Dish Network 2004 Annual Report Download - page 96

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
equipment rental and other services are recognized as revenue, monthly as earned. Revenue from advertising sales
is recognized when the related services are performed. Payments received from subscribers in advance of the
broadcast or service period are recorded as “Deferred revenue” in the consolidated balance sheets until earned.
Revenue from equipment sales is recognized upon shipment to customers.
Contemporaneous with the commencement of sales of co-branded services pursuant to our agreement with SBC
Communications, Inc. (“SBC”) during the first quarter of 2004, revenue from equipment sales to SBC and development
and implementation fees received from SBC is deferred and recognized ratably over the estimated average co-branded
subscriber life. Revenue from installation and certain other services performed at the request of SBC is recognized
upon completion of the services.
Accounting for our new subscriber promotions which include programming discounts falls under the scope of EITF
Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s
Capital Products)” (“EITF 01-9”). In accordance with EITF 01-9, programming revenues under these promotions are
recorded at the discounted monthly rate charged to the subscriber. See Subscriber Acquisition Costs below for
discussion regarding the accounting for costs under these promotions.
Subscriber-related expenses
The cost of television programming distribution rights is generally incurred on a per subscriber basis and various
upfront carriage payments are recognized when the related programming is distributed to subscribers. The cost of
television programming rights to distribute live sporting events for a season or tournament is charged to expense
using the straight-line method over the course of the season or tournament. Programming costs are included in
“Subscriber-related expenses” in the consolidated statements of operations and comprehensive income (loss).
“Subscriber-related expenses” also include costs incurred in connection with our in-home service and call center
operations, overhead costs associated with our installation business, copyright royalties, residual commissions,
billing, lockbox, subscriber retention and other variable subscriber expenses. These costs are recognized as the
services are performed or as incurred.
Contemporaneous with the commencement of sales of co-branded services pursuant to our agreement with SBC during
the first quarter of 2004, “Subscriber-related expenses” also include the cost of sales and expenses from equipment
sales, direct costs of installation and other services related to that relationship. Cost of sales from equipment sales to
SBC are deferred and recognized over the estimated average co-branded subscriber life. Expenses from installation
and certain other services performed at the request of SBC are recognized as the services are performed.
Subscriber Acquisition Costs
Subscriber acquisition costs in our consolidated statements of operations and comprehensive income (loss) consist of
costs incurred to acquire new subscribers through third parties and our direct customer acquisition distribution channel.
Subscriber acquisition costs include the following line items from our consolidated statements of operations and
comprehensive income (loss):
• “Cost of sales – subscriber promotion subsidies” includes the cost of EchoStar receiver systems sold to
retailers and other distributors of our equipment and receiver systems sold directly by us to subscribers.
• “Other subscriber promotion subsidies” includes net costs related to promotional incentives and costs related
to installation.
• “Subscriber acquisition advertising” includes advertising and marketing expenses related to the acquisition of
new DISH Network subscribers. Advertising costs generally are expensed as incurred.
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