Dish Network 2000 Annual Report Download - page 33

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introduction of our $39.99 per month America’s Top 150 programming package. During August 2000, we announced
a promotion offering consumers free premium movie channels. Under this promotion, all new subscribers who order
either our America’s Top 100 CD or America’s Top 150 programming package and any or all of our four premium
movie packages between August 1, 2000 and January 31, 2001, received those premium movie packages free for three
months. This promotion had a negative impact on monthly average revenue per subscriber since premium movie
package revenue from participating subscribers was deferred until the expiration of each participating subscriber’s free
service. While there can be no assurance, we expect our moderate historical increases in revenue per subscriber to
continue during 2001 and expect to reach monthly average revenue per subscriber of approximately $50 by the end of
December 2001.
For the year ended December 31, 2000, DTH equipment sales and integration services totaled $260 million,
an increase of $76 million compared to the same period during 1999. DTH equipment sales consist of sales of digital
set-top boxes and other digital satellite broadcasting equipment to international DTH service operators and sales of
DBS accessories. This increase in DTH equipment sales and integration services revenue was primarily attributable to
an increase in international demand for digital set-top boxes as compared to the same period during 1999.
A significant portion of DTH equipment sales and integration services revenues have resulted from sales to
two international DTH providers. We currently have agreements to provide equipment to DTH service operators in
Spain and Canada. Our future revenue from the sale of DTH equipment and integration services in international
markets depends largely on the success of these DTH operators and continued demand for our digital set-top boxes.
Although we continue to actively pursue additional distribution and integration service opportunities internationally, no
assurance can be given that any such efforts will be successful.
As previously reported, since 1998, Telefonica’s Via Digital, one of the two DTH service providers described
above, has had recurrent discussions and negotiations for a possible merger with Sogecable’s Canal Satelite Digital,
one of its primary competitors. While we are not currently aware of any formal negotiations between Via Digital and
Canal Satelite Digital, there are again rumors of a potential merger in the marketplace. Although we have binding
purchase orders from Via Digital for deliveries of DTH equipment in 2001, we cannot predict the impact, if any,
eventual consummation of this possible merger might have on our future sales to Via Digital.
Satellite services revenue totaled $61 million during the year ended December 31, 2000, an increase of
$20 million as compared to the same period during 1999. These revenues principally include fees charged to content
providers for signal carriage and revenues earned from business television, or BTV customers. The increase in satellite
services revenue was primarily attributable to the addition of new full-time BTV customers and additional sales of idle
satellite capacity to occasional-use customers. As a greater percentage of our satellite capacity is utilized during 2001
for local network channels and other programming designed to drive consumer subscriber acquisitions, satellite
services revenues may decline.
In order, among other things, to commence compliance with the injunction issued against us in our pending
litigation with the four major broadcast networks and their affiliate groups, we have terminated the delivery of distant
network channels to certain of our subscribers. Additionally, the FCC recently issued rules which impair our ability to
deliver certain superstation channels to our customers. Those rules will increase the cost of our delivery of
superstations, and could require that we terminate the delivery of certain superstations to a material portion of our
subscriber base. In combination, these terminations would result in a small reduction in average monthly revenue per
subscriber and could increase subscriber turnover. While there can be no assurance, any such decreases could be offset
by increases in average monthly revenue per subscriber resulting from the delivery of local network channels by
satellite, and increases in other programming offerings.
DISH Network Operating Expenses. DISH Network operating expenses totaled $1.265 billion during the year
ended December 31, 2000, an increase of $532 million or 73% compared to the same period in 1999. DISH Network
operating expenses represented 54% and 55% of subscription television services revenue during the years ended
December 31, 2000 and 1999, respectively. The increase in DISH Network operating expenses in total was consistent
with, and primarily attributable to, the increase in the number of DISH Network subscribers. While there can be no
assurance, we expect that our efforts to control costs and create operating efficiencies will result in a moderate decrease
in operating expenses as a percentage of subscription television services revenue during 2001.