DIRECTV 2010 Annual Report Download - page 60

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DIRECTV
2010, as compared to $33 million at December 31, 2009, based on the official non-leased set-top receivers (which we refer to as mirroring fees), monthly fees we
exchange rate. charge subscribers for leased set-top receivers, monthly fees we charge subscribers
for digital video recorder, or DVR, service, hardware revenues from subscribers who
See ‘‘Liquidity and Capital Resources’’ below for additional information. lease or purchase set-top receivers from us, our published programming guide,
warranty service fees and advertising services. Revenues are reported net of customer
Sky Brazil Functional Currency credits and discounted promotions.
Based on cumulatively significant changes in economic facts and Broadcast Programming and Other. These costs primarily include license fees
circumstances, we determined that the local Brazilian currency should be the for subscription service programming, pay-per-view programming, live sports and
functional currency of Sky Brazil for purposes of financial statement translation other events. Other costs include expenses associated with the publication and
beginning in the second quarter of 2009. As a result of this change in functional distribution of our programming guide, continuing service fees paid to third parties
currency, changes in exchange rates result in gain or losses, which we record in for active subscribers, warranty service costs and production costs for on-air
‘‘Other, net’’ in the Consolidated Statements of Operations related to the advertisements we sell to third parties.
revaluation of U.S. dollar denominated monetary assets and liabilities, such as cash
deposits, notes payable and capital lease obligations held by Sky Brazil. Subscriber Service Expenses. Subscriber service expenses include the costs of
customer call centers, billing, remittance processing and certain home services
Other Than Temporary Impairment expenses, such as in-home repair costs.
In 2009, we recognized a $45 million charge for the other than temporary Broadcast Operations Expenses. These expenses include broadcast center
impairment of certain of our investments in ‘‘Other, net’’ in the Consolidated operating costs, signal transmission expenses (including costs of collecting signals for
Statements of Operations. our local channel offerings), and costs of monitoring, maintaining and insuring our
satellites. Also included are engineering expenses associated with deterring theft of
Share Repurchase Program our signal.
Since 2006 our Board of Directors approved multiple authorizations for the Subscriber Acquisition Costs. These costs include the cost of set-top receivers
repurchase of our common stock. The following table sets forth information and other equipment, commissions we pay to national retailers, independent
regarding shares repurchased and retired for the years ended December 31: satellite television retailers, dealers and telcos, and the cost of installation,
2010 2009 2008 advertising, marketing and customer call center expenses associated with the
(Amounts in Millions, Except acquisition of new subscribers. Set-top receivers leased to new subscribers are
Per Share Amounts) capitalized in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets
Total cost of repurchased and retired shares ....... $5,179 $1,696 $3,174 and depreciated over their useful lives. The amount of set-top receivers capitalized
Average price per share ..................... 38.20 23.79 24.12 each period for subscriber acquisitions is included in ‘‘Cash paid for property and
Number of shares repurchased and retired ........ 136 71 131 equipment’’ in the Consolidated Statements of Cash Flows.
KEY TERMINOLOGY Upgrade and Retention Costs. Upgrade and retention costs are associated with
upgrade efforts for existing subscribers that we believe will result in higher average
Revenues. We earn revenues mostly from monthly fees we charge subscribers monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts
for subscriptions to basic and premium channel programming, HD programming include subscriber equipment upgrade programs for DVR, HD and HD DVR
and access fees, pay-per-view programming, and seasonal and live sporting events. receivers and local channels, our multiple set-top receiver offer and similar
We also earn revenues from monthly fees that we charge subscribers with multiple initiatives. Retention costs also include the costs of installing and providing
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