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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
For the fiscal year ended December 31, 2010
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-106529

DIRECTV HOLDINGS LLC
DIRECTV FINANCING CO., INC.
(Exact name of registrant as specified in its charter)


DIRECTV Holdings LLC—Delaware DIRECTV Financing Co., Inc.—Delaware		25-1902628 59-3772785
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2230 East Imperial Highway, El Segundo, California		90245
(Address of Principal Executive Offices)		(Zip Code)

Registrant's telephone number, including area code: (310) 964-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o ý No ýo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o
Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. None.

The registrant has met the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format.

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Part I
	Item 1.	Business	1
	Item 1A.	Risk Factors	15
	Item 1B.	Unresolved Staff Comments	27
	Item 2.	Properties	2728
	Item 3.	Legal Proceedings	28
	Item 4.	~~Submission~~(Removed ofand ~~Matters to a Vote of Security Holders~~Reserved)	29
Part II
	Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
	Item 6.	Selected Financial Data	30
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3130
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4846
	Item 8.	Financial Statements and Supplementary Data	4947
		Report of Independent Registered Public Accounting Firm	4947
		Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007	50
		Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008	48
		Consolidated Balance Sheets as of December 31, 2009 and 2008	51
		Consolidated Balance Sheets as of December 31, 2010 and 2009	49
		Consolidated Statements of Changes in Owner's Equity for the Years Ended December 31, 2009, 2008 and 2007	52
		Consolidated Statements of Changes in Owner's Equity for the Years Ended December 31, 2010, 2009 and 2008	50
		Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007	53
		Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008	51
		Notes to the Consolidated Financial Statements	5452
	Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	8283
	Item 9A.	Controls and Procedures	8283
	Item 9B.	Other Information	86
Part III
	Item 10.	Directors, Executive Officers and Corporate Governance	86
	Item 11.	Executive Compensation	86
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	86
	Item 14.	Principal Accounting Fees and Services	86
Part IV
	Item 15.	Exhibits and Financial Statement Schedules	87
Signatures			92

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DIRECTV HOLDINGS LLC

CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report on Form 10-K may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "believe," "expect," "estimate," "anticipate," "intend," "plan," "foresee," "project" or other similar ~~words~~references orto ~~phrases.~~future ~~Similarly,~~periods. ~~statements~~Examples ~~that~~of ~~describe our objectives, plans or goals also are~~ forward- looking statements. ~~All~~include, ofbut ~~these forward-looking statements~~ are ~~subject~~not tolimited ~~certain risks and uncertainties~~to, ~~including,~~statements ~~without limitation,~~we ~~risk~~make ~~factors~~related ~~discussed~~to inour ~~more~~business ~~detail~~strategy inand ~~Item 1A~~regarding ~~of this Annual Report, which could cause~~ our ~~actual~~outlook ~~results~~for to2011 ~~differ~~financial ~~materially from historical~~ results, orliquidity ~~from those expressed or implied by the relevant forward-looking statement. The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report~~ and ~~we undertake no obligation to~~capital ~~publicly update these forward-looking statements to reflect subsequent events or circumstances~~resources.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include economic, business, competitive, national or global political, market and regulatory conditions and other risks, each of which is described in more detail in Item 1A—Risk Factors of this Annual Report.

Any forward looking statement made by us in this Annual Report on Form 10-K speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may occur and it is not possible for us to predict them all. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

PART I

ITEM 1. BUSINESS

DIRECTV Holdings LLC is a wholly-owned subsidiary of DIRECTV and consists of DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV U.S, we or us and sometimes refer to DIRECTV as our Parent.

OnWe ~~November 19,~~provide ~~2009,~~over ~~The DIRECTV Group, Inc~~19.,2 million orsubscribers ~~DIRECTV~~with ~~Group,~~access ~~and Liberty Media Corporation, which we refer~~ to ashundreds ~~Liberty or Liberty Media, obtained shareholder approval~~ of ~~and~~channels ~~closed a series~~ of ~~related~~digital-quality ~~transactions~~video ~~which~~entertainment weand ~~refer to collectively as the Liberty Transaction. The Liberty Transaction included the split~~CD-~~off~~quality ofaudio ~~certain~~programming ofthat ~~the~~we ~~assets of the~~transmit ~~Liberty~~directly ~~Entertainment~~to ~~group~~subscribers' ~~into~~homes ~~Liberty Entertainment, Inc.,~~ or ~~LEI,~~businesses ~~which~~via ~~was then split~~high-~~off~~powered ~~from~~geosynchronous ~~Liberty~~satellites. ~~Following~~We ~~the~~also ~~split~~provide video-~~off~~on-demand, DIRECTV Group and LEI merged with subsidiaries of DIRECTV. As a result of the Liberty Transaction, DIRECTV Group, which is comprised of the DIRECTV U.S. and DIRECTV Latin America businesses, and LEI, which held Liberty's 57% interest in DIRECTV Group, a 100% interest in three regional sports networks, a 65% interest in Game Show Network LLC, or ~~GSN~~VOD, ~~approximately~~via ~~$120 million~~broadband into ~~cash~~our ~~and cash equivalents and~~subscribers ~~approximately~~who ~~$2.1 billion~~have ofconnected ~~indebtedness~~their ~~and a series of related equity collars became wholly~~set-~~owned~~top ~~subsidiaries~~receiver ofto ~~DIRECTV.~~their ~~DIRECTV~~broadband ~~Holdings remained a direct subsidiary of DIRECTV Group and became an indirect subsidiary of DIRECTV~~service.

We believe we provide one of the most extensive collections of programming available in the MVPD industry, including over ~~18.5 million~~160 ~~subscribers~~national ~~with~~high-definition, ~~access~~or toHD, ~~hundreds~~television channels ofand four dedicated 3D channels. In addition, we offer VOD service, named DIRECTV CINEMATM, which provides a selection of ~~digital-quality~~over ~~video~~6,000 ~~pictures~~movie and CDtelevision programs to our broadband-~~quality~~connected ~~audio~~subscribers. ~~programming~~As ~~that~~of December 31, 2010, we ~~transmit~~provided local channel coverage in HD to markets covering over 95% of U.S. television households. In addition, we provided local ~~directly~~channel coverage in standard definition to ~~subscribers'~~markets ~~homes~~representing orapproximately ~~businesses~~98% ~~via~~of ~~high-powered~~U.S. ~~geosynchronous~~television ~~satellites~~households.

We ~~believe~~also we provide one of the most extensive collections of programming available in the multi-channel video programming distribution, or MVPD, industry. As of December 31, 2009, we distributed more than 2,000 digital video and audio channels, including about 200 basic entertainment and music channels, 40 premium ~~movie~~professional ~~channels, over 50 regional~~ and ~~specialty~~collegiate sports ~~networks,~~ ~~over~~programming ~~120~~such ~~Spanish~~as and other foreign language special interest channels, over 31 pay-per-view movie and event choices, and over 130 national high-definition, or HD, television channels. Although we distribute more than 1,500 local channels—over 500 in high-definition—a subscriber generally receives only the ~~local~~NFL ~~channels~~SUNDAY inTICKET™ ~~the subscriber's home market. In addition~~package, wewhich ~~offer~~allows ansubscribers onto ~~demand~~view ~~service named DIRECTV on DEMAND which, as of~~ the ~~end~~largest ~~of 2009, provided a~~ selection of ~~about 6,000~~NFL ~~movie~~games ~~and television programs to our subscribers who have a broadband connection to their set-top receiver. As of~~

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DIRECTV HOLDINGS LLC

~~December 31,~~available ~~2009,~~each weSunday ~~provided~~during ~~local~~the ~~channel~~regular ~~coverage~~season. inUnder ~~standard~~our ~~definition~~contract towith ~~markets~~the ~~covering about 95% of U.S. television households. In addition~~NFL, we ~~provided~~have HDexclusive ~~local~~rights ~~channels~~ to ~~markets representing~~provide ~~approximately~~this ~~92%~~service ofthrough ~~U.S. TV households. In~~ the ~~second~~2014 ~~quarter of 2010~~season, weincluding ~~expect~~rights to ~~further~~provide ~~expand~~related broadband, ~~our offering of~~ HD, ~~channels~~interactive ~~when~~and ~~the~~mobile ~~recently launched DIRECTV 12 satellite begins operations~~services.

WeTo ~~also~~subscribe ~~provide~~to ~~premium~~the ~~professional~~DIRECTV® ~~and~~service, ~~collegiate~~subscribers ~~sports~~sign ~~programming~~up ~~such~~for asour ~~the~~service ~~NFL~~through ~~SUNDAY~~us, ~~TICKET™~~our ~~package~~national retailers, independent satellite television retailers or dealers, or regional telephone companies, which ~~allows~~we ~~subscribers~~refer to ~~view~~as ~~the~~telcos. ~~largest~~We ~~selection~~or one of ~~NFL games~~our ~~available~~home ~~each~~service ~~Sunday~~providers ~~during~~or dealers install the ~~regular~~receiving ~~season~~equipment. ~~Under~~The ~~our~~receiving ~~contract~~equipment ~~with~~consists ~~the~~of ~~NFL~~a small receiving satellite dish antenna, weone ~~have~~or ~~exclusive~~more ~~rights~~digital toset-top ~~provide~~receivers, ~~this~~which ~~service~~are ~~through~~typically leased to the ~~2014~~subscriber, ~~season~~and remote controls, ~~including~~which ~~rights~~we refer to ~~provide~~as ~~related~~a DIRECTV® System. After ~~broadband,~~acquiring HDand installing a DIRECTV System, ~~interactive~~subscribers activate the DIRECTV service by contacting us and ~~mobile~~subscribing ~~services~~to one of our programming packages.

To subscribe to the DIRECTV® service, subscribers acquire receiving equipment from either us, our national retailers, independent satellite television retailers or dealers, or regional telephone companies, which we refer to as telcos. Most set-top receivers provided to new and existing subscribers are leased subsequent to the introduction of a lease program on March 1, 2006.The receiving equipment consists of a small receiving satellite dish antenna, a digital set-top receiver and a remote control, which we refer to as a DIRECTV® System. After acquiring and installing a DIRECTV System, subscribers activate the DIRECTV service by contacting us and subscribing to one of our programming packages.

