Dish Network 2001 Annual Report Download - page 45

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our most popular programming package, during May 2000, the increased availability of local channels by satellite
together with the earlier successful introduction of our America’s Top 150 programming package.
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.
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.
Subscriber-related expenses totaled $970 million during the year ended December 31, 2000, an increase of
$395 million compared to the same period in 1999. Such expenses represented 41% and 43% of subscription
television services revenues during the years ended December 31, 2000 and 1999, respectively.
Customer service center and other expenses totaled $251 million during the year ended December 31, 2000,
an increase of $134 million as compared to the same period in 1999. The increase in customer service center and other
expenses primarily resulted from increased personnel and telephone expenses to support the growth of the DISH
Network and from operating expenses related to the expansion of our installation and service business. Customer
service center and other expenses totaled 11% of subscription television services revenue during the year ended
December 31, 2000, as compared to 9% during the same period in 1999. The increase in this expense to revenue ratio
primarily resulted from the on-going construction and start-up costs of our fifth customer service center in Virginia, our
sixth customer service center in West Virginia, and the continued build-out of our installation offices nationwide.
Satellite and transmission expenses include expenses associated with the operation of our digital broadcast
center, contracted satellite telemetry, tracking and control services, and satellite in-orbit insurance. Satellite and
transmission expenses totaled $44 million during the year ended December 31, 2000, a $3 million increase compared to
the same period in 1999. This increase resulted from higher satellite and other digital broadcast center operating
expenses due to an increase in the number of operational satellites. Satellite and transmission expenses totaled 2% and
3% of subscription television services revenue during the years ended December 31, 2000 and 1999, respectively.
Cost of sales – DTH equipment and Integration Services. Cost of sales - DTH equipment and integration
services totaled $195 million during the year ended December 31, 2000, an increase of $47 million compared to the
same period in 1999. This increase in cost of sales - DTH equipment and integration services is consistent with the
increase in DTH equipment sales and integration services revenue. Cost of sales - DTH equipment and integration
services represented 75% and 81% of DTH equipment revenue, during the years ended December 31, 2000 and 1999,
respectively. The higher margin was principally attributable to a $16.6 million loss provision recorded during 1999
primarily for component parts and purchase commitments related to our first generation model 7100 set-top boxes, for
which production was suspended in favor of our second generation model 7200 set-top boxes.
Marketing Expenses. Marketing expenses totaled $1.159 billion during the year ended December 31, 2000, an
increase of $432 million compared to the same period in 1999. The increase in marketing expenses was primarily
attributable to an increase in subscriber promotion subsidies. Subscriber promotion subsidies – cost of sales includes
the cost related to EchoStar receiver systems distributed to retailers and other distributors of our equipment. Subscriber
promotion subsidies - other includes net costs related to our free installation promotion and other promotional
incentives. Advertising and other expenses totaled $139 million and $65 million during the years ended
December 31, 2000 and 1999, respectively.
General and Administrative Expenses. General and administrative expenses totaled $250 million during the
year ended December 31, 2000, an increase of $100 million as compared to the same period in 1999. The increase in
G&A expenses was principally attributable to increased personnel expenses to support the growth of the DISH
Network. G&A expenses represented 9% of total revenue during the years ended December 31, 2000 and 1999.