Dish Network 2010 Annual Report Download - page 25

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If we do not improve our operational performance and customer satisfaction, our gross new subscriber additions
may decrease and our subscriber churn may increase.
If we are unable to improve our operational performance and customer satisfaction, we may experience a decrease in
gross new subscriber additions and an increase in churn, which could have a material adverse effect on our business,
financial condition and results of operations. To address our operational inefficiencies, we need to continue to make
significant investments in staffing, training, information systems, and other initiatives, primarily in our call center
and in-home service operations. These investments are intended to help combat inefficiencies introduced by the
increasing complexity of our business, improve customer satisfaction, reduce churn, increase productivity, and allow
us to scale better over the long run. We cannot, however, be certain that our spending will ultimately be successful
in addressing our operational inefficiencies. In the meantime, we may continue to incur higher costs as a result of
both our operational inefficiencies and levels of spending. While we believe that these costs will be outweighed by
longer-term benefits, there can be no assurance when or if we will realize these benefits at all.
If DISH Network gross new subscriber additions decrease, or if subscriber churn, subscriber acquisition costs or
retention costs increase, our financial performance will be adversely affected.
We have not always met and may continue to fail to meet our own standards for performing high-quality
installations, effectively resolving subscriber issues when they arise, answering subscriber calls in an acceptable
timeframe, effectively communicating with our subscriber base, reducing calls driven by the complexity of our
business, improving the reliability of certain systems and subscriber equipment, and aligning the interests of certain
third party retailers and installers to provide high-quality service.
Most of these factors have affected both gross new subscriber additions as well as existing subscriber churn. Our
future gross new subscriber additions and subscriber churn may continue to be negatively impacted by these factors,
which could in turn adversely affect our revenue growth and results of operations.
We may incur increased costs to acquire new and retain existing subscribers. Our subscriber acquisition costs could
increase as a result of increased spending for advertising and the installation of more HD and DVR receivers, which
are generally more expensive than other receivers. Meanwhile, retention costs may be driven higher by a faster rate
of upgrading existing subscribers’ equipment to HD and DVR receivers. Additionally, certain of our promotions,
including, among others, pay-in-advance, allow consumers with relatively lower credit scores to become
subscribers. These subscribers typically churn at a higher rate.
Our subscriber acquisition costs and our subscriber retention costs can vary significantly from period to period and
can cause material variability to our net income (loss) and free cash flow. Any material increase in subscriber
acquisition or retention costs from current levels could have a material adverse effect on our business, financial
position and results of operations.
Economic weakness, including higher unemployment and reduced consumer spending, may adversely affect our
ability to grow or maintain our business.
A substantial majority of our revenue comes from residential customers whose spending patterns may be affected by
sustained economic weakness and uncertainty. Economic weakness and uncertainty persisted during 2010. Our
ability to grow or maintain our business may be adversely affected by sustained economic weakness and uncertainty,
including the effect of wavering consumer confidence, high unemployment and other factors that may adversely
affect the pay-TV industry. In particular, economic weakness and uncertainty could result in the following:
• Fewer gross new subscriber additions and increased churn. We could face fewer gross new subscriber
additions and increased churn due to, among other things: (i) the sustained weak housing market in the
United States combined with lower discretionary spending; (ii) increased price competition for our products
and services; and (iii) the potential loss of retailers, who generate a significant portion of our new
subscribers, because many of them are small businesses that are more susceptible to the negative effects of
economic weakness. In particular, subscriber churn may increase with respect to subscribers who purchase
our lower tier programming packages and who may be more sensitive to sustained economic weakness,
including, among others, our pay-in-advance subscribers.