Dish Network 1999 Annual Report Download - page 60

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–12
Revenue Recognition
Revenue from the provision of DISH Network subscription television services and satellite services is
recognized as revenue in the period such services are provided. Revenue from sales of digital set-top boxes and
related accessories is recognized upon shipment to customers. Revenue from the provision of integration services is
recognized as revenue in the period the services are performed.
Subscriber Promotion Subsidies and Subscriber Acquisition Costs
In August 1996, EchoStar began selling its receiver systems below manufactured cost to consumers
conditioned upon the consumer’s one-year prepaid subscription to the DISH Network’s America’s Top 50 CD
programming package. From August 1996 through September 1997, the excess of EchoStar’s aggregate costs
(equipment, programming and other) over proceeds from equipment sales and prepaid programming was expensed
(“subscriber promotion subsidies”) upon shipment of the equipment. Remaining costs were deferred (“subscriber
acquisition costs”) and amortized over the term of the prepaid subscription (normally one year). Effective
October 1997, promotional programs changed and new subscribers were not required to prepay for a year of
programming. Consequently, EchoStar began expensing subscriber acquisition costs as incurred. As of
December 31, 1998, all previously deferred costs were fully amortized.
During November 1999, EchoStar entered into an exclusive multi-year agreement with Superstar/Netlink
Group (“Superstar”), a subsidiary of TV Guide, Inc., to convert its current and inactive C-band subscribers to
EchoStar’s DBS services. Under the terms of the agreement, Superstar will actively solicit its C-band subscribers to
convert to EchoStar’s DBS services and will not provide its subscriber lists to cable providers or other DBS
providers. In exchange, in December 1999, EchoStar paid Superstar a $10,000,000 exclusivity fee. In addition,
EchoStar 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. The exclusivity fee will be amortized to expense as subscribers projected to be
converted are activated for DISH Network services.
Deferred Debt Issuance Costs and Debt Discount
Costs of issuing debt are deferred and amortized to interest expense over the terms of the respective notes.
Prior to being refinanced during January 1999, the original issue discounts related to the 1994 Notes and the 1996
Notes were being accreted to interest expense so as to reflect a constant rate of interest on the accreted balance of the
1994 Notes and the 1996 Notes.
Deferred Revenue
Deferred revenue principally consists of prepayments received from subscribers for DISH Network programming. Such
amounts are recognized as revenue in the period the programming is provided to the subscriber.
Long-Term Deferred Satellite Services Revenue
Long-term deferred satellite services revenue consists of advance payments from certain content providers
for carriage of their signal on the DISH Network. Such amounts are deferred and recognized as revenue on a
straight-line basis over the related contract terms (up to ten years).