DIRECTV 2012 Annual Report Download - page 40

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DIRECTV
DIRECTV, DIRECTV Cinema and the DIRECTV Cyclone Design are significantly underpriced and, in effect, subsidized by the rates charged for
trademarks of The DIRECTV Group, Inc. and/or its related entities. Other broadband and telephony services. In Latin America, this practice of cross-
trademarks, service marks and trade names appearing in this Annual Report are the subsidization is sometimes incentivized by higher taxes on pay TV services than on
property of their respective holders. telecommunication and broadband services. These pricing practices can influence
customers’ willingness to subscribe to our service at rates we consider appropriate.
ITEM 1A. RISK FACTORS Mergers, joint ventures and alliances among wireless or private cable television
You should carefully consider the following risk factors. The risks described operators, telcos, broadband service providers and others may result in an increase
below are not the only ones facing our company. Additional risks not presently in the number of providers capable of offering such bundled services. For example,
known to us or that we currently deem immaterial may also impair our business, last year the FCC approved a commercial arrangement under which four of the
financial conditions or results of operations. nation’s largest cable operators and Verizon Wireless would act as agents selling one
another’s services and engage in ongoing development of ways to integrate their
Our business, financial condition or results of operations could be materially wireless and wireline services.
and adversely affected by the following:
We have been unable to secure certain international programming, due to
We compete with other MVPDs, some of whom have greater resources than we exclusive arrangements of programming providers with certain competitors, which
do and levels of competition are increasing. has constrained our ability to compete for subscribers who wish to obtain such
programming. And as discussed below, certain cable-affiliated programmers have
We compete in the MVPD industry against cable television, telcos and wireless withheld their programming from us in certain markets, which has further
companies and other land-based and satellite-based system operators with service constrained our ability to compete for subscribers in those markets.
offerings including video, audio and interactive programming, broadband and other
entertainment services and telephony service. Some of these competitors have In the United States, various telcos and broadband service providers have
greater financial, marketing and other resources than we do. deployed fiber optic lines directly to customers’ homes or neighborhoods to deliver
video services, which compete with the DIRECTV service. It is uncertain whether
Some cable television operators have large, established customer bases and we will be able to increase our satellite capacity, offer a significant level of new
many cable operators have significant investments in, and access to, programming. services in existing markets in which we compete or expand to additional markets
Cable television operators have advantages relative to our U.S. operations, including as may be necessary to compete effectively. Some of these various telcos and
or as a result of: broadband service providers also sell the DIRECTV service as part of a bundle with
• being the incumbent MVPD operator with an established subscriber base in their voice and data services. A new broadly-deployed network with the capability
the territories in which DIRECTV U.S. competes; of providing video, voice and data services could present a significant competitive
challenge and, in the case of the telcos currently selling the DIRECTV service,
• access or telephone service on upgraded cable systems; could result in such companies focusing less effort and resources selling the
• having legacy arrangements for exclusivity in certain multiple dwelling units DIRECTV service or declining to sell it at all. We may be unable to develop other
and planned communities. distribution methods to make up for lost sales through the telcos.
In addition, certain cable companies and telcos in the U.S. and Latin America As a result of these and other factors, we may not be able to continue to
are capable of offering bundled video, broadband and telecommunications services. expand our subscriber base or compete effectively against cable television or other
In some cases, it appears that the video component of such bundled offerings is MVPD operators in the future.
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