Dish Network 2006 Annual Report Download - page 101

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–16
Accounting for certain of our existing and new subscriber promotions which include programming discounts and
subscriber rebates falls under the scope of EITF Issue No. 01-9, “Accounting for Consideration Given by a Vendor
to a Customer (Including a Reseller of the Vendor’s Capital Products)” (“EITF 01-9”). In accordance with EITF 01-
9, programming revenues under these promotions are recorded as earned at the discounted monthly rate charged to
the subscriber. See “Subscriber Promotions” below for discussion regarding the accounting for costs under these
promotions.
Subscriber-Related Expenses
The cost of television programming distribution rights is generally incurred on a per subscriber basis and various
upfront carriage payments are recognized when the related programming is distributed to subscribers. The cost of
television programming rights to distribute live sporting events for a season or tournament is charged to expense
using the straight-line method over the course of the season or tournament. “Subscriber-related expenses” in the
Consolidated Statements of Operations and Comprehensive Income (Loss) principally include programming
expenses, costs incurred in connection with our in-home service and call center operations, overhead costs
associated with our installation business, copyright royalties, billing costs, residual commissions paid to distributors,
direct marketers, retailers and telecommunications partners, refurbishment and repair costs related to EchoStar
receiver systems, subscriber retention and other variable subscriber expenses. These costs are recognized as the
services are performed or as incurred.
“Subscriber-related expenses” also include the cost of sales from equipment sales, and expenses related to installation
and other services from our original agreement with AT&T. Cost of sales from equipment sales to AT&T are
deferred and recognized over the estimated average co-branded subscriber life. Expenses from installation and
certain other services performed at the request of AT&T are recognized as the services are performed. Under the
revised AT&T agreement, we are including costs from equipment and installations in “Subscriber acquisition costs”
or, for leased equipment, in capital expenditures, rather than in “Subscriber-related expenses.” We are continuing to
include in “Subscriber-related expenses” the costs deferred from equipment sales made to AT&T. These costs are
being amortized over the estimated life of the subscribers acquired under the original AT&T agreement.
Subscriber Acquisition Promotions
DISH Network subscribers have the choice of purchasing or leasing the satellite receiver and other equipment
necessary to receive our programming. We generally subsidize installation and all or a portion of the cost of
EchoStar receiver systems in order to attract new DISH Network subscribers. As a result of our promotions, most of
our new subscribers choose to lease their equipment.
Equipment Lease Promotion. We retain title to receivers and certain other equipment offered pursuant to our
equipment lease promotions. As a result, equipment leased to new and existing subscribers is capitalized and
depreciated over their estimated useful lives.