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Directv Annual Report 2008 Leading the Way on Your Screen

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Directv Annual Report 2008 Leading the Way on Your Screen L E A D I N G THE WAY DIRECTV ANNUAL REPORT 2008 LEADING THE WAY ON YOUR SCREEN... DIRECTV CONCERT SERIES DIRECTV ON DEMAND DVR SCHEDULER MASTERS MIX FRIDAY NIGHT LIGHTS ...TO YOUR FUTURE STREAmING cONTENT ScOREGUIDE™ DIREcTV™ mEDIASHARE DIRE cTV2Pc™ DIREcTV APPS cH ...EXPANDING OUR REA mERIcA DIREcTV LATIN A HD AND DVR LEADERSHIP SUPERIOR PROGRAmmING AND INTERAcTIVE SERVIcES EXcLUSIVE cONTENT A mESSAGE TO SHAREHOLDERS At a time when the world’s businesses struggle to find their footing and talk openly about survival as a goal, we almost hesitate to say that DIREcTV has never been stronger. Yet in the past year, we captured market share from our competitors, generated strong double-digit top line growth, increased margins and took our cash flow to a whole new level. clearly our results in these challenging times have been helped by the fact that television has become a staple of day-to-day life, not a discretionary purchase. The average U.S. household is watching more television than ever. At the same time, we also recognize we are not immune to economic pressures. more customers are chasing deals to help make ends meet, and the cost of acquiring or retaining customers is putting pressure on us in a number of places. Nonetheless, we believe we have uniquely distinguished ourselves from our competitors to create a sustainable leadership position that will drive long-term value. This leadership position is built around providing the best television experience. We believe the majority of consumers view television as a rich and important part of their lives, but we also know they’re interested in getting great value from their service. We do not believe television is a commodity because people care a lot about quality, choice, reliability, ease of use, excitement and service. These are our competitive strengths as we continue to pursue and attain the most valuable customers who are interested in enriching their television experience. AN UNPARALLELED cONTENT EXPERIENcE Last year, we strengthened DIREcTV’s brand and video leadership position in the U.S. by expanding our HD offerings and rolling out an array of compelling new services like DIREcTV on DEmAND, as well as more exclusive programming and interactive sports coverage. HD leadership has been a key component behind our marketing message of providing customers with the best television experience. Last year, we further expanded our industry-leading HD programming by 50% to 130 national channels while increasing the availability of local HD channels to 89% of U.S. TV households. With the launch of our DIREcTV 12 satellite later this year, we will gain another 50% increase in our national HD capacity to over 200 channels while offering local HD channels to more than 92% of households. We also greatly enriched our content experience with the launch of DIREcTV on DEmAND, our new video on demand service. Our goal was not merely to offer a VOD service that is competitive with cable, but to make it significantly better and considerably more customer-friendly. DIREcTV on DEmAND offers both instant access to some of the most popular movies and shows that are pushed to customers’ DVR hard drives, and broadband access to a growing library of more than 7,000 titles. In the coming year, we’ll expand the richness and functionality of the service with faster access and a more integrated experience with DIREcTV’s linear channels. Exclusive content is thriving on The 101® Network as well, where viewers enjoy quality programming that can’t be found anywhere else, including critically acclaimed shows, previews of the season’s newest hits, and commercial-free entertainment, all in crystal clear HD. The Peabody Award- winning series, “Friday Night Lights” premiered its third season exclusively on DIREcTV last October, consistently ranking in the top five of all cable shows viewed by our customers in its time period. In January 2009, the too-intense-for-network-TV series, “Wonderland” returned to television, airing on The 101 with six episodes never before aired in the U.S. clearly the cornerstone of our success is sports leadership, which continues to be defined by the crown jewel of the sports world, the NFL SUNDAY TIcKET™ package. We recently extended our exclusive agreement to offer NFL SUNDAY TIcKET™ to DIREcTV customers through the 2014 season. The agreement also significantly broadens our reach by enabling NFL fans, who cannot receive DIREcTV, to get NFL SUNDAY TIcKET™ via broadband beginning no later than 2012. Our sports leadership, In a year in which all of the major cable companies and however, extends beyond DISH Network lost subscribers, DIRECTV U.S. added the NFL as we continue 861,000 net new subscribers in 2008 as gross additions to offer more enhanced and interactive services increased to over 3.9 million subscribers and the average than any other television monthly