DIRECTV 2008 Annual Report Download - page 26

THE DIRECTV GROUP, INC.
result, our service is the only MVPD service that allows subscribers to see all of the Spanish
league games. In addition, we have participated in creating an exclusive golf channel for Latin
America, in an effort to provide programming that is expected to be highly attractive to an
important customer niche.
•Increase DVR Penetration. A key aspect of our strategy is to use the availability of high quality,
reasonably priced DVRs as a cornerstone to distinguish our service from that of our
competitors. Generally speaking, DVRs are not prevalent in Latin America. We believe that our
technology and pan-regional scale, as well as the relationship with DIRECTV U.S., can be
leveraged to provide DVRs that will be more functional and less costly than those our
competitors may introduce. In 2007, PanAmericana introduced DVRs, and Sky Brazil is
launching a new DVR that will improve on a prior model that was previously distributed in
limited numbers. We offer both standard definition DVR and HD-DVR in these markets.
•Establish Leadership Position in High-Definition. In 2008, PanAmericana launched HD services
and Sky Brazil is expected to launch HD services in mid-2009. Although we believe that the HD
content offerings will be more limited than in the United States for the next several years and
the uptake of HD services in Latin America will be much slower than in the United States, we
expect that our ability to offer high quality HD services will provide another opportunity for us
to differentiate the quality of our services from those of our competitors.
•Enhance Programming Features. We believe that we can differentiate our service from our
competitors through the use of enhanced features such as interactivity. For example, we first
offered interactive services for soccer matches from the 2006 World Cup and since then have
offered similar interactive services for the United States Open and Major League Baseball.
•Grow Prepaid Subscription Service. We believe that by offering pre-paid subscription services we
can differentiate our service from our cable competitors and access new segments of the markets
in which we operate. We began to actively market pre-paid services in Venezuela in early 2007,
and have launched this service in other countries in 2008. In 2008, pre-paid subscription services
accounted for approximately 16% of the gross subscriber additions in Latin America and
approximately 8% of total subscribers.
Unlike our post-paid subscribers, our prepaid subscribers are generally not required to meet
specified credit standards or make minimum commitments in order to be a subscriber. However,
they are required to purchase and install the equipment necessary to receive our signal, mostly
at their own expense. This limits our upfront investment in the subscriber. Following the first
month of service, which is typically offered free at the initial time of purchase, prepaid
subscribers purchase a prepaid card and telephonically replenish their accounts as their account
balances deplete. Our prepaid cards are widely accessible at kiosks and outlets and are offered
in various denominations.
Offering pre-paid services may offer several strategic advantages to us in Latin America. First, it
provides us access to subscribers in cash-based economies who do not meet our credit standards
for post-paid services or do not want to make longer term commitments to our service. Second,
since most of our cable competitors still have a large percentage of their subscribers who are
analog, they are not able to offer pre-paid services as efficiently. Third, we believe that the
ability of subscribers to reconnect without additional investments in equipment or installation
could provide continued revenue and limit churn in case of an economic slowdown.
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