Dish Network 1999 Annual Report Download - page 36

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of our customer service has also been impacted. We are rapidly expanding our customer service and installation
capabilities in response to our increased business, but churn may increase until we have completed the upgrades to our
infrastructure. Further, our litigation with the networks in Miami, and other factors, including our inability to obtain
retransmission consents from local network stations on or before May 29, 2000, could require us to terminate delivery
of network channels to a material portion of our subscriber base, which could cause many of those subscribers to
cancel their subscription to our other services. Any such terminations could result in a small reduction in average
monthly revenue per subscriber and could result in increased churn. While there can be no assurance, notwithstanding
the issues discussed above, we expect to be able to continue to manage churn to a level at or below satellite industry
averages during 2000.
Subscriber Acquisition Costs
As previously described, we subsidize the purchase and installation of EchoStar receiver systems in order to
attract new DISH Network subscribers. Consequently, our subscriber acquisition costs are significant. While our
average subscriber acquisition cost was $385 for all of 1999, it was higher during the fourth quarter, averaging
approximately $425 per subscriber. In connection with our plans to encourage as many new subscribers as possible to
be ready for the additional services that will become available at the 110° WL orbital location, and as a result of
continuing competition and our plans to attempt to continue to drive rapid subscriber growth, we expect that our
subscriber acquisition costs during 2000 could increase by as much as $25 per subscriber or more on average compared
to the fourth quarter of 1999. While there can be no assurance, as a result of our free system and free installation
promotion which is anticipated to continue through at least April 30, 2000, we expect our subscriber acquisition costs
for 2000 will be highest during the first several months of the year and may decline thereafter, and may average as
much as $450 or more for the full year. Our subscriber acquisition costs, both in the aggregate and on a per new
subscriber activation basis, may materially increase further to the extent that we continue or expand our bounty
programs, our “free system/free installation” program, or the DISH Network One-Rate Plan, or if we determine that
more aggressive promotions are necessary to respond to competition, or for other reasons.
Further, in November 1999 we entered into an exclusive multi-year agreement with Superstar/Netlink
Group, a subsidiary of TVGuide, to convert its current and inactive C-band (large dish) subscribers to our DBS
(small dish) services. Under the terms of the agreement, we will incur substantial subscriber acquisition costs,
including payments to Superstar and the retailer, and for equipment and other incentives to the consumer for each
Superstar subscriber who actually converts to and remains a subscriber to our DBS Services. Subscriber acquisition
costs under the terms of this agreement are generally higher than under our marketing promotions. As a result of
this agreement, subscriber acquisition costs may increase to the extent our efforts to convert Superstar’s subscribers
are even more successful than we anticipate.
Since we currently subsidize the cost of EchoStar receiver systems and their installation, we incur
significant costs each time we acquire a new subscriber. During the past several months, we have experienced an
increase in subscriber acquisition costs primarily caused by our free system and free installation promotion.
However, our monthly revenue per subscriber has not increased to the same extent. Although there can be no
assurance, we believe that we will be able to fully recoup the up-front costs of subscriber acquisition from future
subscription television services revenue. Funds necessary to meet subscriber acquisition costs will be satisfied from
existing cash and investment balances to the extent available. We may, however, be required to raise additional
capital in the future to meet these requirements. There can be no assurance that additional financing will be
available on acceptable terms, or at all.
Repositioning Costs
We previously indicated that in connection with the launch of EchoStar V and EchoStar VI we expected to
incur material one-time expenses, primarily during 2000, associated with repositioning existing subscribers’ satellite
dishes from the 119° WL orbital location to the 110° WL orbital location. We have now decided to utilize the 110°
WL orbital location, where EchoStar V and EchoStar VI will be located, to enhance revenue opportunities with new
value added services for our current and future subscribers, and to maintain our primary DBS service at the 119° orbital
location. Consequently, while we still expect to incur costs to upgrade some subscribers to dishes capable of receiving
signals from both the 110° WL and 119° WL orbital locations, these costs are not expected to be as significant during
2000 as previously planned.