DISH Network CORP

We determine if an arrangement is a lease and classify that lease as either an operating or finance lease at inception.  Operating leases are included in “Operating lease assets,” “Other accrued expenses” and “Operating lease liabilities” on our Condensed Consolidated Balance Sheets.  Finance leases are included in “Property and equipment, net,” “Current portion of long-term debt and finance lease obligations” and “Long-term debt and finance lease obligations, net of current portion” on our Condensed Consolidated Balance Sheets.  Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 8 for further information on our lease expenses.

We lease certain assets from EchoStar, including, among other things, satellites, office space and data centers.  See Note 13 for further information on our Related Party Transactions with EchoStar.  We have lease agreements with lease and non-lease components, which are generally accounted for separately.  Our variable lease payments are immaterial and our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For equipment leased to new and existing DISH TV subscribers we made an accounting policy election to combine the equipment with our programming services as a single performance obligation in accordance with the revenue recognition guidance as the programming services are the predominant component. 

Furthermore, our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate may be negatively impacted if we are unable to renew our long-term programming carriage contracts before they expire.    In the past, our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate have been negatively impacted as a result of programming interruptions and threatened programming interruptions in connection with the scheduled expiration of programming carriage contracts with content providers.  In June 2018 and November 2018, Univision Communications Inc. (“Univision”) removed certain of its channels from our DISH TV and Sling TV programming lineup.  On March 26, 2019, we and Univision signed a new programming carriage contract which restored certain of these Univision channels to our DISH TV programming lineup.    In October 2018, AT&T removed its HBO and Cinemax channels from our DISH TV and Sling TV programming lineup, as we and AT&T have been unable to negotiate the terms and conditions of a new programming carriage contract.  AT&T offers its programming, including its HBO and Cinemax channels, directly to consumers over the Internet and provides HBO for free to subscribers of its streaming service AT&T’s “Watch TV.”  We experienced a higher DISH TV churn rate, higher net Pay-TV subscriber losses and lower gross new DISH TV subscriber activations during the third and fourth quarter 2018 and continuing into the first quarter 2019, when Univision and AT&T removed certain of their channels from our DISH TV and Sling TV programming lineup.  There can be no assurance that the removal of the AT&T channels will not have a material adverse effect on our business, results of operations and financial condition or otherwise disrupt our business.   

Pay-TV subscribers.  We lost approximately 259,000 net Pay-TV subscribers during the three months ended March 31, 2019 compared to the loss of approximately 94,000 net Pay-TV subscribers during the same period in 2018.  The increase in net Pay-TV subscriber losses during the three months ended March 31, 2019  resulted from fewer net Sling TV subscriber additions and higher net DISH TV subscriber losses.  Our net Pay-TV subscriber losses during the three months ended March 31, 2019  were negatively impacted by Univision and AT&T’s removal of certain of their channels from our DISH TV and Sling TV programming lineup.    As a result, we experienced higher net Pay-TV subscriber losses beginning in the second half of 2018 and continuing into the first quarter 2019.  On March 26, 2019, we and Univision signed a new programming carriage contract which restored certain Univision channels to our DISH TV programming lineup.   We lost approximately 266,000 net DISH TV subscribers during the three months ended March 31, 2019 compared to the loss of approximately 185,000 net DISH TV subscribers during the same period in 2018.  This increase in net DISH TV subscriber losses resulted from lower gross new DISH TV subscriber activations.  We added approximately 7,000 net Sling TV subscribers during the three months ended March 31, 2019 compared to the addition of approximately 91,000 net Sling TV subscribers during the same period in 2018.  This decrease in net Sling TV subscriber additions is primarily related to increased competition, including competition from other OTT service providers, and the impact from Univision and AT&T’s removal of certain of their channels from our programming lineup, discussed above.

Pay-TV subscribers.    We lost approximately 259,000 net Pay-TV subscribers during the three months ended March 31, 2019 compared to the loss of approximately 94,000 net Pay-TV subscribers during the same period in 2018.  The increase in net Pay-TV subscriber losses during the three months ended March 31, 2019  resulted from fewer net Sling TV subscriber additions and higher net DISH TV subscriber losses.  Our net Pay-TV subscriber losses during the three months ended March 31, 2019  were negatively impacted by Univision and AT&T’s removal of certain of their channels from our DISH TV and Sling TV programming lineup.  As a result, we experienced higher net Pay-TV subscriber losses beginning in the second half of 2018 and continuing into the first quarter 2019.  On March 26, 2019, we and Univision signed a new programming carriage contract which restored certain Univision channels to our DISH TV programming lineup.  We lost approximately 266,000 net DISH TV subscribers during the three months ended March 31, 2019 compared to the loss of approximately 185,000 net DISH TV subscribers during the same period in 2018.  This increase in net DISH TV subscriber losses resulted from lower gross new DISH TV subscriber activations.  We added approximately 7,000 net Sling TV subscribers during the three months ended March 31, 2019 compared to the addition of approximately 91,000 net Sling TV subscribers during the same period in 2018.  This decrease in net Sling TV subscriber additions is primarily related to increased competition, including competition from other OTT service providers, and the impact from Univision and AT&T’s removal of certain of their channels from our programming lineup, discussed above.    See “Results of Operations” above for further information.