DIRECTV 2008 Annual Report Download - page 24

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THE DIRECTV GROUP, INC.
had been sold from the iTunes Store. Also in March 2008, Hulu launched its online video service
website to the public. Hulu provides free movies and TV shows from over 130 content providers
including Fox, NBC Universal, MGM, Sony Pictures and Warner Brothers. This content can be
accessed on demand through its website and those of its 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. 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.
DIRECTV LATIN AMERICA
DTVLA is the leading provider of DTH digital television services throughout Latin America and
the Caribbean, which includes Puerto Rico. DTVLA provides a wide selection of high-quality local and
international programming under the DIRECTV and SKY brands to approximately 2.2 million
subscribers in PanAmericana and approximately 1.6 million subscribers in Brazil. Our 41% owned
affiliate, Sky Mexico, has more than 1.7 million subscribers in Mexico and certain countries in Central
America.
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
Comunica¸c˜
oes e Participa¸c˜
oes 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
into a single platform in each of the major territories served in the region. These transactions
were completed as follows:
• On February 16, 2006, we completed the acquisition of our equity interest in Sky Mexico,
which included the acquisition of a 12% equity interest in Sky Mexico in exchange for the
sale of DIRECTV Mexico subscribers to Sky Mexico, as well as our acquisition of News
Corporation’s and Liberty Media International’s interests in Sky Mexico.
• On August 23, 2006, we completed the merger of our Brazil business, Galaxy Brasil Ltda.,
or GLB, with Sky Brazil, as well as our purchase of News Corporation’s and Liberty Media
International’s interests in Sky Brazil.
As a result of these transactions, we own 100% of PanAmericana (which operates principally in
South America and the Caribbean, including Puerto Rico), 74% of Sky Brazil (which operates in
Brazil), and 41% of Sky Mexico (which operates in Mexico, Central America and the Dominican
Republic). Globo owns the other 26% of Sky Brazil and Televisa owns the other 59% of Sky Mexico.
The results of PanAmericana and Sky Brazil are consolidated in our results. We account for our 41%
interest in Sky Mexico under the equity method of accounting.
11