Key Strengths

•: Large Subscriber Base. We are the largest provider of DTH digital television services and the second largest MVPD provider in the United States, in each case based on the number of subscribers. We believe that our large subscriber base provides us with the opportunity to obtain programming on favorable terms and secure unique and exclusive programming. We also believe that our large subscriber base contributes to achieving other economies of scale in areas such as DIRECTV System equipment purchasing, customer service, installation and repair service, broadcast operations and general and administrative services.
•: Leading Brand Name. We commissioned a study in 2010 which indicated that 95% of consumers in the United States recognized the DIRECTV brand name. We believe the strength of our brand name is an important factor in our ability to attract new subscribers. In addition, we believe our recognized brand name enhances our ability to secure strategic alliances with programmers, distributors and other technology and service providers.
•: Substantial Channel Capacity and Programming Content. As a result of our significant channel capacity, we believe we are able to deliver to our subscribers one of the widest selections of local and national programming available today in the United States, including exclusive programming such as the NFL SUNDAY TICKET package, international programming and one of the most extensive national HD offerings currently available in the industry.
•: High-Quality Digital Picture and Sound, Including HD Programming. Our video and audio programming is 100% digitally delivered, providing subscribers with digital-quality video and CD-quality sound. We believe this compares favorably with many cable providers that frequently offer popular programming in an analog format and offer a selection of digital channels for an additional fee. In addition, we believe we currently offer one of the nation's most comprehensive selections of HD channels, including a large choice of 1080p movies.
•: Sales and Marketing. We sell DIRECTV through a number of distribution channels, including direct sales, online, telcos, national sales providers, local sales providers and consumer electronics retailers. We believe this variety of distribution alternatives coupled with sophisticated marketing programs, have enabled us to continue to grow our subscriber base in an increasingly competitive and mature business.
•: Technology. We devote considerable resources to improving our set-top receivers, including the middleware for such receivers, as well as developing new services. For example in 2010, we introduced a "Whole-Home" digital video recorder, or DVR, service which allows consumers to view and control content from one DVR to other rooms in the house with the appropriate equipment.

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DIRECTV HOLDINGS LLC

•: Strong Customer Satisfaction. We have attained top rankings in customer satisfaction studies for our industry. For example, we have scored higher among the largest national cable and satellite TV providers in customer satisfaction for ten consecutive years in the American Customer Satisfaction Index™. We believe that providing high-quality customer service is an important element in minimizing subscriber disconnection, or churn, and attracting new subscribers.
•: Valuable Orbital Slots and Satellite-Based Technology. We believe our regulatory authorization to use desirable orbital slots and broadcast spectrum helps sustain our position as one of the leading companies in the MVPD industry. The Federal Communications Commission, or FCC, has designated three direct broadcast satellite, or DBS, orbital slots in the Ku-Band spectrum that provide full coverage across the 48 contiguous states of the United States, often referred to as CONUS coverage. Within these three orbital slots, there are 96 assigned DBS frequencies. We hold licenses to broadcast our services from 46 of these 96 DBS frequencies. The FCC is currently considering licensing additional DBS slots for satellites that are sometimes referred to as "tweeners" which would provide CONUS coverage. See "Government Regulation—FCC Regulation Under the Communications Act and Related Acts" and "Risk Factors—The ability to maintain FCC licenses and other regulatory approvals is critical to our business" for more information related to these types of slots and satellites.

In addition, we hold licenses in three orbital slots (99° west longitude, or WL, 101° WL, and 103° WL) in the Ka-Band spectrum. The satellites that have been launched into these orbital slots have substantially increased our channel capacity, allowing us to provide one of the most extensive HD channel offerings currently available across the United States. We also have obtained approval from the FCC to transmit our signal in the Ku-Band from one of our satellites that has been stationed at a temporary orbital location at 72.5° WL and from leased capacity on a satellite at 95° WL.

Our satellite-based service provides us with many advantages over ground-based cable television services. We have the ability to distribute hundreds of channels to millions of recipients nationwide with minimal incremental infrastructure cost per additional subscriber. In addition, we have comprehensive coverage to areas with low population density in the United States and the ability to quickly introduce new services to a large number of subscribers.

Business Strategy

Our vision is to provide customers with the best video experience in the United States both inside and outside of the home by offering subscribers unique, differentiated and compelling programming through leadership in content, technology and customer service. Our strategy involves (1) strengthening our core business, (2) delivering the best "anytime, anywhere" experience—both inside and outside of the home, (3) building new revenue streams and (4) enhancing productivity.

•

Strengthen the Core Business. To fulfill our goals, we believe we have to strengthen our core business in several key areas including (1) delighting our customers in all our service interactions, (2) enhancing customer targeting and segmentation and (3) strengthening our bundled offers and capabilities.

•: Delight Our Customers in All Service Interactions; Improve our Loyalty and Retention Programs. Due in part to the higher costs to acquire new subscribers in an increasingly mature industry, it is even more important to focus to delight all of our customers as we strive to reduce churn. We believe an important part of this strategy is to increase customer satisfaction through all service interactions including the initial installation and any subsequent communications, service or upgrade transactions. Another important part of our

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DIRECTV HOLDINGS LLC

~~performances~~strategy byis ~~top-rated~~to ~~artists.~~improve Inour ~~2009,~~loyalty weand ~~also~~retention ~~launched~~programs, ~~new~~particularly ~~shows~~for onour ~~The~~most ~~101®~~tenured ~~Network such as The Dan Patrick Show™~~ and ~~Trailer~~valuable ~~Park Boys®~~customers.

•: Enhance Customer Targeting. As the market for video services becomes increasingly competitive, it is important that we have a better understanding of and focus on our customers' needs and desires. We will use segmentation analysis to better target new customers based on demographic, geographic and customer information to more profitably and effectively provide our customers with the products and services they desire.
•: Strengthen Our Bundled Offers and Capabilities. Bundled video, telephone and broadband services continue to grow in popularity as consumers look for ways to reduce costs in a challenging economy. Currently we have agreements with most of the major telco companies nationwide to offer bundles which include the DIRECTV service. However, in the future, we believe we will need to work more closely with broadband providers to make our bundles more seamless, offer broadband services with higher speeds and improve joint marketing efforts so that a greater percentage of our customers can enjoy the benefits of a bundle.

•

Deliver the Best "Anytime, Anywhere" Experience Both Inside and Outside of the Home. To provide the best video experience both inside and outside of the home, we will be focusing on (1) expanding our Whole-Home DVR and time-shifting capabilities, (2) connecting our subscribers' set-top boxes to broadband service, (3) launching a new user interface to support multi-screen applications and services, (4) enhancing our entertainment portal and (5) providing portable access to DVR content.

•: Expand Whole-Home DVR and Time-Shifting Capabilities. We believe that consumers are looking for more features and functionality in their TV viewing, particularly in terms of place and time shifting. For this reason, in 2011 we expect to expand the availability of our Whole-Home DVR. We plan on continuing to expand our time and place shifting capabilities with new services including the expansion of our pay-per-view and VOD movie offerings, as well as providing the ability for customers to retrieve content that was broadcast at a previous time.
•: Connect Customer HD-DVRs to the Internet. Connecting our customers' receivers to broadband service is strategically important because it greatly enhances the video experience. For example, a connected receiver provides our customers with access to (1) thousands of additional movies and shows, (2) music, video, and pictures stored on their computers and (3) personalized "TV Apps" that provide real-time information such as favorite sports teams, local traffic or weather reports. In the future, broadband-connected receivers will also facilitate access of DIRECTV™ programming services on mobile devices and the ability to search for web-based video such as YouTube® on a customer's television. Another focus for our company will be to provide more social networking applications whereby, for example, customers can interact with friends while watching DIRECTV by accessing their Twitter® or Facebook® account via the television or portable device.
•: Launch New User Interface to Support Multi-Screen Applications and Services. Given the importance of the User Interface, or UI, and guide to our customers to provide a friendly and fun way to navigate through hundreds of channels, in 2011 we will launch a new HD UI which will be significantly faster than our current UI and will be displayed in crisp, easy-to-read HD format using more graphical poster art. In addition, this UI will incorporate our industry-leading Smart Search capabilities as well as improved discovery and personalization features. We are also developing applications for mobile devices and tablets

We also believe we currently have one of the most extensive national HD channel offerings as well as the largest lineup of 1080p movies in the MVPD industry. Additionally, when our DIRECTV 12 satellite is put into service in the second quarter of 2010, we expect to have the capacity to broadcast approximately 200 national HD channels to nearly all U.S. television households. As part of this rollout, we plan on offering local channels in HD to 19 additional markets, bringing the total number of HD local channel markets to 157—covering over 95% of TV homes. Subscribers receiving local HD channels will generally only receive the channels broadcast in their home market. Additionally, in 2010 we plan on being one of the first MVPD providers to offer dedicated 3D programming by introducing three 3D channels to our HD customers who have purchased 3D television sets.

We also expect to expand our DIRECTV on DEMAND, a video-on-demand, or VOD, service for subscribers that have the DIRECTV Plus® digital video recorder, or DVR, or DIRECTV Plus® HD DVR set-top receivers. As of year end 2009, DIRECTV on DEMAND offered about 6,000 titles providing thousands of hours of top programming from the major broadcast and cable networks, as well as popular movies. Most of the titles are offered free of charge and are downloaded from the Internet through a broadband connection for those subscribers with a DIRECTV Plus HD DVR. In addition, we download top movies via our satellites to a customer's DVR hard drive. In 2010, we expect to introduce a new movie service, DIRECTV Cinema™, which will substantially increase the number of new release movies available for our customers to view and purchase from either their television, laptop computer or mobile telephone.

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DIRECTV HOLDINGS LLC

~~standard-definition~~so ~~video~~that ~~functionality~~our ~~throughout the home and allow~~ customers towill ~~access~~enjoy ~~stored~~many ~~content,~~DIRECTV ~~including~~features ~~video, photos~~ and ~~music,~~functionalities ~~seamlessly~~both ~~from~~inside ~~any connected television in a home. We also intend to make DIRECTV programming more ubiquitous by offering it on portable~~ and ~~mobile~~outside ~~devices,~~of including cell phones. For example, in 2009, subscribers to our NFL SUNDAY TICKET™ SuperFan® package were able to stream live NFL games to their mobile phones. In addition, we believe that our ongoing marketing relationships with the ~~major wireless telephony providers such as AT&T and Verizon provide us a unique opportunity to develop compelling applications for our customers~~home.

•: Enhance our Entertainment Portal. In 2010, we launched a new web-based entertainment portal for our customers named MyDIRECTV™. Today, MyDIRECTV offers customers a fun and easy-to-use platform to explore, search and record all of their favorite shows. In the future, we will introduce video streaming capabilities on our entertainment portal so that customers will be able to watch authorized DIRECTV programming from their laptop, tablet, smartphone or computer.
•: Provide Portable Access to DVR Content. We believe our customers increasingly desire the ability to take content with them, due in part to the growing popularity of smart phones and tablets. For this reason, in 2011, we expect to launch a service which will build on our platform as a way to access content stored on a customer's DVR. We will also be building on our entertainment portal as a way to access content through the Internet.

•

Create New Revenue Platforms. In order to continue growing DIRECTV revenues while maintaining strong profit margins, a key strategic objective is to capture incremental revenue streams in key areas including (1) DIRECTV Cinema, (2) addressable and local advertising and (3) the commercial property market.

