Dish Network 2007 Annual Report Download - page 50

Table of Contents
Among other things, our “Subscriber-related revenue”
has been impacted in a number of respects. Commencing in the fourth quarter 2005, new
subscribers acquired under our revised AT&T agreement do not generate equipment sales, installation or other services revenue from AT&T.
However, our programming services revenue is greater for subscribers acquired under the revised AT&T agreement.
Deferred equipment sales revenue relating to subscribers acquired through our original AT&T agreement will continue to have a positive
impact on “Subscriber-related revenue” over the estimated average life of those subscribers. Further, development and 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.
Equipment sales
. “Equipment sales” include sales of non-DISH Network digital receivers and related components to an international DBS
service provider and to other international customers. “Equipment sales” also includes unsubsidized sales of DBS accessories to retailers and
other distributors of our equipment domestically and to DISH Network subscribers. “Equipment sales” does not include revenue from sales of
equipment to AT&T.
Effective the second quarter of 2006, we reclassified certain warranty and service related revenue from “Equipment sales” to “Subscriber-
related revenue.” All prior period amounts were reclassified to conform to the current period presentation.
“Other” sales. “Other” sales consist principally of satellite transmission revenue and C-band subscription television service revenue.
Subscriber
-related expenses . “Subscriber-related expenses” 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 our distributers, refurbishment and repair costs related to EchoStar receiver systems, subscriber retention and other
variable subscriber expenses. “Subscriber-related expenses” also include the cost of equipment sales, and expenses related to installation and
other services from our original agreement with AT&T. Cost of 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. All prior period amounts were reclassified to conform to current period presentation.
Under the revised AT&T agreement, we are including costs from equipment and installations in “Subscriber acquisition costs” or 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.
Satellite and transmission expenses
. “Satellite and transmission expenses” include costs associated with the operation of our digital broadcast
centers, the transmission of local channels, satellite telemetry, tracking and control services, satellite and transponder leases, and other related
services.
Cost of sales – equipment. “Cost of sales – equipment” principally includes costs associated with non-DISH Network digital receivers and
related components sold to an international DBS service provider and to other international customers. “Cost of sales – equipment” also
includes unsubsidized sales of DBS accessories to retailers and other distributors of our equipment domestically and to DISH Network
subscribers. “Cost of sales – equipment” does not include the costs from sales of equipment to AT&T.
Effective the second quarter of 2006, we reclassified certain warranty and service related expenses from “Cost of sales – equipment” to
“Subscriber-related expenses” and “Depreciation and amortization.”
All prior period amounts were reclassified to conform to the current period
presentation.
Cost of sales – other. “Cost of sales – other” principally includes programming and other expenses associated with the C-band subscription
television service business of SNG and costs related to satellite transmission services.
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Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
Continued