Dish Network 2010 Annual Report Download - page 52

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
45
45
Because both we and EchoStar are defendants in the Tivo lawsuit, we and EchoStar are jointly and severally liable
to Tivo for any final damages and sanctions that may be awarded by the District Court. We have determined that we
are obligated under the agreements entered into in connection with the Spin-off to indemnify EchoStar for
substantially all liability arising from this lawsuit. EchoStar contributed an amount equal to its $5 million
intellectual property liability limit under the Receiver Agreement. We and EchoStar have further agreed that
EchoStar’s $5 million contribution would not exhaust EchoStar’s liability to us for other intellectual property claims
that may arise under the Receiver Agreement. We and EchoStar also agreed that we would each be entitled to joint
ownership of, and a cross-license to use, any intellectual property developed in connection with any potential new
alternative technology.
If Voom prevails in its breach of contract suit against us, we could be required to pay substantial damages, which
would have a material adverse affect on our financial position and results of operations. In January 2008, Voom HD
Holdings (“Voom”) filed a lawsuit against us in New York Supreme Court, alleging breach of contract and other
claims arising from our termination of the affiliation agreement governing carriage of certain Voom HD channels on
the DISH Network satellite TV service. At that time, Voom also sought a preliminary injunction to prevent us from
terminating the agreement. The Court denied Voom’s request, finding, among other things, that Voom had not
demonstrated that it was likely to prevail on the merits. In April 2010, we and Voom each filed motions for
summary judgment. Voom later filed two motions seeking discovery sanctions. On November 9, 2010, the Court
issued a decision denying both motions for summary judgment, but granting Voom’s motions for discovery
sanctions. The Court’s decision provides for an adverse inference jury instruction at trial and precludes our damages
expert from testifying at trial. We appealed the grant of Voom’s motion for discovery sanctions to the New York
State Supreme Court, Appellate Division, First Department. On February 15, 2011, the appellate Court granted our
motion to stay the trial pending our appeal. Voom is claiming over $2.5 billion in damages.
We entered into an $87.5 million Credit Facility with DBSD North America on February 1, 2011. The Credit
Facility remains subject to approval by the Bankruptcy Court. In addition, on February 1, 2011 we committed to
acquire 100% of the equity of reorganized DBSD North America for approximately $1.0 billion subject to certain
adjustments, including interest accruing on DBSD North America’s existing debt. This transaction is to be
completed upon satisfaction of certain conditions, including approval by the FCC and DBSD North America’s
emergence from bankruptcy. See Note 18 in the Notes to the Consolidated Financial Statements in Item 15 of this
Annual Report on Form 10-K for further discussion.
The Spin-off. On January 1, 2008, we completed the distribution of our technology and set-top box business and
certain infrastructure assets (the “Spin-off”) into a separate publicly-traded company, EchoStar. DISH Network and
EchoStar operate as separate publicly-traded companies, and neither entity has any ownership interest in the other.
However, a substantial majority of the voting power of the shares of both companies is owned beneficially by
Charles W. Ergen, our Chairman, President and Chief Executive Officer or by certain trusts established by Mr.
Ergen for the benefit of his family.
EXPLANATION OF KEY METRICS AND OTHER ITEMS
Subscriber-related revenue. “Subscriber-related revenue” consists principally of revenue from basic, premium
movie, local, HD programming, pay-per-view, Latino and international subscription television services, equipment
rental fees and other hardware related fees, including fees for DVRs, equipment upgrade fees and additional outlet
fees from subscribers with multiple receivers, advertising services, fees earned from our in-home service operations
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 non-subsidized
sales of DBS accessories to retailers and other third-party distributors of our equipment domestically and to DISH
Network subscribers.