•: Enhance DIRECTV Cinema. We believe we have a significant opportunity to generate incremental VOD revenues mostly by expanding our VOD library and making it easier for customers to watch movies and shows. Last year we made great strides toward this goal by "pushing" top-rated movies onto customers DVRs for instant viewing and by launching an enhanced movie service called DIRECTV CINEMA that provides most of our customers with access to significantly more movies than before. For example, for those customers with HD-DVRs connected to a broadband service, we now offer over 6,000 movie and television titles, and we expect to continue adding more titles in 2011. Other new DIRECTV Cinema enhancements include shorter viewing windows relative to the DVD release and the ability to order movies which are still showing in movie theaters for future viewing. Looking forward, DIRECTV Cinema enhancements will include further expansion of our video library and increasing the number of days a VOD pay-per-view, or PPV, movie can be watched once the movie has been paid for.
•: Launch Addressable and Local Advertising. Our advertising revenue per subscriber trails many of our competitors. This is because, unlike the cable industry, we have not had the ability to target advertising at the local level due to the nature of our national satellite infrastructure. Using new technology which we expect will be available in 2011, we will have the capability to insert ads into individual DVR set-top receivers to enable advertisers to target customers in local regions and eventually in the individual home. With this new technology, we expect to significantly increase our advertising revenues over the coming years.
•: Deliver New Products Focused on Priority Commercial Segments. Based on our extremely low market penetration rates, we believe commercial properties represent another growth opportunity for DIRECTV. For example, although historically we have competed effectively in the higher-end hotel market, we expect that in the coming years, hotels will be upgrading their television service from standard definition to HD, which should present us with opportunities for growth. We also currently have low market share in the private businesses and smaller bars and restaurants segments and we intend to grow our share in these

DIRECTV has led the industry in the application of remote DVR scheduling technology as over 2 million of our customers have scheduled over 12 million recordings remotely to DIRECTV DVRs through 2009. We also introduced ScoreGuide™ in 2009 which, at the press of a button, enables customers to easily track scores and start times of major sporting events, see a list of channels carrying each event and tune directly to those channels. In 2010, we expect to further expand ScoreGuide, to include Olympic and soccer coverage. Another example of our improved user interface is GameSearch™ which automatically recognizes when a customer has tuned to a channel with a blacked-out sports game and immediately looks to see if the game is on another channel. It then provides the customer a message telling them where to find the game or if it is unavailable.

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DIRECTV HOLDINGS LLC

~~resulted~~markets inwith anew ~~substantial~~technologies ~~portion~~such ~~of our previously outsourced service and installation network technicians becoming DIRECTV U.S. employees. By having these technicians~~ as ~~employees~~digital ~~of DIRECTV U.S.~~signage, we ~~have~~as ~~reduced~~well ~~turnover~~as ~~and~~from improved ~~the overall customer experience~~management, ~~and performance of the remaining outsourced technicians has also generally improved. We have also improved the quality and usage of our web-based customer service capabilities~~targeting, ~~improved the tools that our customer service representatives have at their disposal~~billing, ~~and~~pricing ~~simplified our customer bills. In addition, we have implemented a new work order management system that has improved the scheduling~~ and ~~tracking of our installation and service calls including the use of wireless handheld devices so that our service technicians can improve the efficiency of their daily work orders~~packaging. ~~In 2009, we have seen substantial improvements in many of our customer service and installation metrics and we expect to make further improvements in 2010.~~

•

Enhance Productivity and Manage Costs. Improving our productivity is a critical element of our goal to maintain strong margins particularly given the competitive nature of our industry and rising programming costs. In particular, we plan to focus our efforts on effectively managing our programming costs and capturing enterprise-wide productivity improvements.

•

Strategically Manage Content Cost Growth. Content costs are DIRECTV's largest expense and as a result, we must manage these costs as effectively as possible particularly considering that we expect programming costs to increase at a faster rate in the future than in prior years primarily due to higher sports costs (including the NFL Sunday Ticket) and higher retransmission fees for the carriage of local channels. Our strategy for minimizing this rate of cost growth is to:

•: Leverage our size, growth and attractive subscriber demographics to attain competitive terms and conditions.
•: More closely align a channel's ratings with the costs we pay.
•: Obtain rights for new value-added video services such as rights to offer our customers 3D, mobile and streaming services.
•: Repackage channels to better align the programming that our customers want to watch with what they are willing to pay for.
•: Drop less popular channels if we are unable to negotiate fair terms and conditions.

•

Capture Enterprise-Wide Productivity Improvements. Our objective is to deliver the best video experience at the lowest possible cost. We endeavor to manage our costs and in particular to capture productivity improvements which will not only reduce costs, but also improve customer service.

Infrastructure

Satellites. We currently have a fleet of twelve geosynchronous satellites, including eleven owned satellites and one leased satellite. We have seven Ku-Band satellites at the following orbital locations: 101° WL (three), 110° WL (one), 119° WL (one), 72.5° WL (one), and 95° WL (one-leased). We also have five Ka-Band satellites at our 99° WL (two) and 103° WL (three) orbital locations. The 72.5° WL orbital location is used pursuant to an arrangement with Telesat Canada and Bell ExpressVu.

We ~~are~~have ~~currently~~contracted ~~evaluating~~for ~~whether~~the ~~to begin~~ construction of an additional satellite to provide additional services as well as backup capacity., Ifwhich we doexpect ~~decide~~ to ~~acquire~~launch ~~such a satellite, we expect that it would be launched~~ and goplace into service in 2013.

Satellite Risk Management. At times, we use launch and in-orbit insurance to mitigate the potential financial impact of satellite fleet launch and in-orbit failures unless the premium costs are considered to be uneconomical relative to the risk of satellite failure. The insurance generally does not compensate for business interruption or loss of future revenues or subscribers. We rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact of a potential satellite failure on our ability to provide service. However, programming continuity cannot be assured in all instances or in the event of multiple satellite losses.

Launch insurance typically covers the time frame from ignition of the launch vehicle through separation of the satellite from the launch vehicle. In the past, we have launched satellites without ~~insurance. As of December 31, 2009, the net book value of our in-orbit satellites was $1,516 million, none of which is insured.~~

Digital Broadcast Centers. To gather programming content, ensure its digital quality, and transmit content to our satellites, we have built two digital broadcast centers, located in Castle Rock, Colorado and Los Angeles, California. These facilities provide the majority of our national and local standard-definition and HD programming. We have also built five uplink facilities which are used to provide HD local channels. Our broadcast centers receive programming from content providers via satellite, fiber optic cable and/or special tape. Most satellite-delivered programming is then digitized, encoded and

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~~transmitted~~insurance. toAs ~~our~~of ~~satellites.~~December 31, We2010, ~~designed~~the ~~each~~net ~~broadcast~~book ~~center~~value ~~and~~of ~~uplink~~our ~~facility~~in-orbit ~~with~~satellites ~~redundant~~was ~~systems~~$1,724 million, tonone ~~minimize~~of ~~service~~which ~~interruptions~~is insured.

~~Installation~~Digital ~~Network~~Broadcast Centers. ~~The~~To ~~DIRECTV~~gather ~~home~~programming ~~service provider~~content, orensure ~~HSP,~~its ~~installation~~digital quality, and ~~service~~transmit ~~network~~content ~~performs~~to ~~installation~~our satellites, we ~~upgrades~~have ~~and~~built ~~other service~~two ~~call~~digital ~~work~~broadcast ~~for~~centers, ~~us.~~located Inin ~~2008~~Castle ~~and 2009~~Rock, weColorado ~~entered~~and ~~into~~Los ~~several~~Angeles, ~~transactions~~California. ~~that~~These ~~brought~~facilities aprovide ~~significant~~the ~~portion~~majority of ~~this~~our ~~HSP~~national ~~network~~and ~~activity~~local instandard-~~house.~~definition Weand ~~now~~HD ~~directly~~programming. ~~employ~~We ~~nearly 4,000~~have ~~technicians~~also ~~and~~built ~~utilize~~five anuplink ~~additional~~facilities ~~11,000~~which ~~technicians~~are ~~from~~used ~~seven~~to ~~outsourced~~provide ~~companies~~HD ~~around~~local ~~the~~channels. ~~United~~Our ~~States.~~broadcast ~~The~~centers ~~combined~~receive ~~workforce~~programming ~~completed~~from ~~approximately~~content ~~93%~~providers ofvia ~~all~~satellite, ~~in-home~~fiber ~~visits in~~optic ~~2009.~~cable Weand/or ~~set~~special ~~the~~tape. Most ~~standards~~satellite-delivered ~~for~~programming ~~the~~is ~~quality~~then ofdigitized, ~~installation~~encoded and ~~service,~~transmitted ~~perform~~to ~~quality~~our ~~control,~~satellites. ~~manage~~We ~~inventory~~designed ~~and~~each ~~monitor~~broadcast ~~the~~center ~~overall~~and ~~service~~uplink ~~network~~facility ~~performance~~with ~~for~~redundant ~~nearly~~systems ~~all~~to ofminimize ~~the~~service ~~third-party installation network~~interruptions.

~~Customer~~Installation ~~Service Centers~~Network. AsThe ofDIRECTV ~~December 31,~~Home ~~2009~~Service Provider, weor ~~used~~HSP, 36network performs customer ~~service~~installation, ~~centers employing over 16~~upgrade,~~000~~ ~~customer service~~and ~~representatives.~~service ~~Most~~call ofwork ~~these~~for ~~customer~~us. ~~service~~From 2008 ~~centers~~to ~~are~~2010, ~~operated~~we byentered ~~Convergys~~into ~~Customer~~several ~~Management~~transactions ~~Group, Inc.,~~that ~~Precision~~brought ~~Response~~a ~~Corporation,~~significant ~~Sitel~~portion ~~Operating~~of ~~Corporation,~~this ~~N.E.W.~~HSP ~~Customer~~network ~~Service Companies, Inc.,~~activity ~~VXI Global Solutions, Inc~~in-house. ~~and Teleperformance.~~ We ~~currently~~now ~~own~~directly ~~and~~employ ~~operate~~nearly ~~six~~5,000 ~~customer~~technicians ~~service~~and ~~centers~~utilize ~~located~~an additional ~~in: Boise~~10,000 ~~Idaho;~~technicians ~~Tulsa,~~from ~~Oklahoma;~~six ~~Huntsville,~~outsourced ~~Alabama; Missoula,~~companies ~~Montana;~~around ~~Huntington,~~the ~~West~~United ~~Virginia~~States. ~~and~~The ~~Denver,~~combined ~~Colorado~~workforce ~~that~~completed ~~employ~~ approximately ~~5,000~~92% ~~customer~~of ~~service~~all ~~representatives.~~in-home ~~Potential~~visits ~~and~~in ~~existing~~2010. ~~subscribers~~We ~~can~~set ~~call a single telephone~~quality ~~number~~standards ~~24 hours~~for aall ~~day~~installation, ~~seven~~upgrade, ~~days~~and aservice ~~week~~work, toperform ~~request~~quality ~~assistance~~control ~~for~~procedures ~~hardware,~~against ~~programming,~~those ~~installation~~standards, ~~technical~~manage ~~and~~network ~~other~~inventory ~~support.~~levels, Weand ~~continue~~monitor tooverall ~~increase~~network ~~the~~performance ~~functionality of~~for ~~telephone-based~~nearly ~~and~~all ~~web-based~~of ~~self-care~~the ~~features~~installation ~~in order to better manage customer service costs~~ and ~~improve~~ service ~~levels~~network.