churn rate dropped to a nine-year low of 1.47%. provider. Last year, for example, we offered expanded interactive coverage of the 2008 Beijing Olympic Games, U.S. Open and French Open tennis tournaments, as well as the masters Golf Tournament. And in 2009, we’ll be offering enhanced coverage, including our innovative mix channel, for all four Grand Slam tennis and golf tournaments. The combination of all these unique offerings contributes to an unparalleled content experience. In a year in which all of the major cable companies and DISH Network lost subscribers, DIREcTV U.S. added 861,000 net new subscribers in 2008 as gross additions increased to over 3.9 million subscribers and the average monthly churn rate dropped to a nine-year low of 1.47%. A DYNAmIc USER EXPERIENcE Our robust offerings encourage customers to interact with their DIREcTV® service more and more each day, so we’re constantly seeking ways to enrich their user experience and make it easier for them to find and take advantage of all our great content. Our latest and most popular example is a new service we launched last year called DIREcTV® DVR Scheduler, which gives customers the freedom to set up recordings on their home DVR from any cell phone or computer. To date, our customers have remotely scheduled about 5 million recordings using the DVR Scheduler. Working in partnership with The Weather channel, we now offer customers multiple methods for receiving five-day forecasts and vital ZIP code-specific local weather information, including severe weather alerts during the popular “Local on the 8s” segments. We also introduced QuickTune, which allows customers to personalize their own programming guide with nine of their favorite channels. And getting ready to debut in 2009 is ScoreGuide™, which will provide customers with up-to-the-minute game scores from the major sports leagues at the touch of a button via their remote control. ADDRESSING THE cHALLENGE OF cUSTOmER SERVIcE Though we are making progress in providing customer service that is commensurate with the excellent reputation of our brand, this is clearly an area where we have much work to do. Furthermore, customer satisfaction can and should be a major competitive advantage for DIREcTV. As such, our goal of significantly improving customer service is one of our most important priorities in 2009. Last year we formally articulated our commitment to dramatically improve the DIREcTV customer experience through a “customer Promise” to all of our 17-plus million customers: “We strive to deliver the best television experience for you every day. committed to the principles of honesty and integrity, our employees are determined to provide you with prompt, courteous and excellent service. We promise to do our best to resolve any issues that might arise as quickly as possible. And we will continue to develop the unique, innovative programming and services that you have come to expect and enjoy from DIREcTV.” A key goal for our management team is to ensure that all of our employees remain fully committed to delivering on this promise. We took some important steps in 2008 to address customer concerns and increase performance in key areas that drive customer satisfaction, including revamping our customers’ experience during their first 30 days on the DIREcTV platform with a new customer communications strategy. We also launched a “Thank You” program to reward our most loyal and tenured customers with anniversary gifts such as three free months of premium programming or a free receiver upgrade. To give us better insight into the installation services aspect of our business, we took ownership of roughly one-third of our Home Services field organization in 2008. This is allowing us to test and deploy tools and technologies like wireless handhelds, dish pointing verification, and diagnostics that will not only improve our performance on many levels, but also enable us to build Home Services into a unique strength for DIREcTV. Although we have barely scratched the surface, we’re striving for excellence to delight our customers with an experience that lives up to their high expectations. EXEcUTION AND EFFIcIENcY While we recognize that leadership in content, technology, and service is the foundation for our strategic plan, our success is ultimately dependent on our ability to execute with a discipline and focus that enables us to take advantage of our opportunities and achieve targeted results. That means developing unique marketing messages that stand out in a cluttered media world and resonate with customers in communicating the superiority of DIREcTV. We must continue to find unique marketing vehicles like our DIREcTV blimp that intrigue customers while generating that much sought-after water cooler buzz. In 2008, we had a unique opportunity to add a major dimension to our sales efforts and strengthen our competitive position against the cable bundle by reaching a long-term agreement with AT&T for the sale of DIREcTV bundled with AT&T broadband and telephony products.
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