Dish Network 1999 Annual Report Download - page 34

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Satellite services revenue totaled $22 million during 1998, an increase of $11 million as compared to 1997.
The increase in satellite services revenue was primarily attributable to increased BTV revenue due to the addition of
new full-time BTV customers.
DISH Network Operating Expenses. DISH Network operating expenses totaled $395 million during 1998, an
increase of $202 million or 105%, compared to 1997. The increase in DISH Network operating expenses was
consistent with, and primarily attributable to, the increase in the number of DISH Network subscribers. DISH Network
operating expenses represented 59% and 65% of subscription television services revenue during 1998 and 1997,
respectively.
Subscriber-related expenses totaled $297 million during 1998, an increase of $153 million compared to 1997.
Subscriber-related expenses represented 44% of subscription television services revenues during 1998 compared to
48% during 1997. The decrease in subscriber-related expenses as a percentage of subscription television services
revenue resulted primarily from a decrease in programming expenses on a per subscriber basis, which resulted from a
change in product mix combined with price discounts received from certain content providers.
Customer service center and other expenses totaled $72 million during 1998, an increase of $37 million as
compared to 1997. The increase in customer service center and other expenses resulted from increased personnel and
telephone expenses to support the growth of the DISH Network. Customer service center and other expenses totaled
11% of subscription television services revenue during 1998 compared to 12% of subscription television services
revenue during 1997.
Satellite and transmission expenses totaled $26 million during 1998, an $11 million increase compared to
1997. This increase resulted from higher satellite and other digital broadcast center operating expenses due to an
increase in the number of operational satellites.
Cost of sales – DTH equipment and Integration Services. Cost of sales – DTH equipment and integration
services totaled $173 million during 1998, an increase of $111 million compared to 1997. This increase is consistent
with the increase in DTH equipment revenue. As a percentage of DTH equipment revenue, cost of sales represented
68% during each of 1998 and 1997.
Marketing Expenses. Marketing expenses totaled $321 million during 1998, an increase of $141 million or
78%, compared to 1997. The increase in marketing expenses was primarily attributable to the increase in subscriber
promotion subsidies. During all of 1998 we recognized subscriber promotion subsidies as incurred. These expenses
totaled $273 million during 1998, an increase of $128 million over 1997. This increase resulted from increased
subscriber activations and the immediate recognition of all subscriber promotion subsidies incurred in 1998, due to the
removal of any prepaid subscription requirement. During 1997, a portion of such expenses were initially deferred and
amortized over the related prepaid subscription term, generally one year. Advertising and other expenses totaled
$48 million during 1998, an increase of $13 million over 1997.
During 1998, our subscriber acquisition costs, inclusive of acquisition marketing expenses, totaled
$314 million, or approximately $285 per new subscriber activation. Comparatively, our 1997 subscriber acquisition
costs, inclusive of acquisition marketing expenses and deferred subscriber acquisition costs, totaled $252 million, or
approximately $340 per new subscriber activation. The decrease in our subscriber acquisition costs, on a per new
subscriber activation basis, principally resulted from decreases in the manufactured cost of EchoStar receiver systems.
General and Administrative Expenses. General and administrative expenses totaled $97 million during 1998,
an increase of $28 million as compared to 1997. The increase in G&A expenses was principally attributable to
increased personnel expenses to support the growth of the DISH Network. G&A expenses as a percentage of total
revenue decreased to 10% during 1998 compared to 15% during 1997.
Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA was negative $20 million and
negative $51 million, during 1998 and 1997, respectively. EBITDA, as adjusted to exclude amortization of subscriber
acquisition costs, was negative $39 million for 1998 compared to negative $173 million for 1997. This improvement in
EBITDA principally resulted from increases in our ETC and DISH Network revenues. However, EBITDA does not