Customer Service Centers. As of December 31, 2010, we utilized 36 customer service centers employing over 17,000 customer service representatives. Most of these customer service centers are operated by Convergys Customer Management Group, Inc., Alorica, Inc., Sitel Operating Corporation, N.E.W. Customer Service Companies, Inc., VXI Global Solutions, Inc. and Teleperformance. We currently own and operate six customer service centers located in: Boise, Idaho; Tulsa, Oklahoma; Huntsville, Alabama; Missoula, Montana; Huntington, West Virginia and Denver, Colorado that employ approximately 5,000 customer service representatives. Potential and existing subscribers can call a single telephone number 24 hours a day, seven days a week, to request assistance for hardware, programming, installation, technical and other support. We continue to increase the functionality of telephone-based and web-based self-care features in order to better manage customer service costs and improve service levels.

Competition

We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our competition includes companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, telcos, wireless companies and companies that are developing new technologies, including online video distributors, or OVDs. Many of our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. Our over 18 19.52 million subscribers represent approximately 19% of MVPD subscribers at December 31, ~~2009~~2010.

•: Cable Television. We encounter substantial competition in the MVPD industry from cable television companies. According to the National Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming content. Approximately 100 million households subscribe to an MVPD service and approximately 60% of MVPD

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~~and~~subscribers ~~digital-quality~~receive ~~video.~~their ~~For~~programming ~~example,~~from ~~Verizon~~a ~~announced~~cable ~~that at the end of 2009, it had the capability to serve 15 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2010~~operator. In addition, ~~AT&T~~most ~~has~~cable ~~begun~~providers ~~deploying~~have ~~fiber~~completed ~~optic~~network ~~lines~~upgrades tothat ~~neighborhoods~~allow ~~and~~for ~~expects~~enhanced toservice ~~have~~offerings ~~the~~such ~~capability~~as todigital ~~serve~~cable, ~~approximately~~HD ~~30 million~~channels, ofbroadband ~~its~~Internet ~~customers~~access byand ~~the~~telephony ~~end of 2011~~services. AsCable ofcompanies ~~year~~bundle ~~end~~these ~~2009~~services, ~~Verizon~~offering ~~had~~discounts ~~nearly 3 million video subscribers~~ and ~~AT&T~~providing ~~had~~one ~~approximately~~bill ~~2 million subscribers. Similar~~ to ~~the~~ ~~cable companies,~~ the ~~telcos expect to offer their customers multiple services at a discount on one bill~~consumer.

•: Telephone Companies. Several telcos have upgraded a significant portion of their infrastructure by replacing their older, copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the telcos with significantly greater capacity enabling them to offer new and enhanced services, such as broadband Internet access at much greater speeds and digital- quality video. For example, Verizon announced that at the end of 2010, it had the capability to serve approximately 16 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2011. In addition, AT&T is deploying fiber optic lines to neighborhoods and expects to have the capability to serve approximately 30 million of its homes passed by the end of 2011. As of year-end 2010, Verizon had approximately 3.5 million video subscribers and AT&T had approximately 3 million video subscribers. Similar to the cable companies, the telcos expect to offer their customers multiple services at a discount on one bill.
•: Other Direct Broadcast Satellite and Direct-To-Home Satellite System Operators. We also compete with DISH Network Corporation, or DISH Network, which had over 14 million subscribers at the end of 2010, representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the United States.
•: Video via the Internet. With the large increase in the number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers, televisions and other devices. For example, Apple TV® offers hundreds of television shows and movies for rental, some in high-definition, on the online iTunes® Store. In addition, Hulu™ is an OVD which provides free movies and TV shows from over 225 content providers including FOX, NBC Universal, ABC, Lionsgate, MGM, National Geographic, Paramount, A&E Television Networks, PBS, and Warner Bros. This content can be accessed on demand through its website and those of its partners—AOL, IMDb, MSN, MySpace, and Yahoo!. In addition, several companies, such as Netflix, Blockbuster and Amazon.com, sell and rent movies or other shows via Internet download or streaming media. For example, Netflix has a library of thousands of movies and TV shows available for download to its over 20 million subscribers in the U.S. and Canada. There are also several similar initiatives by companies such as Intel, Microsoft and Sony to make it easier to view Internet- based video on television and personal computer screens. Many television models, Blu-Ray Disc® players and gaming consoles like Nintendo's Wii®, Sony's PS3® and the Xbox® can be directly connected to the Internet and have the capacity to stream video to the television.
•: Mobile Video. Many companies are beginning to offer mobile applications for video allowing consumers to watch video on the go. For example, AT&T offers AT&T mobile TV™ which provides users the ability to watch full length TV shows from ABC, CBS, ESPN and other programmers on their cell phones. Verizon Wireless offers V Cast™ which allows subscribers to watch many of the top TV shows including college football and basketball on their mobile phone for a modest fee. In addition other mobile applications and services are becoming available. Other cable and satellite distributors are also focused on distributing their content to their customers' mobile devices.

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•: Small and Rural Telephone Companies. Other telephone companies are also finding ways to deliver video programming services over their wireline facilities or in a bundle with other MVPD providers. For example, DISH Network has agreements with Embarq, Windstream, TDS, and Frontier to bundle their individual DSL and telephony services with DISH Network's video service.
•: Local Broadcasters. Most areas of the United States can receive traditional digital television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide local, network and syndicated programming typically free of charge. There are over 2,000 TV broadcast stations in the U.S. split among 210 TV markets.

ACQUISITIONS, STRATEGIC ALLIANCES AND DIVESTITURES

We review our competitive position on an ongoing basis and, from time to time, consider various acquisitions, strategic alliances and divestitures, including potential wireless broadband investments or alliances, in order to continue to compete effectively, improve our financial results, grow our business and allocate our resources efficiently. We also consider periodically making equity investments in companies with which we can jointly provide services to our subscribers.

GOVERNMENT REGULATION

We are subject to government regulation in the United States, primarily by the FCC and, to a certain extent, by the legislative branches, other federal agencies and state and local authorities. We are also subject to the rules and procedures of the International Telecommunications Union, or ITU, a specialized agency of the United Nations within which governments and the private sector coordinate global telecommunications networks and services. Depending upon the circumstances, noncompliance with legislation or regulations promulgated by these entities could result in the suspension or revocation of our licenses or registrations, the termination or loss of contracts or the imposition of contractual damages, civil fines or criminal penalties.

This section sets forth a summary of regulatory issues pertaining to our operations in the United States and is not intended to describe all present and proposed government regulation and legislation affecting the MVPD industry or our business.

FCC Regulation Under the Communications Act and Related Acts. The Communications Act and other related acts give the FCC broad authority to regulate the operations of our company.

The ownership and operation of our DBS/DTH system is regulated by the FCC primarily for:

•: the licensing of DBS and DTH satellites, earth stations and ancillary authorizations;
•: the assignment of frequencies and orbital slots, the relocation of satellites to different orbital locations or the replacement of an existing satellite with a new satellite;
•: compliance with the terms and conditions of assignments and authorizations, including required timetables for construction and operation of satellites;
•: avoidance of interference by and to DBS/DTH operations with operations of other entities that make use of the radio spectrum; and
•: compliance with the Communications Act and FCC rules governing U.S.- licensed DBS and DTH systems.

The FCC grants authorizations to satellite operators that meet its legal, technical and financial qualification requirements. The FCC conditions such authorizations on satisfaction of ongoing due diligence, construction, reporting and related obligations.

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~~ten-year~~ The ~~term, which is less than the useful life of a healthy direct broadcast satellite. Upon expiration of the initial license term, the~~ FCC ~~has~~grants ~~the~~authorizations ~~option~~ to ~~renew a~~ satellite ~~operator's~~ ~~license~~operators orthat ~~authorize~~meet anits ~~operator to operate for a period of time on special temporary authority~~legal, ortechnical ~~decline~~and tofinancial ~~renew~~qualification ~~the license~~requirements. IfThe ~~the~~ FCC ~~declines~~conditions tosuch ~~renew~~authorizations ~~the~~on ~~operator's~~satisfaction ~~license, the~~of ~~operator~~ongoing isdue ~~required~~diligence, toconstruction, ~~cease~~reporting ~~operations~~ and ~~the~~related ~~frequencies it was previously authorized to use would revert to the FCC~~obligations.

All of our satellites and earth stations are or have been licensed by the FCC. Currently, two of our satellites are licensed by the government of Canada. While the FCC generally issues DTH space station licenses for a fifteen-year term, DBS space station and earth station licenses are generally issued for a ten-year term, which is less than the useful life of a healthy direct broadcast satellite. Upon expiration of the initial license term, the FCC has the option to renew a satellite operator's license or authorize an operator to operate for a period of time on special temporary authority, or decline to renew the license. If the FCC declines to renew the operator's license, the operator is required to cease operations and the frequencies it was previously authorized to use would revert to the FCC.

Currently, we have several applications pending before the FCC, including applications to launch and operate future satellites to support DIRECTV's services. In general, the FCC's approval of these applications is required for us to continue to expand our range of service offerings while increasing the robustness of our satellite fleet. We may not obtain these approvals in a timely fashion or at all.

As a DBS/DTH licensee and operator we are subject to a variety of Communications Act requirements, FCC regulations and copyright laws that could materially affect our business. They include the following:

•: Local-into-Local Service and Limitation on Retransmission of Distant Broadcast Television Signals. The Satellite Home Viewer Act ("SHVA," which in this document includes progeny legislation (including the Satellite Home Viewer Improvement Act of 1999, or SHVIA; the Satellite Home Viewer Extension and Reauthorization Act of 2004, or SHVERA; and the Satellite Television Extension and Localism Act of 2010, or STELA) allows satellite carriers to retransmit the signals of local broadcast television stations in the stations' local markets without obtaining authorization from the holders of copyrights in the individual programs carried by those stations. Another portion of SHVA also permits satellite retransmission of distant network stations (those that originate outside of a satellite subscriber's local television market) only to "unserved households." A subscriber qualifies as an "unserved household" if he or she cannot receive, over the air, a signal of sufficient intensity from a local station affiliated with the same network, or falls into one of a few other very limited exceptions. SHVA also prohibits satellite carriers from signing up a new subscriber to distant analog or digital signals if that subscriber lives in a local market where the satellite carrier makes available the same-network local signal. SHVA imposes a number of notice and reporting requirements, and also permits satellite retransmission of distant stations in neighboring markets where they are determined by the FCC to be "significantly viewed." In implementing SHVA, the FCC has required satellite carriers to delete certain programming, including sports programming, from the signals of certain distant stations. In addition, the FCC's continuing interpretation, implementation and enforcement of other provisions of this legislation as well as judicial decisions interpreting and enforcing these laws, could hamper our ability to retransmit local and distant network and superstation signals, reduce the number of our existing or future subscribers that can qualify for receipt of these signals, impose costs on us in connection with the process of complying with the rules, or subject us to fines, monetary damages or injunctions. Also, the FCC's sports blackout requirements, which apply to all distant network signals, may require costly upgrades to our system. The distant signal provisions of SHVA are now set to expire in 2014. Congress may decline to renew those provisions, which could severely restrict our ability to retransmit distant signals. Congress could also adopt amendments to SHVA with respect to local or distant signals, including limiting the provision of distant signals.

