Dish Network 2008 Annual Report Download - page 52

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
42
EXPLANATION OF KEY METRICS AND OTHER ITEMS
Subscriber-related revenue. “Subscriber-related revenue” consists principally of revenue from basic, movie, local,
pay-per-view, Latino and international subscription television services, equipment rental fees and other hardware
related fees, including fees for DVRs and additional outlet fees from subscribers with multiple receivers, advertising
services, fees earned from our DishHOME Protection Plan, equipment upgrade fees, HD programming and other
subscriber revenue. Certain of the amounts included in “Subscriber-related revenue” are not recurring on a monthly
basis.
Equipment sales and other revenue. “Equipment sales and other revenue” principally includes the unsubsidized sales
of DBS accessories to retailers and other third-party distributors of our equipment and to DISH Network subscribers.
During 2007 and 2006, this category also included sales of non-DISH Network digital receivers and related
components to international customers and satellite and transmission revenue, which related to the set-top box business
and other assets that were distributed to EchoStar in connection with the Spin-off.
Equipment sales, transitional services and other revenue – EchoStar. “Equipment sales, transitional services and
other revenue – EchoStar” includes revenue related to equipment sales, and transitional services and other agreements
with EchoStar associated with the Spin-off.
Subscriber-related expenses. “Subscriber-related expenses” principally include programming expenses, costs
incurred in connection with our in-home service and call center operations, billing costs, refurbishment and repair
costs related to receiver systems, subscriber retention and other variable subscriber expenses.
Satellite and transmission expenses – EchoStar. “Satellite and transmission expenses – EchoStar” includes the cost
of digital broadcast operations provided to us by EchoStar, which were previously performed internally, including
satellite uplinking/downlinking, signal processing, conditional access management, telemetry, tracking and control and
other professional services. In addition, this category includes the cost of leasing satellite and transponder capacity on
satellites that were distributed to EchoStar in connection with the Spin-off.
Satellite and transmission expenses – other. “Satellite and transmission expenses – other” includes transponder
leases and other related services. Prior to the Spin-off, “Satellite and transmission expenses – other” included costs
associated with the operation of our digital broadcast centers, including satellite uplinking/downlinking, signal
processing, conditional access management, telemetry, tracking and control, satellite and transponder leases, and other
related services, which were previously performed internally.
Equipment, transitional services and other cost of sales. “Equipment, transitional services and other cost of sales”
principally includes the cost of unsubsidized sales of DBS accessories to retailers and other distributors of our
equipment domestically and to DISH Network subscribers. In addition, this category includes costs related to
equipment sales, transitional services and other agreements with EchoStar associated with the Spin-off.
During 2007 and 2006, “Equipment, transitional services and other cost of sales” also included costs associated with
non-DISH Network digital receivers and related components sold to international customers and satellite and
transmission expenses, which related to the set-top box business and other assets that were distributed to EchoStar in
connection with the Spin-off.
Subscriber acquisition costs. In addition to leasing receivers, we generally subsidize installation and all or a portion
of the cost of our receiver systems in order to attract new DISH Network subscribers. Our “Subscriber acquisition
costs” include the cost of our receiver systems sold to retailers and other distributors of our equipment, the cost of
receiver systems sold directly by us to subscribers, net costs related to our promotional incentives, and costs related to
installation and acquisition advertising. We exclude the value of equipment capitalized under our lease program for
new subscribers from “Subscriber acquisition costs.”
SAC. Management believes subscriber acquisition cost measures are commonly used by those evaluating
companies in the pay-TV industry. We are not aware of any uniform standards for calculating the “average
subscriber acquisition costs per new subscriber activation,” or SAC, and we believe presentations of SAC may not
be calculated consistently by different companies in the same or similar businesses. Our SAC is calculated as
“Subscriber acquisition costs,” plus the value of equipment capitalized under our lease program for new subscribers,
divided by gross subscriber additions. We include all the costs of acquiring subscribers (e.g., subsidized and