Dish Network 2009 Annual Report Download - page 59

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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Overview. Revenue totaled $11.664 billion for the year ended December 31, 2009, an increase of $47 million or 0.4%
compared to the same period in 2008. “Net income (loss) attributable to DISH Network common shareholders”
totaled $636 million, a decrease of $267 million or 29.6%.
DISH Network added approximately 422,000 net new subscribers during the year ended December 31, 2009 as a
result of higher gross subscriber additions and reduced churn. Our increased gross subscriber additions were
primarily a result of our sales and marketing promotions during the last half of 2009. Churn was positively
impacted by, among other things, the completion of our security access device replacement program, an increase in
our new subscriber commitment period and initiatives to retain subscribers. Historically, we have experienced
slightly higher churn in the months following the expiration of commitments for new subscribers. In February 2008,
we extended the required new subscriber commitment from 18 to 24 months. During the last half of 2009, due to
the change in promotional mix, we had fewer expiring new subscriber commitments. We continue to focus on
addressing operational inefficiencies specific to DISH Network which we believe will contribute to long-term
subscriber growth. ARPU has been negatively impacted by promotional discounts on programming offered to new
subscribers and our initiatives to retain subscribers, both of which negatively impacted our subscriber-related
margins. “Subscriber-related expenses” continued to be negatively impacted by increased programming costs and
initiatives to retain subscribers, migrate certain subscribers to make more efficient use of transponder capacity, and
improve customer service.
DISH Network subscribers. As of December 31, 2009, we had approximately 14.100 million DISH Network
subscribers compared to approximately 13.678 million subscribers at December 31, 2008, an increase of 3.1%. DISH
Network added approximately 3.118 million gross new subscribers for the year ended December 31, 2009, compared
to approximately 2.966 million during the same period in 2008, an increase of 5.1%.
DISH Network added approximately 422,000 net new subscribers during the year ended December 31, 2009,
compared to a loss of approximately 102,000 net new subscribers during the same period in 2008. Our average
monthly subscriber churn rate for the year ended December 31, 2009 was 1.64%, compared to 1.86% for the same
period in 2008. We believe this increase in net new subscribers and the decrease in churn primarily resulted from
the factors discussed in the “Overview” above. Although churn declined during the year, given the increasingly
competitive nature of our industry and the current economic conditions, we may not be able to maintain or continue
to reduce churn without increasing our spending on customer retention incentives, which would have a negative
effect on our results of operations and free cash flow.
We have not always met our own standards for performing high-quality installations, effectively resolving
subscriber issues when they arise, answering subscriber calls in an acceptable timeframe, effectively communicating
with our subscriber base, reducing calls driven by the complexity of our business, improving the reliability of certain
systems and subscriber equipment, and aligning the interests of certain third party retailers and installers to provide
high-quality service. Most of these factors have affected both gross new subscriber additions as well as existing
subscriber churn. Our future gross subscriber additions and subscriber churn may continue to be negatively
impacted by these factors, which could in turn adversely affect our revenue growth.
Our distribution relationship with AT&T was a substantial contributor to our gross and net subscriber additions in
prior years, accounting for approximately 17% of our gross subscriber additions for the year ended December 31,
2008. This distribution relationship ended January 31, 2009. Consequently, beginning with the second quarter
2009, AT&T no longer contributed to our gross subscriber additions. In addition, nearly one million of our current
subscribers were acquired through our distribution relationship with AT&T and subscribers acquired through this
channel have historically churned at a higher rate than our overall subscriber base. Although AT&T is not permitted
to target these subscribers for transition to another pay-TV service and we and AT&T are required to maintain
bundled billing and cooperative customer service for these subscribers, these subscribers may continue to churn at
higher than historical rates following termination of the AT&T distribution relationship.
Subscriber-related revenue. DISH Network “Subscriber-related revenue” totaled $11.539 billion for the year ended
December 31, 2009, an increase of $83 million or 0.7% compared to the same period in 2008. This change was
primarily related to the increase in “ARPU” discussed below, partially offset by the decline in our subscriber base
from second quarter 2008 through first quarter 2009.