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•: Must Carry Requirement. SHVA also imposes a must carry obligation on satellite carriers. This must carry obligation requires satellite carriers that choose to take advantage of the statutory copyright license in a local market to carry upon request the signals of all qualifying television broadcast stations within that local market, subject to certain limited exceptions. The FCC has implemented SHVA's must carry requirement and adopted further detailed must carry rules covering our carriage of both commercial and non-commercial broadcast television stations. These rules generally require us to carry all of the local broadcast stations requesting carriage in a timely and appropriate manner in markets in which we choose to retransmit the signals of local broadcast stations. We have limited capacity, and the projected number of markets in which we can deliver local broadcast programming will continue to be constrained because of the must carry requirement and may be reduced depending on the FCC's interpretation of its rules in pending and future rulemaking and complaint proceedings, as well as judicial decisions interpreting must carry requirements. For example, the FCC issued an order requiring mandatory carriage of high-definition digital signals in an increasing number of markets each year, requiring so-called "HD carry-one, carry-all" in all local markets served by 2013. We may not be able to comply with these must carry rules, or compliance may mean that we will be required to use capacity that could otherwise be used for new or additional local or national programming services. Moreover, Congress may amend the must carry rules at any time.
•: Retransmission Consent. For those local television broadcast stations that do not elect must carry, SHVA also requires DIRECTV to obtain consent prior to retransmitting their signals to viewers. Television broadcast stations may withhold this consent (subject to a requirement to negotiate for carriage in good faith), and other provisions of SHVA prevent DIRECTV from providing duplicate out-of-market programming in many instances. Thus, where network affiliated television stations withhold consent, DIRECTV subscribers may lose access to popular network programming until such consent is restored.
•: Public Interest Requirement. Under a requirement of the Communications Act, the FCC has imposed certain public interest obligations on DBS operators, including a requirement that such providers set aside four percent of channel capacity exclusively for noncommercial programming of an educational or informational nature, for which we must charge programmers below-market rates and for which we may not impose additional charges on subscribers. FCC rules also require us to comply with a number of political broadcasting requirements to which broadcasters are subject under the Communications Act, as well as limits on the commercialization of children's programming applicable to cable operators. We believe that we are in compliance with all of these requirements, but some of them require our interpretations, which we believe are reasonable and consistent with industry practice. However, if we are challenged, the FCC may not agree with our interpretations. In addition, the FCC could, in the future, attempt to impose additional public interest or content requirements on us, for example, by seeking to impose rules on indecent programming.
•: Emergency Alert System. The Emergency Alert System, or EAS, requires participants to interrupt programming during nationally declared emergencies and to pass through emergency related information. The FCC has adopted rules that require satellite carriers to participate in the "national" portion of EAS. It is also considering whether to mandate that satellite carriers also interrupt programming for local emergencies and weather events. We believe that any such requirement would be very difficult to implement, would require costly changes to our DBS/DTH system, and, depending on how it is implemented, could inconvenience or confuse our viewers. The FCC is also considering whether to require that EAS alerts be provided in multiple

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~~viewers. The FCC is also considering whether to require that EAS alerts be provided in multiple~~ languages or via text messages, which could also prove difficult and costly to implement depending upon the nature of any such requirement adopted.

•: Spectrum Allocation and License Assignment Rules. We depend upon the FCC's allocation of sufficient DBS frequencies and assignment of DBS licenses in order to operate our business. DBS frequencies and available DBS orbital locations capable of supporting our business have become increasingly scarce. While we have obtained additional DTH service capacity and continue to explore new sources of DBS/DTH capacity, there can be no assurance that we will obtain further capacity. In addition, the FCC had adopted a system of competitive bidding to assign licenses for additional DBS frequencies. On June 21, 2005, the United States Court of Appeals for the D.C. Circuit held that such an auction process was not authorized by statute. The FCC subsequently voided the previous auction and implemented a freeze on applications for authority to provide DBS service in the United States using new frequencies or new orbital locations not assigned to the United States in the ITU Region 2 Broadcasting Satellite Service, or BSS, Plan. On August 18, 2006, the FCC began a proceeding to identify a new system for assigning DBS authorizations. There can be no assurance that we will be able to obtain additional DBS capacity under whatever system the FCC implements in the future.

In 2007, the FCC adopted new service and licensing rules for the BSS in the 17.3-17.8 GHz and 24.75-25.25 GHz bands, or 17/24 GHz BSS. This spectrum, also known as the "reverse band" (in that transmissions from these satellites to consumers would occur in spectrum currently used for uplinking programming to traditional DBS satellites), could provide a new source of additional DTH capacity. ~~Among other things, the FCC established a licensing procedure under which the four parties with applications then pending—including~~ DIRECTV~~—would~~ becurrently ~~allowed~~holds toauthorizations ~~amend~~for ~~their~~satellites ~~applications~~in tothis ~~conform~~band toat ~~the~~three ~~new~~orbital ~~rules and would be entitled to have those applications processed on a co-equal basis with one another before any new applications would be accepted~~locations. ~~On July 28, 2009, the FCC granted four DIRECTV satellite applications in this band.~~ However, foreign operators who may have international priority have indicated an interest in using slots that may conflict with some or all of these licenses. One foreign licensed operator, Spectrum Five LLC, has filed a petition seeking reconsideration of one of DIRECTV's licenses at an orbital location where Spectrum Five also proposes to operate, and that petition remains pending.

•: Rules Governing Co-Existence With Other Satellite and Terrestrial Services and Service Providers in the MVPD Industry. The FCC has adopted rules to allow non-geostationary orbit fixed satellite services to operate on a co-primary basis in the same frequency band as the one used by direct broadcast satellite and Ku-Band-based fixed satellite services. In the same proceeding, the FCC concluded that multi-channel video and data distribution services, or MVDDS, can share spectrum with DBS operators on a non-interference basis, and adopted rules and a method for assigning licenses in that service, as well. While the FCC has established service and technical rules to govern the non-geostationary orbit and MVDDS services to protect DBS operations from harmful interference, these rules may not be sufficient to prevent such interference, and the introduction of such services into spectrum used by us for DBS service may have a material adverse impact on our operations. In addition, one MVDDS operator recently received a conditional waiver of the applicable rules so that it could operate its system in Albuquerque, New Mexico at substantially higher power levels, which may have a material adverse impact on our operations in that market. Although we have opposed that waiver request, there can be no assurance that the FCC will deny it.

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On August 18, 2006, the FCC released a notice of proposed rulemaking regarding the possible operation of "tweener" or "short spaced" satellites—satellites that would operate in the same DBS uplink and downlink frequency bands as us, from orbital positions located in between those now assigned to the DBS service. This rulemaking follows applications by SES and Spectrum Five LLC to operate tweener satellites. Under rules that the FCC is considering, a provider could, by complying with certain technical restrictions, operate a satellite in between two orbital locations where we have already positioned our satellites without completing coordination of its operations with us and without demonstrating that such operations would not "affect" us as ~~that~~ that term is defined by the ITU. We have opposed this proposal, and believe that tweener satellites as proposed by applicants would cause interference to our current and planned operations and impose a a significant constraint on the further growth of our DBS service. We cannot predict what if any action the FCC may take or the effect of such a proceeding on our business.

On November 29, 2006, despite the pendency of the tweener satellite rulemaking and over our opposition, the FCC's International Bureau granted Spectrum Five's application to operate a tweener satellite at the 114.5° 5o WL orbital location, only 4.5°5o away from our DBS satellites operating at the ~~110°~~ 110o WL and ~~119° WL~~ 119o WL orbital locations. While the Bureau limited Spectrum Five's operations to levels below those at which the ITU deems one DBS system to "affect" another in the absence of agreement from all affected DBS operators (including us), the Bureau's grant of Spectrum Five's application prior to coordination could ultimately permit Spectrum Five to operate at levels that would cause interference to our operations. On February 1, 2008, the full FCC denied reconsideration of the International Bureau's order, but clarified that, if Spectrum Five is unable to coordinate its tweener satellite, it must file for a modification of its authorization and demonstrate that its proposed operational parameters would not exceed the ITU trigger for coordination. To date, Spectrum Five has neither ~~contacted~~engaged in usnegotiations to ~~attempt~~coordinate ~~coordination of~~ its tweener system nor filed for modification of its authorization as directed by the FCC. Instead, it recently sought extension of the November 29, 2010 deadline for completion of its first satellite.

The FCC has also adopted rules that require satellite operators to take certain measures to mitigate the dangers of collision and orbital debris. Among other things, these rules impose certain requirements for satellite design and end-of-life disposal maneuvers for all satellites launched after March 18, 2002, which apply to eight of our in-orbit satellites. We believe that we are in compliance with all of these requirements and expect that we will continue to be able to comply with them going forward, but the requirements for end-of-life disposal could result in a slight reduction in the operational life of each new satellite.

•: Geographic Service Rules. The FCC requires DBS licensees to comply with certain geographic service obligations intended to foster the provision of DBS service to subscribers residing in the states of Alaska and Hawaii. We believe that we are in compliance with these rules although, in the past, some have argued otherwise to the FCC. The FCC has not acted on petitions filed several years ago by the State of Hawaii and an Alaska satellite television dealer. We cannot be sure that the FCC will agree with our view that we are in compliance with the agency's geographic services rules, or that the FCC will not require us to make potentially cumbersome and costly changes to our offerings. The FCC has also adopted similar rules for the ¹⁷/24 GHz BSS service.
•: FCC Conditions Imposed In Connection With the Liberty and News Corporation Transactions. In approving Liberty's 2008 acquisition of News Corporation's equity investment in our Parent, the FCC imposed a number of regulatory conditions on us and Liberty, some of which directly or indirectly affected our business. In granting authority for subsequent transactions in 2009 and 2010, the FCC conditioned its approval on continued compliance with those conditions. Accordingly, the FCC has imposed on us program carriage conditions intended to prevent discrimination against all forms of unaffiliated programming; and certain program access conditions intended to ensure non-discriminatory access to much of the programming carried on the DIRECTV service. In particular, we may be required to submit to "baseball style"

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Entertainment, Inc. and DIRECTV in 2009, the FCC conditioned its approval of the transaction on continued compliance with those conditions. Accordingly, the FCC has imposed on us program carriage conditions intended to prevent discrimination against all forms of unaffiliated programming; and certain program access conditions intended to ensure non-discriminatory access to much of the programming carried on the DIRECTV service. In particular, we may be required to submit to "baseball style" arbitration if we cannot arrive at terms for carriage of our regional sports network programming with an MVPD. We cannot predict what effect our compliance with or the FCC's enforcement of these conditions will have on our business.

