Dish Network 2012 Annual Report Download - page 62

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
As of December 31, 2012 and 2011, the carrying value for cash and cash equivalents, marketable investment
securities, trade accounts receivable, net of allowance for doubtful accounts, and current liabilities, excluding the
“Current portion of long-term debt and capital lease obligations,” is equal to or approximates fair value due to their
short-term nature or proximity to current market rates. See Note 6.
Fair values for our publicly traded debt securities are based on quoted market prices, when available. The fair
values of private debt are estimated based on an analysis in which we evaluate market conditions, related securities,
various public and private offerings, and other publicly available information. In performing this analysis, we make
various assumptions regarding, among other things, credit spreads, and the impact of these factors on the value of
the notes. See Note 11 for the fair value of our long-term debt.
Deferred Debt Issuance Costs
Costs of issuing debt are generally deferred and amortized to interest expense ratably over the terms of the respective
notes. See Note 11.
Revenue Recognition
We recognize revenue when an arrangement exists, prices are determinable, collectability is reasonably assured and
the goods or services have been delivered.
DISH Segment
Revenue from our pay-TV service is recognized when programming is broadcast to subscribers. We recognize
revenue from our broadband services when the service is provided. Payments received from pay-TV and broadband
subscribers in advance of the broadcast or service period are recorded as “Deferred revenue and other” in our
Consolidated Balance Sheets until earned.
For certain of our promotions, subscribers are charged an upfront fee. A portion of these fees may be deferred and
recognized over the estimated subscriber life for new subscribers or the estimated remaining life for existing subscribers
ranging from 18 months to five years. Revenue from advertising sales is recognized when the related services are
performed.
Subscriber fees for pay-TV equipment rental, including DVRs, additional outlets and fees for receivers with
multiple tuners, our in-home service operations, and broadband equipment rental fees are recognized as revenue as
earned. Generally, revenue from equipment sales and equipment upgrades is recognized upon shipment to
customers.
Certain of our existing and new subscriber promotions include programming discounts. Programming revenues are
recorded as earned at the discounted monthly rate charged to the subscriber.
We offer our customers the opportunity to download movies for a specific viewing period or permanently purchase
a movie from our web-site. We recognize revenue when the movie is successfully downloaded by the customer,
which, based on our current technology, occurs at the time the customer plays the movie for the first time.
Blockbuster Segment
Rental revenue is generally recognized at the time of rental or sale. Rental revenue is generated from the rental of
movies and video games and any eventual sale of previously rented items.
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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Certain rental and subscription programs allow customers to rent a specified or unlimited number of titles during a
specific period. We recognize rental revenues from the sale of these programs and our online subscription service
over the term of the service.
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. Long-term
flat rate programming contracts are charged to expense using the straight-line method over the term of the
agreement. 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,
billing costs, refurbishment and repair costs related to receiver systems, subscriber retention and other variable
subscriber expenses, and monthly wholesale fees paid to broadband providers. These costs are recognized as the
services are performed or as incurred. The cost of broadband services is expensed monthly and generally incurred
on a per subscriber basis.
Subscriber Acquisition Costs
Subscriber acquisition costs in our Consolidated Statements of Operations and Comprehensive Income (Loss) consist
of costs incurred to acquire new pay-TV and broadband subscribers through third parties and our direct sales
distribution channel. Subscriber acquisition costs include the following line items from our Consolidated Statements of
Operations and Comprehensive Income (Loss):
x “Cost of sales – subscriber promotion subsidies - EchoStar” includes the cost of our receiver systems sold to
retailers and other distributors of our equipment and receiver systems sold directly by us to subscribers.
x “Other subscriber acquisition costs” includes net costs related to promotional incentives and costs related to
installation and other promotional subsidies and advertising and marketing expenses related to the acquisition
of new pay-TV and broadband subscribers.
We characterize amounts paid to our independent retailers as consideration for equipment installation services and for
equipment buydowns (incentives and rebates) as a reduction of revenue. We expense payments for equipment
installation services as “Other subscriber acquisition costs.” Our payments for equipment buydowns represent a partial
or complete return of the retailer’s purchase price and are, therefore, netted against the proceeds received from the
retailer. We report the net cost from our various sales promotions through our independent retailer network as a
component of “Other subscriber acquisition costs.” Net proceeds from the sale of subscriber related equipment
pursuant to our subscriber acquisition promotions are not recognized as revenue.
Advertising Costs
Our advertising costs associated with acquiring new Pay-TV and broadband subscribers and Blockbuster customers are
expensed as incurred. During the years ended December 31, 2012, 2011 and 2010, we recorded advertising costs of
$487 million, $375 million and $373 million, respectively, within “Other subscriber acquisition costs” and “General
and administrative expenses” on our Consolidated Statements of Operations and Comprehensive Income (Loss).
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