved in, legal proceedings, claims, and investigations in the ordinary course of business, including claims for infringing patents, copyrights or other intellectual property rights related to its platform and products, or the content distributed through its platform by the Company or third-party channel developers. Although the results of these proceedings, claims, and investigations cannot be predicted with certainty, the Company does not believe that the final outcome of any matters that it is currently involved in are reasonably likely to have a material adverse effect on its business, financial condition, or results of operations.

Indemnification

Many of the Company’s agreements include certain provisions for indemnifying content publishers, licensees, contract manufacturer and suppliers if the Company’s products or services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each agreement. To date, the Company has not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements.