Cablevision 2011 Annual Report Download - page 64

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inflationary cost increases for employees, contractors, programming rates, insurance and other various
expenses. Certain of these costs are also variable based on the number of customers. Costs of field
operations also increase as the portion of our expenses that we are able to capitalize decreases due to
lower new customer installations and lower new service upgrades. Network related costs also fluctuate as
capitalizable network upgrade and enhancement activity changes. Franchise fees are payable to the state
governments and local municipalities where we operate and are primarily based on a percentage of certain
categories of revenue, primarily video revenue, which vary by state and municipality. These costs change
in relation to changes in such categories of revenues or rate changes. We expect that our technical and
operating expenses will continue to increase in the future.
Selling, general and administrative expenses increased $64,319 (6%) for 2011 as compared to 2010.
Excluding the impact of Bresnan Cable's selling, general and administrative expenses, such expenses
decreased $17,641 (2%) in 2011 as compared to 2010. The net increase is attributable to the following:
Selling, general and administrative expenses include customer related costs, principally from the
operation and maintenance of our call center facilities that handle customer inquiries and billing and
collection activities. These costs generally rise as the number of customers grow and also as a result of
general inflationary cost increases for employees and other various expenses. Sales and marketing costs
primarily consist of employee costs and advertising production and placement costs associated with
acquiring and retaining customers. These costs may vary period to period and may increase with intense
competition.
The payment of long-term cash incentive awards is based on achievement of performance targets set at
the time of the award. As a result of our current strategy to make additional investments designed to
enhance our products and services with a focus on retention and acquisition of customers, these targets
are not expected to be achieved for awards due to be paid in 2013 and expected to be only partially
achieved for awards due to be paid in 2014. Accordingly, in 2011, the related accruals were reversed or
substantially reduced.
Prior to the AMC Networks Distribution, the Telecommunications Services segment received a
management fee calculated based on gross revenues of AMC and WE tv (as defined under the terms of
the management agreement) on a monthly basis. Historically, these management fees were reported as a
contra-expense and amounted to $13,958 for the year ended December 31, 2011 (which represents
management fees through June 30, 2011) as compared to $26,511 for the year ended December 31, 2010.
Increase in sales and marketing costs primarily due to costs associated with the operation of the
newly acquired Bresnan Cable system of $35,670, and in the New York metropolitan service
area higher employee and consumer incentive related costs, partially offset by lower costs
related to program carriage disputes recorded in the first quarter 2010 .............................................. $ 49,234
Decrease in expenses relating to long-term incentive plan awards to employees primarily due to
accrual reversals and reductions in the fourth quarter of 2011 of $25,353 (see discussion below) .... (30,558)
Increase in customer related costs, primarily due to costs associated with the operation of the
newly acquired Bresnan Cable system of $29,007, increased high-speed data and voice
customers and general cost increases, partially offset by a decrease in customer related costs in
the New York metropolitan service area primarily due to a reduction in call center labor costs
due to fewer calls handled .................................................................................................................. 19,217
Increase primarily in call center overtime costs attributable to two severe storms in the New York
metropolitan service area .................................................................................................................... 3,800
Other net increases primarily due to administrative costs associated with the operation of the
newly acquired Bresnan Cable system of $17,282, and the impact of insurance, legal, other fees
and employee costs (including $3,236 of certain executive separation costs in the fourth quarter
of 2011) in the New York metropolitan service area .......................................................................... 22,587
Intra-segment eliminations .................................................................................................................... 39
$ 64,319