Dish Network 2007 Annual Report Download - page 103

Table of Contents
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
implementation fees received from AT&T will continue to be recognized over the estimated average subscriber life of all subscribers acquired
under both the original and revised agreements with AT&T.
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.
Subscriber Acquisition Costs.
Subscriber acquisition costs in our Consolidated Statements of Operations and Comprehensive Income (Loss)
consist of costs incurred to acquire new subscribers through third parties and our direct customer acquisition distribution channel. Subscriber
acquisition costs include the following line items from our Consolidated Statements of Operations and Comprehensive Income (Loss):
F-16
• “Cost of sales – subscriber promotion subsidies” includes the cost of EchoStar receiver systems sold to retailers and other distributors
of our equipment and receiver systems sold directly by us to subscribers.
•
“
Other subscriber promotion subsidies
”
includes net costs related to promotional incentives and costs related to installation.