•: Potential Regulation of Set-Top Boxes. Cable operators are subject to a wide variety of regulation of their set-top boxes, including a prohibition on so-called "integrated" security and non-security functions. The FCC has exempted DTH satellite operators from such rules, but has been urged to eliminate that exemption. Were it to do so, DIRECTV may be required to redesign its set-top boxes and, conceivably, replace existing boxes on a schedule not of its own devising. The FCC is also considering a new regime under which all multichannel video providers, including DIRECTV, would be required to offer so-called "All Vid interfaces" instead of its existing set-top box arrangements. Such interfaces would be designed according to government specifications to deliver DIRECTV's programming stream and related data for manipulation by third-party electronic equipment. DIRECTV believes such a requirement would significantly hinder its ability to offer new and innovative services, and could complicate its customer service efforts.

International Telecommunications Union Rules. We are required by international rules to coordinate the use of the frequencies on our satellites with other satellite operators who may interfere with us or who may suffer interference from our operations.

Other Legal and Regulatory Requirements. DBS/DTH providers are subject to other federal and state regulatory requirements, such as Federal Trade Commission, FCC and state telemarketing and advertising rules, and subscriber privacy rules similar to those governing other MVPDs. We have agreed with the Federal Trade Commission to (1) review and monitor compliance with telemarketing laws by any companies we authorize to do telemarketing as well as by independent retailers, (2) investigate and respond to complaints about alleged improper telemarketing and (3) terminate our relationship with marketers or retailers found in violation. Similarly, we have agreed with certain state attorneys general to comply with advertising disclosure requirements and monitor compliance by independent retailers.

In addition, although Congress has granted the FCC exclusive jurisdiction over the provision of DTH satellite services, aspects of DBS/DTH service remain regulated at the state and local level. For example, the FCC has promulgated rules prohibiting restrictions by local government agencies, such as zoning commissions and private organizations, such as homeowners associations, on the placement of DBS receiving antennas. Local governments and homeowners associations, however, may continue to regulate the placement of such antennas if necessary to accomplish a clearly defined public safety objective or to preserve a recognized historic district, and may also apply to the FCC for a waiver of FCC rules if there are other local concerns of a special or unusual nature. In addition, a number of state and local governments have attempted to impose consumer protection, customer service and other types of regulation on DBS operators. Also, while Congress has prohibited local taxation of the provision of DBS service, taxation at the state level is permissible, and many states have imposed such taxes, and additional states have attempted to do so recently. Incident to conducting a consumer directed business, we occasionally receive inquiries or complaints from authorities such as state attorneys general and state consumer protection offices. These matters are generally resolved in the ordinary course of business, and DIRECTV recently agreed to implement a restitution program for consumers who send eligible complaints related to consumer protection practices.

INTELLECTUAL PROPERTY

All DIRECTV companies maintain active programs for identifying and protecting our important intellectual property. With the exception of certain ~~U.S.~~patents ~~trademark~~and ~~registrations~~trademarks held by us, ~~pursuant to trademark license agreements~~ and various ~~intellectual property licensed from third parties, DIRECTV Group owns all of the intellectual property for the benefit of the company and its subsidiaries.~~

We believe that our growing portfolio of pending and issued patents are important assets. We presently hold over 1,950 issued patents worldwide relating to our past and present businesses, including over 450 patents developed by, or otherwise relating to, the businesses of DIRECTV U.S. We hold a worldwide portfolio of over 1,100 trademarks in over 130 countries related to the DIRECTV brand, the Cyclone Design and DIRECTV products and services. In particular, DIRECTV U.S. holds trademark registrations relating to its business, including registrations of the primary "DIRECTV" and Cyclone Design trademarks. In many instances, these trademarks are licensed royalty-free to third

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~~parties~~intellectual ~~for~~property ~~use~~licensed infrom ~~support~~third ofparties, ~~the~~ DIRECTV ~~U.S.~~Group ~~business.~~owns Weall ~~actively~~of ~~protect~~the ~~our important patents, trademarks and other~~ intellectual property ~~rights~~for ~~against~~the ~~unauthorized~~benefit orof ~~improper~~the ~~use~~company byand ~~third parties~~subsidiaries.

~~DIRECTV,~~We ~~DIRECTV~~believe ~~Plus~~that our growing portfolio of pending and issued patents are important assets. We presently hold over 2,000 ~~SuperFan~~issued patents worldwide relating to our past and present businesses, ~~SUPERCAST~~including over 500 patents developed by, ~~ScoreGuide~~or otherwise relating to our businesses. We hold a worldwide portfolio of over 1,150 trademarks related to the DIRECTV ~~Cinema~~brand, ~~GameSearch~~the Cyclone Design and DIRECTV products and services. In particular, ~~The~~we ~~101~~hold ~~Network~~trademark registrations relating to its business, including registrations of the primary "DIRECTV" and the DIRECTV Cyclone Design ~~are~~trademarks. In many instances, these trademarks ofare ~~The~~licensed ~~DIRECTV~~royalty-free ~~Group,~~to ~~Inc.~~third ~~and/or~~parties ~~its related~~for ~~entities.~~use ~~Other~~in ~~trademarks,~~support ~~service~~of ~~marks~~our ~~and~~business. ~~trade~~We ~~names~~actively ~~appearing~~protect inour ~~this~~important ~~Annual~~patents, ~~Report~~trademarks ~~are~~and ~~the~~other intellectual property ofrights ~~their~~against ~~respective~~unauthorized ~~holders~~or improper use by third parties.

ENVIRONMENTAL REGULATION

We are subject to the requirements of federal, state, local and foreign environmental laws and regulations. These include laws regulating air emissions, water discharge and universal and hazardous waste management activities. We have an environmental management function designed to track, facilitate and support our compliance with these requirements and attempt to maintain compliance with all such requirements. We have made and will continue to make, as necessary, capital and other expenditures to comply with environmental requirements. We do not, however, expect capital or other expenditures for environmental compliance to be material in ~~2010~~2011. In addition, we periodically review environmental stewardship concepts (such as green initiatives and energy conservation strategies) and implement these whenever feasible. Environmental requirements are complex, change frequently and have become more stringent over time. Accordingly, we cannot provide assurance that these requirements will not change or become more stringent in the future in a manner that could have a material adverse effect on our business.

We are also subject to environmental laws requiring the investigation and cleanup of environmental contamination at facilities we formerly owned or operated or currently own or operate or to which we sent hazardous wastes, including specified universal wastes, for treatment, service, disposal or recycling. We are aware of contamination at one of our former sites. We are in the process of complying with the requirements stipulated by the government agency overseeing the site ~~clean~~cleanup up and have allocated the funds to achieve the decontamination goals.

EMPLOYEES

As of December 31, ~~2009~~2010, we had approximately 1516,~~900~~000 full-time and 300 part-time employees.

***

ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors~~, as well as the more detailed descriptions of our business elsewhere in this Annual Report~~. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also ~~adversely~~impair ~~affect~~ our business, financial ~~condition~~conditions or results of operations.

Our business, financial condition or results of operations could be materially and adversely affected by the following:

We compete with other MVPDs, some of whom have greater resources than we do and levels of competition are increasing.

We compete in the MVPD industry against cable television, telcos, and wireless companies and other land-based and satellite-based system operators with service offerings including video, audio and interactive programming, data and other entertainment services and telephony service. Some of these competitors have greater financial, marketing and other resources than we do.

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Our business, financial condition or results of operations could be materially and adversely affected by the following:

We compete with other MVPDs, some of whom have greater resources than we do and levels of competition are increasing.

Some cable television operators have large, established customer bases and many cable operators have significant investments in, and access to, programming. According to the National Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Of the 128.6 million U.S. housing units, approximately 97.6 million subscribe to an MVPD service and approximately 62% 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 video service 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, and a recent federal appeals court decision invalidating the cap on the number of subscribers a single cable operator may allow them additional avenues for growth. 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~~three 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. And as discussed below, certain cable-affiliated programmers have withheld their programming from us in certain markets, which has further constrained our ability to compete for subscribers in those markets.

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 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. In

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~~particular~~service, ~~programming~~could ~~offered~~result ~~over~~in ~~the~~such ~~Internet~~companies ~~has~~focusing ~~become~~less ~~more~~effort ~~prevalent~~and asresources ~~broadband~~selling ~~networks~~the ~~have~~DIRECTV ~~improved their speed and quality of~~ service. ~~Significant~~or ~~changes~~declining ~~in consumer behavior with regard~~ to ~~the~~sell ~~means~~it byat ~~which~~all. ~~they~~We ~~obtain~~may ~~video~~be ~~entertainment~~unable ~~and information in response~~ to ~~this~~develop ~~emerging~~other ~~digital~~distribution ~~media~~methods ~~competition~~to ~~could~~make ~~materially~~up for ~~adversely~~lost ~~affect~~sales ~~our~~through ~~revenues~~the ~~and earnings or otherwise disrupt our business~~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. In particular, programming offered over the Internet has become more prevalent as the speed and quality of broadband networks have improved. OVDs and providers such as Hulu, Roku, Netflix, Apple TV, Amazon and Google TV are aggressively working to establish themselves as an alternative provider of video services. Such services and the growing availability of online content, coupled with an expanding market for connected devices and internet-connected televisions, poses a potential competitive challenge to traditional MVPDs, as a number of consumers may decide to drop their traditional MVPD subscription package.

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.

WeAlmost ~~depend~~all onof ~~third~~our ~~parties~~programming tois ~~provide~~provided usby ~~with~~unaffiliated ~~almost~~third ~~all~~parties. ofTypically our programming ~~services,~~agreements ~~including~~are multiple-year ~~third~~agreements ~~parties~~and ~~who~~contain ~~are~~annual ~~our~~price ~~affiliates and~~increases. ~~third~~When ~~parties~~negotiating ~~controlled~~to byacquire ~~competitors.~~rights Asto ~~discussed~~new ~~below~~programming, aor ~~limited~~for ~~number~~renewal of ~~cable-affiliated~~expiring ~~programmers~~contracts, programming suppliers have historically inincreased the ~~past~~rates ~~denied~~they charge us ~~access~~for toprogramming, ~~their~~increasing ~~programming~~our costs. ~~Our~~Often ~~ability~~these toincreases ~~compete successfully~~are ~~will~~greater ~~depend~~than onthe ~~our~~rate ~~ability~~of toinflation ~~continue~~for tothe ~~obtain~~same ~~desirable~~period. ~~programming~~We expect this practice to continue and ~~deliver~~the itnegotiations over such increases to ~~our~~become ~~subscribers~~more atdifficult ~~competitive~~and ~~prices~~potentially disruptive. ~~Our~~Increases in programming ~~agreements~~costs, ~~generally~~including ~~have~~retransmission ~~remaining~~costs ~~terms ranging~~for ~~from~~broadcast ~~less~~programming, ~~than~~could cause ~~one~~us to upincrease tothe ~~ten~~rates ~~years~~that ~~and~~we ~~contain~~charge ~~various~~our ~~renewal~~subscribers, ~~and~~which ~~cancellation~~could ~~provisions.~~in Weturn, ~~may~~especially ~~not~~in bea ~~able~~difficult toeconomic ~~renew~~environment, ~~these~~cause ~~agreements~~subscribers onto ~~favorable~~terminate ~~terms,~~their orsubscriptions ~~at all,~~ or ~~these~~potential ~~agreements~~new ~~may~~subscribers beto ~~canceled~~refrain ~~prior~~from subscribing to ~~expiration~~our ofservice. ~~their~~Furthermore, ~~original~~due ~~terms.~~to Ifthe economy and other factors, we ~~are~~may be unable to ~~renew~~pass ~~any~~programming ofcost ~~these~~increases ~~agreements~~on orto ~~the~~our ~~other~~subscribers. ~~parties~~Alternatively, ~~cancel~~in order ~~the~~to ~~agreements,~~attempt weto ~~may~~mitigate ~~not~~the beeffect ~~able~~of toproposed ~~obtain substitute~~ programming, orprice ifincreases, we ~~are~~may ~~able~~refuse to ~~obtain~~carry ~~such~~certain ~~substitute programming~~channels, itwhich ~~may~~could ~~not~~adversely beaffect ~~comparable~~subscriber ingrowth ~~quality~~ or ~~cost~~result toin ~~our~~higher ~~existing programming~~churn.

