Dish Network 2014 Annual Report Download - page 182

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-76
to the T2 satellite for $55 million. In accordance with accounting principles that apply to transfers of assets between
companies under common control, we recorded the difference between our historical cost basis of the satellite and
the fair value of the satellite transferred to EchoStar as a $9 million, net of deferred taxes, capital contribution in
“Additional paid-in capital” on our Consolidated Balance Sheet.
Sling TV. Effective July 1, 2012, we and EchoStar formed Sling TV, which was owned two-thirds by us and one-
third by EchoStar and was consolidated into our financial statements beginning July 1, 2012. Sling TV was formed
to develop and commercialize certain advanced technologies. At that time, we, EchoStar and Sling TV entered into
the following agreements with respect to Sling TV: (i) a contribution agreement pursuant to which we and
EchoStar contributed certain assets in exchange for our respective ownership interests in Sling TV; (ii) a limited
liability company operating agreement (the “Operating Agreement”), which provides for the governance of Sling
TV; and (iii) a commercial agreement (the “Commercial Agreement”) pursuant to which, among other things, Sling
TV has: (a) certain rights and corresponding obligations with respect to its business; and (b) the right, but not the
obligation, to receive certain services from us and EchoStar, respectively. Since this was a formation of an entity
under common control and a step-up in basis was not allowed, each party’s contributions were recorded at historical
book value for accounting purposes.
Effective August 1, 2014, EchoStar and Sling TV entered into the Exchange Agreement pursuant to which, among
other things, Sling TV distributed certain assets to EchoStar and EchoStar reduced its interest in Sling TV to a ten
percent non-voting interest. We now have a ninety percent equity interest and a 100% voting interest in Sling TV.
In addition, we, EchoStar and Sling TV amended and restated the Operating Agreement, primarily to reflect the
changes implemented by the Exchange Agreement. Finally, we, EchoStar and Sling TV amended and restated the
Commercial Agreement, pursuant to which, among other things, Sling TV: (1) continues to have certain rights and
corresponding obligations with respect to its business; (2) continues to have the right, but not the obligation, to
receive certain services from us and EchoStar; and (3) has a license from EchoStar to use certain of the assets
distributed to EchoStar as part of the Exchange Agreement. On February 9, 2015, we launched a live, OTT service
under the Sling TV brand.
Since the Exchange Agreement is among entities under common control, we recorded the difference between the
historical cost basis of the assets transferred to EchoStar and our historical cost basis in EchoStar’s one-third
noncontrolling interest in Sling TV as a $6 million, net of deferred taxes, capital distribution in “Additional paid-in
capital” on our Consolidated Balance Sheet. In addition, we recorded the initial fair value of EchoStar’s ten percent
non-voting interest as a $14 million, net of deferred taxes, deemed distribution in “Additional paid-in capital” on
our Consolidated Balance Sheet. All services provided to Sling TV by EchoStar under the Commercial Agreement
are recorded in “General and administrative expenses” on our Consolidated Statements of Operations and
Comprehensive Income (Loss). See “General and administrative expenses” within the related party section
previously discussed.
DISH Remote Access Services Agreement. Effective February 23, 2010, we entered into an agreement with
EchoStar pursuant to which we receive, among other things, certain remote DVR management services. The fees
for the services provided under this services agreement depend, among other things, upon the cost to develop and
operate such services. This agreement has a term of five years with automatic renewal for successive one year
terms. This agreement may be terminated for any reason upon at least 120 days notice to EchoStar. During the
years ended December 31, 2014, 2013 and 2012, we paid $3 million, $2 million and $2 million, respectively, for
these services from EchoStar, included in “Subscriber-related expenses” on the Consolidated Statements of
Operations and Comprehensive Income (Loss).
SlingService Services Agreement. Effective February 23, 2010, we entered into an agreement with EchoStar
pursuant to which we receive certain services related to placeshifting. The fees for the services provided under this
services agreement depend, among other things, upon the cost to develop and operate such services. This
agreement has a term of five years with automatic renewal for successive one year terms. This agreement may be
terminated for any reason upon at least 120 days notice to EchoStar. During the years ended December 31, 2014,
2013 and 2012, we paid $4 million, $3 million and $2 million, respectively, for these services from EchoStar,
included in “Subscriber-related expenses” on the Consolidated Statements of Operations and Comprehensive
Income (Loss).