DIRECTV 2007 Annual Report Download - page 19

THE DIRECTV GROUP, INC.
•Small and Rural Telephone Companies. Other telephone companies are also finding ways to
deliver video programming services over their wireline facilities. For example, the National Rural
Telecommunications Cooperative (‘‘NRTC’’) and the National Telecommunications Cooperative
Association (‘‘NTCA’’), which represent utilities and telecommunications cooperatives generally
located in rural areas, have entered into an agreement under which its members would have
access to the IP-Prime service offered by SES. IP-Prime is a turnkey arrangement under which
SES aggregates video programming and delivers it in digital format using the Internet protocol
to a RBOC’s headend by satellite, for delivery over the RBOC’s digital subscriber lines. SES
also offers headend equipment and consumer set-top boxes. This service officially launched in
September 2007. Intelsat has announced a similar IPTV product delivered via satellite.
•Video via the Internet. With the large increase in the number of consumers with broadband
service, a significant amount of video content has become available on the Internet for users to
download and view on their personal computers and other devices. For example, in April 2007
Vudu announced a deal with several studios to download movies directly to a TV set-top box to
enable VOD for its customers. In addition, in October 2007 HULU began beta testing a service
to provide movies and TV shows on demand through their partners—AOL, Comcast, MSN,
MySpace and Yahoo. In addition, several companies, such as Netflix, Blockbuster and
Amazon.com, have begun selling and renting movies via Internet download. Similarly, in early
2007, Apple Inc. announced a partnership to distribute Paramount films through iTunes, its
online video download store and introduced Apple TV, a set-top box/router which enables
consumers to stream iTunes content, including movies and music from computers to TVs. There
are also several similar initiatives by companies such as Intel and Microsoft to make it easier to
view Internet-based video on television and personal computer screens.
•VHF/UHF Broadcasters. Most areas of the United States can receive traditional terrestrial VHF/
UHF television broadcasts of between three and ten channels. These broadcasters are often low
to medium power operators with a limited coverage area and provide local, network and
syndicated programming typically free of charge. The FCC has allocated additional digital
spectrum to licensed broadcasters. At least during a transition period, each existing television
station will be able to retain its present analog frequencies and also transmit programming on a
digital channel that may permit multiple programming services per channel.
DIRECTV LATIN AMERICA
DTVLA is the leading provider of DTH digital television services throughout Latin America and
the Caribbean, which includes South America, Central America, and Puerto Rico. DTVLA provides a
wide selection of high-quality local and international programming under the DIRECTV and SKY
brands to approximately 1.5 million subscribers in Brazil and approximately 1.7 million subscribers in
PanAmericana. Our 41% owned affiliate, Sky Mexico, has approximately 1.6 million subscribers in
Mexico.
In 2006 and 2007 we completed a series of transactions to strengthen our operating and financial
performance, which included:
•Purchase of Darlene’s Interest in DLA LLC. In January 2007 we purchased Darlene’s 14%
interest in DLA LLC, so that we now own 100% of DLA LLC.
•Sky Transactions. During 2006, we completed the Sky Transactions, a series of transactions that
were agreed in October 2004 with News Corporation, Grupo Televisa, S.A., or Televisa, Globo
Comunicacoes e Participacoes S.A., or Globo, and Liberty Media International and which
resulted in the consolidation of the DTH platforms of DIRECTV and SKY in Latin America
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