In addition, ~~many~~a oflimited ~~our~~number ~~programming~~of ~~agreements~~cable-affiliated ~~are~~programmers ~~long~~have ~~term~~in ~~agreements~~the ~~and~~past ~~contain~~denied ~~fixed~~us ~~annual~~access ~~price~~to ~~increases.~~their ~~When offering new~~ programming,. orOur ~~upon~~ability ~~expiration~~to ofcompete ~~existing contracts,~~successfully ~~programming~~will ~~suppliers~~depend ~~have~~on ~~historically~~our ~~increased~~ability ~~the~~to continue ~~rates~~to ~~they~~obtain ~~charge~~desirable ~~us for~~ programming, ~~increasing~~and ~~our~~deliver ~~costs.~~it Weto ~~expect~~our ~~this~~subscribers ~~practice~~at tocompetitive ~~continue~~prices. ~~Increases~~We inmay ~~programming~~not ~~costs~~be ~~could cause~~able us to ~~increase~~renew ~~the~~these ~~rates~~agreements ~~that~~on wefavorable ~~charge our subscribers~~terms, ~~which~~or ~~could~~at ~~in turn~~all, ~~especially~~or inthese aagreements ~~difficult~~may ~~economic~~be canceled ~~environment,~~prior ~~cause subscribers~~ to ~~terminate~~expiration of their ~~subscriptions~~original orterms. ~~potential~~If ~~new subscribers~~we toare ~~refrain~~unable ~~from subscribing~~ to ~~our~~renew ~~service.~~any ~~Furthermore,~~of ~~due~~these toagreements or the ~~economy~~other ~~and~~parties ~~other~~cancel ~~factors~~the agreements, we may not be ~~unable~~able to ~~pass~~obtain substitute programming, or ~~cost~~if ~~increases~~we onare able to ~~our~~obtain ~~subscribers,~~such ~~which~~substitute ~~could~~programming, ~~have~~it ~~a material~~may ~~adverse~~not ~~effect~~be oncomparable ~~our~~in ~~earnings~~quality or ~~cash~~cost ~~flow~~to our existing programming.

If we ~~Increased~~are ~~subscriber~~unable ~~churn~~to obtain rights to programming or ~~subscriber~~are ~~upgrade~~unable to pass additional costs on to subscribers, the potential loss of subscribers and ~~retention~~the need to absorb some or all of the additional costs could ~~materially~~have ~~adversely~~a ~~affect~~material adverse effect on our ~~financial~~earnings ~~performance~~or cash flow.

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.

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~~their efforts~~ inA ~~offering~~National aFootball ~~DIRECTV~~League ~~System~~strike ~~at a lower cost to consumers. Our subscriber acquisition costs may materially increase to the extent we continue~~ or ~~expand~~lockout ~~current sales promotion activities or introduce other more aggressive promotions, or due to increased competition. Any material increase~~ in ~~subscriber~~2011 ~~acquisition costs from current levels would negatively impact our earnings and~~ could materially adversely affect our ~~financial~~cash ~~performance~~flows.

We have a contract with the National Football League for the exclusive rights to distribute the NFL Sunday Ticket Package to our subscribers. The NFL's collective bargaining agreement with its players expires before the beginning of the 2011-2012 NFL season. If there is a players' strike or an owners' lockout and no games are played or a reduced schedule is played, we would still be obligated to make certain contractual payments to the NFL for such season. Our subscriber revenues would decrease if NFL games are not played or a full season is lost and cash flows from operating activities would decrease from lower revenues because we would still be obligated to make certain contractual payments to the NFL. We will be able to partially offset these payments through provisions such as credits in the following year, reimbursements for games not played and its rights to an extra season if an entire season were cancelled, but in the near term a strike or lockout could have a material adverse effect on our cash flows from operating activities primarily due to payments we may have to make to the NFL, including minimum contractual obligations, an optional advance payment that may be requested by the NFL and the loss of subscriber revenue, as well as possibly resulting in reduced subscriber additions and higher churn.

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 or increased retransmission fees paid to broadcasters 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 offer more costly advanced equipment or services, including connecting our receivers to the customers broadband service, 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 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 that are beyond our control, such as downturns in economic activity, 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 performance could be negatively affected more than those of our competitors. In addition, if our customers seek alternative means to obtain video entertainment, they may choose to purchase fewer services from us. Due to the economic and competitive environment, we may need to spend more to acquire and retain customers who in turn spend less on our services. If our average monthly revenue per subscriber, or ARPU, decreases, our margins could become compressed and the long term value of a customer would then decrease. The weak economy may affect our net subscriber additions and reduce subscriber spending and, if these economic conditions continue or deteriorate further, our subscriber growth could decline and our churn rate could increase which would have a material adverse effect on our earnings and financial performance.

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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 performance could be negatively affected more than those of our competitors. In addition, if our customers seek alternative means to obtain video entertainment, they may choose to purchase fewer services from us. Due to the economic and competitive environment, we may need to spend more, or we may provide greater discounts or credits, to acquire and retain customers who in turn spend less on our services. If our ARPU decreases or does not increase commensurate with increases in programming or other costs, our margins could become compressed and the long term value of a customer would then decrease. The weak economy may affect our net subscriber additions and reduce subscriber spending and, if these economic conditions continue or deteriorate further, our subscriber growth could decline and our churn rate could increase which would have a material adverse effect on our earnings and financial performance.

Our ability to keep pace with technological developments is uncertain.

In the video industry, changes occur rapidly as new technologies are developed, which could cause our services and products that deliver our services to become obsolete. We may not be able to keep pace with technological developments. If the new technologies on which we intend to focus our investments fail to achieve acceptance in the marketplace or our technology does not work and requires significant cost to replace or fix, we could suffer a material adverse effect on our future competitive position, which could cause a reduction in our revenues and earnings. For example, our competitors could be the first to obtain proprietary technologies that are perceived by the market as being superior. Further, after incurring substantial costs, one or more of the technologies under development by us or any of our strategic partners could become obsolete prior to its introduction.

In addition, technological innovation depends, to a significant extent, on the work of technically skilled employees. Competition for the services of these employees has been vigorous. We cannot assure you that we will be able to continue to attract and retain these employees.

To access technologies and provide products that are necessary for us to remain competitive, particularly in the area of broadband services, we may make future acquisitions and investments and may enter into strategic partnerships with other companies. Such investments may require a commitment of significant capital and human and other resources. The value of such acquisitions, investments and partnerships and the technology accessed may be highly speculative. Arrangements with third parties can lead to contractual and other disputes and dependence on the development and delivery of necessary technology on third parties that we may not be able to control or influence. These relationships may commit us to technologies that are rendered obsolete by other developments or preclude the pursuit of other technologies which may prove to be superior.

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New technologies could also create new competitors for us. Entities such as telcos are supporting digital video delivery over existing telephone lines and building out fiber optic lines to enhance their capabilities to deliver programming services. Satellite operators such as SES have begun offering turn-key packages of digital programming on a wholesale basis for distribution by rural telcos. In addition, programming services offered over the Internet have become more prevalent as broadband networks have improved their speed and quality of service. We may not be able to compete successfully with new entrants in the market for video services.

Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe patents and proprietary rights of others.

Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that we currently offer or may offer in the future. In general, if a court determines that one or more of our services or the products used to transmit or receive our services infringes on intellectual property owned by others, we and the applicable manufacturers or vendors may be required to cease developing or marketing those services and products, to obtain licenses from the owners of the intellectual property or to redesign those services and products in such a way as to avoid infringing the intellectual property rights. If a third party holds intellectual property rights, it may not allow us or the applicable manufacturers to use its intellectual property at any price, which could materially adversely affect our competitive position.

We may not be aware of all intellectual property rights that our services or the products used to transmit or receive our services may potentially infringe. In addition, patent applications in the United States are confidential until the Patent and Trademark Office issues a patent. Therefore, we cannot evaluate the extent to which our services or the products used to transmit or receive our services may infringe claims contained in pending patent applications. Further, without lengthy litigation, it is often not possible to determine definitively whether a claim of infringement is valid.

We cannot estimate the extent to which we may be required in the future to obtain intellectual property licenses or the availability and cost of any such licenses. Those costs, and their impact on our earnings, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. To the extent that we are required to pay royalties to third parties to whom we are not currently making payments, these increased costs of doing business could materially adversely affect our operating results. We are currently being sued in patent infringement actions related to use of technologies in our DTH business. There can be no assurance that the courts will conclude that our services or the products used to transmit or receive our services do not infringe on the rights of third parties, that we or the manufacturers would be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we or the manufacturers would be able to redesign our services or the products used to transmit or receive our services to avoid infringement. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations for any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

See "Legal Proceedings—Intellectual Property Litigation" in Part I, Item 3 of this Annual Report.

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~~John C~~property rights. ~~Malone~~If ~~has~~a ~~significant~~third ~~influence~~party ~~over~~holds ~~actions~~intellectual ~~requiring~~property ~~stockholder~~rights, ~~approval~~it ~~and~~may ~~his~~not ~~interests~~allow ~~may~~us ~~differ~~or ~~from~~the ~~ours~~applicable manufacturers to use its intellectual property at any price, which could materially adversely affect our competitive position.

