in direct mail and inserts. In the second half of 2007, we lowered prices on our most popular subscription plans and decided to partially offset the cost of our investment in lower prices by reducing our spending on marketing programs. Subscriber acquisition cost decreased in 2008 as compared to 2007 primarily due to more efficient marketing spending.

The decrease in marketing expenses in absolute dollars in 2007 as compared to 2006 was primarily attributable to a decrease in marketing program spending, principally in television advertising and direct mail. Subscriber acquisition cost decreased in 2007 as compared to 2006 primarily due to more efficient marketing spending.

General and Administrative

The decrease in general and administrative expenses in absolute dollars in 2008 as compared to 2007 was primarily attributable to a decrease in costs related to our subsidiary, Red Envelope Entertainment, as well as a decrease in costs related to legal proceedings. These decreases were offset by an increase in personnel-related costs.

The increase in general and administrative expenses in absolute dollars in 2007 as compared to 2006 was primarily attributable to an increase in personnel-related costs due to growth in headcount. The increase was also attributable to higher costs related to legal proceedings.

Gain on Disposal of DVDs

The decrease in gain on disposal of DVDs in absolute dollars in 2008 as compared to 2007 was primarily attributable to a decrease in the sales price of DVDs.

The increase in gain on disposal of DVDs in absolute dollars in 2007 as compared to 2006 was primarily attributable to an increase in the volume of DVDs sold, offset in part by an increase in the cost of DVD sales.

In the first quarter of 2009, we discontinued retail sales of previously viewed DVD’s to subscribers. However, we will continue to sell previously viewed DVDs through wholesale channels.

Gain on Legal Settlement

On June 25, 2007, we resolved a pending patent litigation with Blockbuster, Inc. As part of the settlement, we received a one-time payment of $7.0 million during the second quarter of 2007.

Interest Expense on Lease Financing Obligations

In June 2004 and June 2006, we entered into two separate lease arrangements whereby we leased a building that was constructed by a third party. As discussed in Note 1 of the condensed consolidated financial statements, we have accounted for these leases in accordance with Emerging Issues Task Force (“EITF”) No. 97-10, The Effect of Lessee Involvement in Asset Construction (“EITF 97-10”), and SFAS No. 98, Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases; an amendment of FASB Statements No. 13, 66, and 91 and a rescission of FASB Statement No. 26 and Technical Bulletin No. 79-11 (“SFAS 98”), which causes Netflix to be considered the owner (for accounting purposes) of the two buildings.

Accordingly, we have recorded assets on our balance sheet for the costs paid by our lessor to construct our headquarters facilities, along with corresponding financing liabilities