by reducing our spending on marketing programs. The decrease was partially offset by higher personnel-related costs due to higher headcount and an increase in the costs of free trial periods due to the 28.4% increase in gross subscriber additions. Subscriber acquisition cost decreased in 2008 as compared to 2007 primarily due to more efficient marketing spending.

General and Administrative

General and administrative expenses consist of payroll and related expenses for executive, finance, content acquisition and administrative personnel, as well as recruiting, professional fees and other general corporate expenses.

The $1.7 million increase in general and administrative expenses was primarily attributable to a $7.4 million increase in legal costs offset partially by a $2.7 million decrease in costs related to our subsidiary, Red Envelope Entertainment, a $2.1 million release of accruals in 2009 associated with a former class action suit that was settled in 2008, and decreases in personnel-related costs.

The $2.7 million decrease in general and administrative expenses was primarily attributable to a $2.6 million decrease in costs related to our subsidiary, Red Envelope Entertainment, as well as a $3.2 million decrease in legal costs. These decreases were partially offset by an increase in personnel-related costs due to a 9.6% increase in headcount.

Gain on Disposal of DVDs

Gain on disposal of DVDs represents the difference between proceeds from sales of DVDs and associated cost of DVD sales. Cost of DVD sales includes the net book value of the DVDs sold, shipping charges and, where applicable, a contractually specified fee for the DVDs that are subject to revenue sharing agreements.

The $1.8 million decrease in gain on disposal of DVDs was primarily attributable to the discontinuation of retail sales of previously viewed DVDs to subscribers in the first quarter of 2009. We continue to sell previously viewed DVDs through wholesale channels and expect our future gains to continue to be insignificant in relation to our overall operations.

The $0.9 million decrease in gain on disposal of DVDs in absolute dollars was primarily attributable to a decrease in the sales price of DVDs.

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

Interest expense consists of the interest on our lease financing obligations and the interest on our 8.50% senior notes including the amortization of debt issuance costs. Also, in the fourth quarter of 2009, we expensed the debt issuance costs related to our line of credit.

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 5 of the consolidated financial statements, we have accounted for these leases in accordance with ASC topic 840.40 Leases—Sale-Leaseback Transactions as it applies to situations in which an entity is involved with the construction funding of an asset that will be leased when the construction project