Dish Network 2001 Annual Report Download - page 42

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Under the Bounty Programs, qualified customers were eligible to receive a free base-level EchoStar receiver
system and free installation. To be eligible for this program, a subscriber must have made a one-year commitment to
subscribe to a qualified programming package. Certain of these promotions expired on January 31, 2001.
From February through July 2001, we offered new subscribers a free base-level EchoStar receiver system and
free installation under our Free Now promotion. To be eligible, a subscriber had to provide a valid major credit card
and make a one-year commitment to subscribe to either our America’s Top 150 programming package or our
America’s Top 100 CD or DISH Latino Dos programming package plus additional programming totaling at least
$39.98 per month. Subscriber acquisition costs were materially higher under this plan compared to historical
promotions.
During August 2001, we commenced our I Like 9 promotion. Under this promotion, subscribers who
purchased an EchoStar receiver system for $199 or higher, receive free installation and either our America’s Top 100
CD or our DISH Latino Dos programming package for $9 a month for the first year. Subscriber acquisition costs are
materially lower under this plan compared to historical promotions. This promotion expired January 31, 2002.
Our direct sales to consumers pursuant to our DISH Network One-Rate Plan, Bounty Programs, Free Now
promotion and I Like 9 fall under the scope of EITF Issue No. 00-14, “Accounting for Certain Sales Incentives” (“EITF
00-14”). In accordance with EITF 00-14, we account for the rebate (substantively equivalent to the return of a
customer deposit) under our DISH Network One-Rate Plan by establishing a liability equal to the amount of the rebate
to be paid to the customer upon receipt of the upfront payment from the subscriber and do not recognize revenue for
that amount. The return of the upfront payment received from the customer is charged against such liability account
when such amount is paid back to the customer. We do not receive any up-front proceeds from subscribers under
Bounty Programs or the Free Now promotion. Programming revenue under the I Like 9 promotion is recorded at the
substantially discounted monthly rate charged to the subscriber.
Our dealer sales under our DISH Network One-Rate Plan, the Bounty Programs, Free Now promotion and I
Like 9 fall under the scope of EITF Issue No. 00-25, “Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor’s Products” (“EITF 00-25”). In accordance with the consensus guidance for Issue 2 of
EITF 00-25, “buydowns” should be characterized as a reduction of revenue. As such, certain commissions paid to
dealers are recorded as a reduction of the net proceeds received by us from the dealers. We also charge the equipment
reimbursements paid under the Bounty Programs and the Free Now promotion against the proceeds from the dealer.
The rebate paid under the One Rate Plan is treated similarly as a reduction of proceeds from the dealer by analogy to
lease inducements, which are also generally recognized as a reduction of revenue.
Free Installation. Under our free installation program all customers who purchase an EchoStar receiver
system from January 2000 through April 2000, from May 24, 2000 to July 31, 2000 and from September 15, 2000 to
the present, are eligible to receive a free professional installation.
Digital Home Plan. Our Digital Home Plan promotion, introduced during July 2000, offers several choices to
consumers, ranging from the use of one EchoStar receiver system and our America’s Top 100 CD or DISH Latino Dos
programming package for $36.99 per month, to providing consumers two or more EchoStar receiver systems and our
America’s Top 150 programming package for $50.99 to $60.99 per month. With each plan, consumers receive in-
home service, must agree to a one-year commitment and incur a one-time set-up fee of $49.99, which through
December 31, 2001, included the first month’s programming payment. For consumers who choose the Digital Home
Plan with Dish PVR, which includes the use of one or more EchoStar receiver systems, one of which includes a built-in
hard drive that allows viewers to pause and record live programming without the need for videotape, the consumer will
incur a one-time set-up fee of $148.99. Since we retain ownership of equipment issued pursuant to the Digital Home
Plan promotion, equipment costs are capitalized and depreciated over a period of four years. Although there can be no
assurance as to the ultimate duration of the Digital Home Plan promotion, we intend to continue it through at least
April 30, 2002.
Generally, under most promotions, we subsidize the cost and installation of EchoStar receiver systems in
order to attract new DISH Network subscribers. There is no clear industry standard used in the calculation of
subscriber acquisition costs. Our subscriber acquisition costs include subscriber promotion subsidies – cost of sales,
subscriber promotion subsidies - other and DISH Network acquisition marketing expenses. During the year ended