Dish Network 2003 Annual Report Download - page 37

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
32
EXECUTIVE SUMMARY
For competitive and other reasons, we are not providing specific operational or financial guidance or projections for
2004. Our operating and financial strategy for 2004 will focus on improving our operating results and free cash
flow by increasing our subscriber base, reducing churn, controlling rising subscriber acquisition costs and
maintaining or improving operating margins.
Operational Results and Goals
Increase subscriber base. We added approximately 1.245 million net new subscribers during 2003, ending the year
with approximately 9.425 million DISH Network subscribers. We remain committed to growing our subscriber base
with high quality customers by continuing to offer attractive consumer promotions and DISH Network programming
packages with a better “price-to-value” relationship than packages currently offered by most other subscription
television providers. However, there can be no assurance that we will be able to maintain our current rate of new
subscriber growth if our competitors offer more attractive consumer promotions, better priced or more attractive
programming packages, more compelling programming and services, including advanced DVR and HDTV services
or additional local channels, or otherwise offer more attractive products and services than us.
Reduce subscriber churn. Our percentage monthly churn for the year ended December 31, 2003 was approximately
1.57%, compared to our percentage churn for the same period in 2002 of approximately 1.59%. We believe
continued tightening of credit requirements, together with promotions tailored toward subscribers with multiple
receivers and advanced products, will attract better long-term subscribers and may help reduce churn. We plan to
continue to offer consumer promotions, loyalty programs and dealer programs to improve our overall subscriber
retention. We also continue to undertake initiatives with respect to our conditional access system to further enhance
the security of the DISH Network signal and attempt to make theft of our programming commercially impractical or
uneconomical. However, many factors can impact subscriber churn and there can be no assurance that we will be
able to maintain or reduce subscriber churn or that our churn will not increase in future periods.
Our success in increasing our subscriber base and reducing churn will depend on, among other things, our ability to:
• Offer new and compelling programming and services. We plan to offer our subscribers new and
compelling programming and services, including next generation digital video recorder, or DVR, services,
additional high-definition television, or HDTV, channels and interactive programming. In addition, we
continue to develop bundled broadband service solutions as we believe this can help us gain and maintain
market share, and retain subscribers.
• Expand the availability of local channels. Assuming successful launch and continued nominal operation
of our satellites, we expect to increase our local channel coverage from 110 markets to over 140 markets
representing approximately 94% of United States television households, by the end of 2004.
• Improve distribution channels. We continue to strengthen our distribution channels for our DISH
Network business unit through, among other things, new and improved commercial relationships with
companies like SBC and Qwest.
• Increase satellite capacity. With the formation of strategic alliances with fixed satellite services
providers, the successful launch of EchoStar IX and the completion of a contract for the future construction
of EchoStar X, we continue to increase our satellite capacity for additional programming and services.
Financial Results and Goals
Control rising subscriber acquisition costs. We generally subsidize installation and all or a portion of the cost of
EchoStar receiver systems in order to attract new DISH Network subscribers. Our average subscriber acquisition
costs on a per new subscriber activation basis were approximately $453 during 2003 compared to $421 in 2002,
excluding costs capitalized for leased equipment. If a subscriber churns early in the average subscriber life-cycle,
we cannot fully recover the costs related to the acquisition of that subscriber. We believe continued tightening of
credit requirements, together with promotions tailored toward subscribers with multiple receivers and advanced
products, will attract better long-term subscribers. In addition, as a result of recent changes in our equipment lease