DIRECTV 2008 Annual Report Download - page 36

THE DIRECTV GROUP, INC.
MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable
operator. Cable television operators have advantages relative to us, including or as a result of:
• being the incumbent MVPD operator with an established subscriber base in the territories in
which we compete;
• bundling their analog video service with expanded digital video services delivered terrestrially or
via satellite, or with efficient two-way high-speed Internet access or telephone service on
upgraded cable systems;
• having the ability to provide certain local and other programming, including HD programming,
in geographic areas where we do not currently provide local or local HD programming; and
• having legacy arrangements for exclusivity in certain multiple dwelling units and planned
communities.
In addition, cable television operators have grown their subscriber bases through mergers and
acquisitions. Moreover, mergers, joint ventures and alliances among franchise, wireless or private cable
television operators, telcos, broadband service providers and others may result in providers capable of
offering bundled television, data and telecommunications services in competition with our services.
We do not currently offer local channel coverage to markets covering approximately five percent of
U.S. television households, which places us at a competitive disadvantage in those markets. We also
have been unable to secure certain international programming, due to exclusive arrangements of
programming providers with certain competitors, which has constrained our ability to compete for
subscribers who wish to obtain such programming.
In the United States, various telcos and broadband service providers have deployed fiber optic
lines directly to customers’ homes or neighborhoods to deliver video services, which compete with the
DIRECTV service. It is uncertain whether we will be able to increase our satellite capacity, offer a
significant level of new services in existing markets in which we compete or expand to additional
markets as may be necessary to compete effectively. Some of these various telcos and broadband
service providers also sell the DIRECTV service as part of a bundle with their voice and data services.
A new broadly-deployed network with the capability of providing video, voice and data services could
present a significant competitive challenge and, in the case of the telcos companies currently selling the
DIRECTV service, could result in such companies focusing less effort and resources selling the
DIRECTV service or declining to sell it at all. We may be unable to develop other distribution
methods to make up for lost sales through the telcos.
As a result of these and other factors, we may not be able to continue to expand our subscriber
base or compete effectively against cable television or other MVPD operators in the future.
Emerging digital media competition could materially adversely affect us.
Our business is focused on television, and we face emerging competition from other providers of
digital media, some of which have greater financial, marketing and other resources than we do.
Significant changes in consumer behavior with regard to the means by which they obtain video
entertainment and information in response to this emerging digital media competition could materially
adversely affect our revenues and earnings or otherwise disrupt our business.
We depend on others to produce programming and programming costs are increasing.
We depend on third parties to provide us with programming services, including third parties who
are our affiliates and third parties controlled by competitors. Our ability to compete successfully will
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