DIRECTV 2003 Annual Report Download - page 14

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THE DIRECTV GROUP, INC.
Business Strategy
DIRECTV U.S.’ overall goal is to provide customers with the best television experience in the U.S.
DIRECTV U.S. believes its association with News Corporation’s global economies of scale and world-class
content will help it attain this goal. DIRECTV U.S.’ strategy focuses on attaining leadership in technology,
offering its customers compelling and differentiated content and providing high-quality customer service. If it is
successful in executing this strategy, DIRECTV U.S. believes that it will generate strong subscriber revenue and
cash flow growth in the future.
•Technology Leadership. DIRECTV U.S. believes that technological leadership will be key to its
ability to introduce compelling services that are also easy to use and customer-friendly. DIRECTV U.S.
believes that advancements in its technology will lead to enhanced digital video recorders, or DVRs,
more standardized set-top receivers, HDTV programming and reduced signal theft.
•Enhance DVRs and Standardize Set-top Receivers. A cornerstone of DIRECTV U.S.’ strategy is to
use set-top receivers that incorporate DVR technology. These products digitally record television
programs without videotape and allow customers to pause and rewind live television, create their
own television programming lineups based on personal preferences and watch one live program
while simultaneously recording another. DIRECTV U.S. currently has a non-exclusive arrangement
with TiVo, Inc. to provide DVR functionality in selected set-top receivers. DIRECTV U.S. expects
to continue to develop its relationship with TiVo, Inc. as well as actively explore other options to
establish a DVR market leadership position. Furthermore, DIRECTV U.S. plans to significantly
expand usage of DVRs by offering enhanced capabilities including expanded storage capacity, more
sophisticated software and the ability to record HDTV programming. In addition, by incorporating a
common technology standard into the design and manufacture of the DIRECTV set-top receivers
along with other efficiencies, DIRECTV U.S. believes it can drive manufacturing costs lower while
bringing new features and functionality to market in an accelerated fashion.
•Expand HDTV Programming. DIRECTV U.S. launched its HDTV programming package on July
1, 2003 and currently offers seven national HDTV channels. In the first quarter of 2004, DIRECTV
U.S. began offering network HDTV programming from CBS in its owned and operated markets,
which include eight of the ten largest U.S. markets. As more HDTV programming becomes
available, DIRECTV U.S. expects to continue expanding its HDTV offerings through advancements
in compression technologies and the utilization of additional spectrum.
•Reduce Signal Theft. DIRECTV U.S. has undertaken various initiatives with respect to its
conditional access system to further enhance the security of the DIRECTV signal. To help combat
signal theft, DIRECTV U.S. is currently providing its customers with more advanced access cards
that DIRECTV U.S. believes significantly enhance the security of the DIRECTV signal and expects
to complete this effort by the end of the second quarter of 2004. In addition, DIRECTV U.S.
continues to seek out and prosecute signal thieves with its internal efforts and with the support of
local, state and federal law enforcement agencies.
•Compelling and Differentiated Content. To fulfill its goal to offer the best television experience in
the U.S., DIRECTV U.S. believes it must have the most extensive collection of valuable programming
services available in the MVPD industry. As such, it will distribute local channel programming to
additional markets, introduce a new electronic program guide, or EPG, offer interactive services, expand
ethnic programming and continue to offer exclusive content such as the NFL SUNDAY TICKET
package.
•Expand Local Channel Service. Over the last several years, expanded local channel service has
been a significant driver of DIRECTV U.S.’ growth. In general, DIRECTV U.S. attains greater
subscriber growth, lower churn and higher ARPU in those markets where it delivers local channels
to subscribers.
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