Dish Network 2000 Annual Report Download - page 40

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significant increase in subscriber acquisition costs associated with our rapid subscriber growth and our “free
installation” promotion.
We expect that our future working capital, capital expenditure and debt service requirements will be satisfied
primarily from existing cash and investment balances and cash generated from operations. Our ability to generate
positive future operating and net cash flows is dependent upon our ability to continue to expand our DISH Network
subscriber base, retain existing DISH Network subscribers, and our ability to grow our ETC and Satellite Services
businesses. There can be no assurance that we will be successful in achieving our goals. The amount of capital
required to fund our 2001 working capital and capital expenditure needs will vary, depending, among other things, on
the rate at which we acquire new subscribers and the cost of subscriber acquisition. Our working capital and capital
expenditure requirements could increase materially in the event of increased competition for subscription television
customers, significant satellite failures, or in the event of a general economic downturn, among other factors. These
factors could require that we raise additional capital in the future.
Subscriber Turnover
Our churn for the year ended December 31, 2000 was consistent with our churn for the same period in 1999.
We believe that our percentage churn continues to be lower than satellite and cable industry averages. While we have
successfully managed churn within a narrow range historically, our maturing subscriber base, a slowing economy, the
effects of rapid growth, bounty programs offered by competitors and other factors could cause future increases in
churn. Further, impacts from our litigation with the networks in Miami, new FCC rules governing the delivery of
superstations and other factors, could cause us to terminate delivery of distant network channels and superstations to a
material portion of our subscriber base, which could cause many of those customers to cancel their subscription to our
other services. Any such terminations could result in a small reduction in average monthly revenue per subscriber and
could result in increased churn. While there can be no assurance, notwithstanding the issues discussed above we have
and expect to be able to continue to manage churn below industry averages during 2001.
Subscriber Acquisition Costs
As previously described, we subsidize the cost and installation of EchoStar receiver systems in order to attract
new DISH Network subscribers. Our average subscriber acquisition costs were $452 per new subscriber activation
during the year ended December 31, 2000. Since we retain ownership of the equipment, amounts capitalized under our
Digital Dynamite Plan are not included in our calculation of these subscriber acquisition costs. As a result of
continuing competition and our plans to attempt to continue to drive rapid subscriber growth, we expect our per
subscriber acquisition costs for 2001 will remain in a range consistent with our 2000 average of approximately $452
per new subscriber activation. Our subscriber acquisition costs, both in the aggregate and on a per new subscriber
activation basis, may materially increase to the extent that we continue or expand our Free Now promotion, or
introduce other more aggressive promotions if we determine that they are necessary to respond to competition, or for
other reasons.
Funds necessary to meet subscriber acquisition costs will be satisfied from existing cash and investment
balances to the extent available. We may, however, be required to raise additional capital in the future to meet these
requirements. If we were required to raise capital today, a variety of debt and equity funding sources would likely be
available to us. However, there can be no assurance that additional financing will be available on acceptable terms, or
at all, if needed in the future.
Digital Dynamite
During July 2000, we announced the commencement of our new Digital Dynamite promotion. The Digital
Dynamite plans offer four choices to consumers, ranging from the use of one EchoStar receiver system and our
America’s Top 100 CD programming package for $35.99 per month, to providing consumers two EchoStar receiver
systems and our America’s Top 150 programming package for $49.99 per month. With each plan, consumers receive
in-home-service, must agree to a one-year commitment and incur a one-time set-up fee of $49.99, which includes the
first month's programming payment. Our Digital Dynamite promotion allows us to capitalize and depreciate over 4
years equipment costs that would otherwise be expensed at the time of sale, but also results in increased capital