DIRECTV 2009 Annual Report Download - page 36

DIRECTV
be able to obtain substitute programming, or if we are able to obtain such substitute programming, it
may not be comparable in quality or cost to our existing programming.
In addition, many of our programming agreements are long term agreements and contain fixed
annual price increases. When offering new programming, or upon expiration of existing contracts,
programming suppliers have historically increased the rates they charge us for programming, increasing
our costs. We expect this practice to continue. Increases in programming costs could cause us to
increase the rates that we charge our subscribers, which could in turn, especially in a difficult economic
environment, cause subscribers to terminate their subscriptions or potential new subscribers to refrain
from subscribing to our service. Furthermore, due to the economy and other factors, we may be unable
to pass programming cost increases on to our subscribers, which could have a material adverse effect
on our earnings or cash flow.
Increased subscriber churn or subscriber upgrade and retention costs could materially adversely affect
our financial performance.
Turnover of subscribers in the form of subscriber service cancellations, or churn, has a significant
financial impact on the results of operations of any subscription television provider, including us, as
does the cost of upgrading and retaining subscribers. Any increase in our upgrade and retention costs
for our existing subscribers may adversely affect our financial performance or cause us to increase our
subscription rates, which could increase churn. Churn may also increase due to factors beyond our
control, including churn by subscribers who are unable to pay their monthly subscription fees, a slowing
economy, significant signal theft, consumer fraud, a maturing subscriber base and competitive offers.
Any of the risks described in this Annual Report that could potentially have a material adverse impact
on our cost or service quality or that could result in higher prices for our subscribers could also, in
turn, cause an increase in churn and consequently have a material adverse effect on our earnings and
financial performance.
Our subscriber acquisition costs could materially increase.
We incur costs relating to subscribers acquired by us and subscribers acquired through third
parties. These costs are known as subscriber acquisition costs. For instance, we provide installation
incentives to our retailers to enable them to offer standard professional installation as part of the
subscriber’s purchase or lease of a DIRECTV System. In addition, we pay commissions to retailers for
their efforts in offering a DIRECTV System at a lower cost to consumers. Our subscriber acquisition
costs may materially increase to the extent we continue or expand current sales promotion activities or
introduce other more aggressive promotions, or due to increased competition. Any material increase in
subscriber acquisition costs from current levels would negatively impact our earnings and could
materially adversely affect our financial performance.
Results are impacted by the effect of, and changes in, United States and Latin America economic
conditions and weakening economic conditions may reduce subscriber spending and our rate of growth
of subscriber additions and may increase subscriber churn.
Our business may be affected by factors in the United States and other countries in which we
operate that are beyond our control, such as downturns in economic activity in a specific country or
region, or in the MVPD industry. Factors such as interest rates and the health of the housing market
may impact our business. A substantial portion of our revenues comes from residential customers
whose spending patterns may be affected by prevailing economic conditions. Our market share in
multiple dwelling units such as apartment buildings is lower than that of many of our competitors. If
unemployment and foreclosures of single family residences increase, our earnings and financial
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