Dish Network 2004 Annual Report Download - page 12

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Sales, Marketing and Distribution
Sales Channels. We currently sell EchoStar receiver systems and solicit orders for DISH Network programming
services through independent distributors, retailers and consumer electronics stores. While we also sell receiver
systems and programming directly, independent retailers are responsible for most of our sales. These independent
retailers are primarily local retailers who specialize in TV and home entertainment systems. We also acquire
customers through nationwide retailers such as Costco, Sears and certain regional consumer electronic chains. In
addition, RadioShack Corporation sells EchoStar receiver systems and markets DISH Network programming
services through its 5,200 corporate stores and in approximately 1,000 dealer franchise stores nationwide. We also
have an agreement with JVC to distribute our receiver systems under its label through certain of its nationwide
retailers.
We offer our distributors and retailers what we believe are competitive incentive programs. Through these
programs, qualified distributors and retailers receive, among other things, incentives upon new subscriber
activations and generally receive monthly residual incentives dependent on, among other things, continued
consumer subscription to qualified programming.
Marketing. We use print, radio, and television, on a local and national basis, to advertise and promote the DISH
Network. We also offer point-of-sale literature, product displays, demonstration kiosks and signage for retail
outlets. We provide guides that describe DISH Network products and services to our retailers and distributors and
conduct periodic educational seminars. Our mobile sales and marketing team visits retail outlets regularly to
reinforce training and ensure that these outlets have proper point-of-sale materials for our current promotions.
Additionally, we dedicate a DISH Network television channel and website to provide retailers with information
about special services and promotions that we offer from time to time.
Promotional Subsidies. Our future success in the subscription television industry depends on, among other factors,
our ability to acquire and retain DISH Network subscribers. We provide varying levels of subsidies and incentives
to attract customers, including leased, free or subsidized receiver systems, installations, programming and other
items. This marketing strategy emphasizes our long-term business strategy of maximizing future revenue by selling
DISH Network programming to a large potential subscriber base and rapidly increasing our subscriber base. Since
we subsidize consumer up-front costs, we incur significant costs each time we acquire a new subscriber. Although
there can be no assurance, we believe that, on average, we will be able to fully recoup the up-front costs of
subscriber acquisition from future subscription television services revenue.
During July 2000, we began offering our DISH Network subscribers the option to lease receiver systems. Our
current equipment lease program, the Digital Home Advantage promotion, offers new customers the ability to lease
up to four installed EchoStar receivers, including various premium models such as advanced digital video recorders
and high definition receivers, when they subscribe to one of several qualifying programming packages. Although
there can be no assurance, we expect this marketing strategy will reduce the cost of acquiring future subscribers
because we retain ownership of the receiver systems. Upon termination of service, Digital Home Advantage
subscribers are required to return the receiver and certain other equipment to us. While we do not recover all of the
equipment upon termination of service, equipment that is recovered after deactivation is reconditioned and re-
deployed at a lower cost than new equipment. The effectiveness of our plan to reduce subscriber acquisition costs
through redeployment of leased equipment is dependent on our ability to retrieve and cost effectively recondition
leased equipment from subscribers who terminate service. Our ability to realize reduced equipment costs from
redeploying reconditioned equipment will be negatively impacted by new compression technologies that will
inevitably render some portion of our current and future EchoStar receivers obsolete. We will incur additional costs,
which may be substantial, to upgrade or replace these set-top boxes.
We base our marketing promotions, among other things, on current competitive conditions. In some cases, if
competition increases, or we determine for any other reason that it is necessary to increase our subscriber acquisition
costs to attract new customers, our profitability and costs of operation would be adversely affected.