Dish Network 1998 Annual Report Download - page 31

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subscriber. In addition, we believe that these customers represent lower credit risk and therefore may be marginally
less likely to churn than other DISH Network subscribers. Although there can be no assurance as to the ultimate
duration of the DISH Network One-Rate Plan, it will continue through at least April 1999.
Our subscriber acquisition costs, both in the aggregate and on a per subscriber basis, will increase in direct
relation to the participation rate in the DISH Network One-Rate Plan. While we presently expect approximately one-
third of our new subscriber activations to result from the DISH Network One-Rate Plan during the duration of the
promotion, the actual consumer participation level could be significantly higher. To the extent that actual consumer
participation levels exceed present expectations and subscriber acquisition costs materially increase, our EBITDA
results will be negatively impacted because subscriber acquisition costs are expensed as incurred.
Depreciation and Amortization. Depreciation and amortization expenses during 1998, including amortization
of subscriber acquisition costs of $19 million, aggregated $103 million, a $70 million decrease compared to 1997. The
decrease in depreciation and amortization expenses principally resulted from a decrease in amortization of subscriber
acquisition costs of $103 million, partially offset by an increase in depreciation related to the commencement of
operation of EchoStar III, EchoStar IV and other depreciable assets placed in service during 1998. Promotional
programs changed in October 1997 and we ceased deferral of subscriber acquisition costs after that date. All
previously deferred costs were fully amortized during 1998
Other Income and Expense. Other expense, net totaled $138 million during 1998, an increase of $50 million
as compared to 1997. The increase in other expense resulted primarily from interest expense associated with our
12 1/2% Senior Secured Notes due 2002 issued in June 1997, combined with increased interest expense resulting from
increased accreted balances on our 12 7/8% Senior Secured Discount Notes due 2004 issued in 1994 and our 13 1/8%
Senior Secured Discount Notes due 2004 issued in 1996.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996.
Revenue. Total revenue in 1997 was $477 million, an increase of 140%, or $278 million, as compared to total
revenue of $199 million in 1996. The increase in total revenue in 1997 was primarily attributable to the operation of
the DISH Network during the entirety of 1997, combined with DISH Network subscriber growth.
DISH Network subscription television services revenue totaled $299 million during 1997, an increase of
$249 million compared to 1996. This increase was directly attributable to the operation of the DISH Network during
the entirety of 1997, combined with the increase in the number of DISH Network subscribers. Average monthly
revenue per subscriber approximated $38.50 during 1997 compared to approximately $35.50 in 1996. The increase
in monthly revenue per subscriber was primarily due to additional channels added upon commencement of
operations of EchoStar II.
Other DISH Network revenue totaled $45 million in 1997, an increase of $35 million compared to 1996.
Other DISH Network revenue primarily consists of incremental revenues over advertised subscription rates realized
from our 1996 Promotion, whereby consumers were able to purchase a standard EchoStar receiver system for $199,
conditioned upon the consumer’s prepaid one-year subscription to a programming package for approximately $300,
as well as installation revenue and loan origination and participation income. In 1997, we recognized incremental
revenues related to our 1996 Promotion of approximately $40 million, an increase of $35 million over 1996.
During 1997, DTH equipment sales and integration services totaled $92 million. We sold digital satellite
broadcasting equipment using our proprietary technology to two international DTH service operators. We realized
revenues of $74 million related to these agreements during 1997. Of this amount, $59 million related to sales of
digital set-top boxes and other DTH equipment while $15 million resulted from the provision of integration services,
such as revenue from uplink center design, construction oversight, and other project integration services. DBS
accessory sales totaled $11 million during 1997, an $8 million increase compared to 1996.
DTH equipment sales and integration services revenue totaled $78 million during 1996. These revenues
consisted primarily of sales of EchoStar receiver systems and related accessories prior to the August 1996
nationwide rollout of our 1996 Promotion.