~~The~~We may ~~Chairman~~not ofbe ~~our~~aware ~~Parent's Board~~ of ~~Directors,~~all ~~John~~intellectual ~~Malone,~~property isrights ~~also~~that ~~Chairman~~our ~~and~~services ~~Chief~~or ~~Executive~~the ofproducts ~~Liberty~~used ~~Media,~~to ~~Chairman~~transmit ~~of Liberty~~or ~~Global, Inc.,~~receive ~~and~~our ~~owns~~services ~~significant~~may ~~voting~~potentially ~~interests~~infringe. inIn ~~each of DIRECTV~~addition, ~~Liberty Media, Liberty Global, and Discovery Communications, Inc. Mr. Malone, his wife and certain~~patent ~~trusts~~applications ~~for~~in the ~~benefit~~United ofStates ~~their~~are ~~children~~generally ~~own~~confidential ~~shares~~until ofthe ~~DIRECTV~~Patent ~~common~~and ~~stock,~~Trademark ~~which~~Office ~~represent~~issues ~~approximately~~a 24patent.3% ~~of the total voting power of the outstanding shares of DIRECTV as of December 31~~Therefore, ~~2009.~~we ~~DIRECTV~~cannot ~~has~~evaluate ~~two classes of common stock,~~ the ~~Class A~~extent ~~common stock entitling holders~~ to ~~one~~which ~~vote~~our ~~per~~services ~~share~~or ~~and~~ the ~~Class B~~products ~~common stock entitling holders to 15~~used ~~votes per share. The shares of DIRECTV Class B common stock also have certain limited consent rights with respect~~ to ~~certain~~transmit ~~share~~or ~~distributions~~receive ~~and~~our ~~certain~~services ~~amendments~~may toinfringe ~~the~~claims ~~DIRECTV~~contained ~~Amended and~~in ~~Restated~~pending ~~Certificate~~patent ~~of Incorporation~~applications. ByFurther, ~~virtue~~without oflengthy ~~such rights as well as Mr. Malone's position as DIRECTV's Chairman~~litigation, ~~Mr. Malone~~it ~~may~~is ~~have~~often ~~significant~~not ~~influence~~possible ~~over the outcome of any corporate transaction or other matters submitted~~ to ~~DIRECTV~~determine ~~stockholders~~definitively ~~for~~whether ~~approval,~~a claim ~~including the election~~ of ~~directors,~~infringement ~~mergers,~~is ~~consolidations and the sale of all or substantially all of DIRECTV's assets~~valid.

See "Legal Proceedings—Intellectual Property Litigation" in Part I, Item 3 of this Annual Report.

We rely on key personnel.

We believe that our future success will depend to a significant extent upon the performance of certain of our key executives. The loss of certain of our key executives could have a material adverse effect on our business, financial condition and results of operations.

Construction or launch delays on satellites could materially adversely affect our revenues and earnings.

A key component of our business strategy is our ability to expand our offering of new programming and services, including increased local and HD programming. In order to accomplish this goal, we need to construct and launch new satellites. The construction and launch of satellites are often subject to delays, including satellite and launch vehicle construction delays, periodic unavailability of reliable launch opportunities due to competition for launch slots, weather and also due to general delays that result when a launch provider experiences a launch failure, and delays in obtaining regulatory approvals. A significant delay in the future delivery of any satellite would materially adversely affect the use of the satellite and thus could materially adversely affect our anticipated revenues and earnings. If satellite construction schedules are not met, there can be no assurance that a launch opportunity will be available at the time a satellite is ready to be launched. Certain delays in satellite construction could also jeopardize a satellite authorization that is conditioned on timely construction and launch of the satellite.

Our satellites are subject to significant launch and operational risks.

Satellites are subject to significant operational risks relating to launch and while in orbit. Launch and operational risks include launch failure, incorrect orbital placement or improper commercial operation. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to 36 months, and obtain other launch opportunities. We estimate the overall historical loss rate for all launches of commercial satellites in the last seven years to be approximately 5% but it may be higher. Any significant delays or failures in successfully launching and deploying our satellites could materially adversely affect our ability to generate revenues. While we have traditionally purchased insurance covering the launch and, in limited cases, operation of our satellites, such policies typically cover the loss of the satellite itself or a portion thereof, and not the business interruption or other associated direct and indirect costs. For example, we

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~~purchased launch~~ ~~insurance~~Our ~~covering~~satellites aare ~~portion~~subject ~~of our DIRECTV 12 satellite, which we launched at the end of 2009, and launch vehicle costs in the event of a total loss of the satellite prior~~ to ~~separation~~ ~~from~~significant ~~the~~ launch ~~vehicle,~~and ~~but~~operational ~~did not purchase in-orbit insurance for it~~risks.

Satellites are subject to significant operational risks relating to launch and while in orbit. Launch and operational risks include launch failure, incorrect orbital placement or improper commercial operation. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to 36 months, and obtain other launch opportunities. We estimate the overall historical loss rate for all launches of commercial satellites in the last seven years to be approximately five percent but it may be higher. Any significant delays or failures in successfully launching and deploying our satellites could materially adversely affect our ability to generate revenues. While we have traditionally purchased insurance covering the launch and, in limited cases, operation of our satellites, such policies typically cover the loss of the satellite itself or a portion thereof, and not the business interruption or other associated direct and indirect costs. For example, we purchased launch insurance covering a portion of our DIRECTV 12 satellite, which we launched at the end of 2009, and launch vehicle costs in the event of a total loss of the satellite prior to separation from the launch vehicle, but did not purchase in-orbit insurance for it.

In-orbit risks include malfunctions, commonly referred to as anomalies, and collisions with meteoroids, other spacecraft or other space debris. Anomalies occur as a result of various factors, such as satellite manufacturing errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh space environment. We work closely with our satellite manufacturers to determine and eliminate the potential causes of anomalies in new satellites and provide for redundancies of critical components in the satellites as well as having backup satellite capacity. However, we cannot assure you that we will not experience anomalies in the future, nor can we assure you that our backup satellite capacity will be sufficient for our business purposes. Any single anomaly or series of anomalies could materially adversely affect our operations and revenues and our relationships with our subscribers, as well as our ability to attract new subscribers for our services. Anomalies may also reduce the expected useful life of a satellite, thereby creating additional expenses due to the need to provide replacement or backup satellites and potentially reducing revenues if service is interrupted. Finally, the occurrence of anomalies may materially adversely affect our ability to insure our satellites at commercially reasonable premiums, if at all. While some anomalies are currently covered by existing insurance policies, others are not now covered or may not be covered in the future.

Any single anomaly or series of anomalies could materially adversely affect our operations and revenues and our relationships with our subscribers, as well as our ability to attract new subscribers for our services. Anomalies may also reduce the expected useful life of a satellite, thereby creating additional expenses due to the need to provide replacement or backup satellites and potentially reducing revenues if service is interrupted. Finally, the occurrence of anomalies may materially adversely affect our ability to insure our satellites at commercially reasonable premiums, if at all. While some anomalies are currently covered by existing insurance policies, others are not now covered or may not be covered in the future.

Our ability to earn revenue also depends on the usefulness of our satellites. Each satellite has a limited useful life. A number of factors affect the useful life of a satellite, including, among other things:

•: the design;
•: the quality of its construction;
•: the durability of its component parts;
•: the launch vehicle's insertion of the satellite into orbit;

Generally, the minimum design life of the satellites in our fleet is between 12 and 16 years. The actual useful lives of the satellites may be shorter or longer, in some cases significantly. Our operating results could be adversely affected if the useful life of any of our satellites were significantly shorter than 12 years from the date of launch.

In the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite. In the event of a complete satellite failure, our services provided via that satellite could be unavailable for several days or longer while backup in-orbit satellites are repositioned and services are moved. We are not insured for any resultant lost revenues. The use of backup satellite capacity for our programming may require us to discontinue some programming services due to potentially reduced capacity on the backup satellite. Any relocation of our satellites would require prior FCC approval and, among other things, a demonstration to the FCC that the replacement satellite would not cause additional interference compared to the failed or lost satellite. Such FCC approval may not be obtained. We believe we have or will have in 2010, in-orbit satellite capacity to expeditiously recover transmission of most our programming in the event one of

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•: any required movement, temporary or permanent, of the satellite;
•: the ability to continue to maintain proper orbit and control over the satellite's functions; and
•: the remaining on-board fuel following orbit insertion.

~~our~~ Generally, ~~in-orbit~~the minimum design life of the satellites ~~fails~~in our fleet is between 12 and 16 years. ~~However,~~The ~~programming~~actual ~~continuity~~useful ~~cannot~~lives of the satellites may be ~~assured~~shorter or longer, in some cases significantly. Our operating results could be adversely affected if the ~~event~~useful life of ~~multiple~~any ~~satellite~~of ~~losses~~our satellites were significantly shorter than 12 years from the date of launch.

In the ~~The~~event ~~cost~~ of ~~commercial~~a ~~insurance~~failure ~~coverage~~or onloss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite. In the ~~loss~~event of a complete satellite failure, our services provided via that issatellite could be unavailable for several days or longer while backup in-orbit satellites are repositioned and services are moved. We are not insured ~~could~~for ~~materially~~any ~~adversely~~resultant ~~affect~~lost revenues. The use of backup satellite capacity for our ~~earnings~~programming may require us to discontinue some programming services due to potentially reduced capacity on the backup satellite. Any relocation of our satellites would require prior FCC approval and, among other things, a demonstration to the FCC that the replacement satellite would not cause additional interference compared to the failed or lost satellite. Such FCC approval may not be obtained. We believe we have or will have in 2011, in-orbit satellite capacity to expeditiously recover transmission of most our programming in the event one of our in-orbit satellites fails. However, programming continuity cannot be assured in the event of multiple satellite losses.

We ~~use~~The ~~in-orbit~~loss ~~and launch insurance to mitigate the potential financial impact~~ of ~~satellite~~a ~~fleet in-orbit and launch failures unless the premium costs are considered uneconomic relative to the risk of~~ satellite ~~failure.~~that ~~When insurance~~ is ~~obtained, it generally covers all or a portion of the unamortized book value of covered satellites. Although the insurance does~~ not ~~compensate~~insured ~~for~~could ~~business~~materially ~~interruption~~adversely oraffect ~~loss of future revenues or subscribers, we rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact that a satellite failure may have on~~ our ~~ability to provide service~~earnings.

~~The price~~Any launch vehicle failure, ~~terms~~or ~~and~~loss ~~availability~~or destruction of ~~insurance~~any ~~fluctuate~~of ~~significantly.~~our ~~Launch~~satellites, ~~and~~even ~~in-orbit~~if ~~policies~~insured, could have a material adverse effect on our ~~satellites~~financial ~~may~~condition ~~not~~and ~~continue~~results of operations, our ability to becomply ~~available~~with onFCC ~~commercially~~regulatory ~~reasonable terms~~obligations and our ability to fund the construction or atacquisition ~~all.~~of Inreplacement ~~addition~~satellites toin ~~higher~~a ~~premiums~~timely fashion, ~~insurance~~or ~~policies~~at ~~may~~all. ~~provide~~At ~~for~~December 31, ~~higher deductibles~~2010, ~~shorter~~the ~~coverage~~net ~~periods~~book ~~and~~value ~~satellite~~of ~~health~~in-~~related~~orbit ~~policy~~satellites ~~exclusions~~was $1,724 million, none of which was insured.

Any launch vehicle failure, or loss or destruction of any of our satellites, even if insured, could have a material adverse effect on our financial condition and results of operations, our ability to comply with FCC regulatory obligations and our ability to fund the construction or acquisition of replacement satellites in a timely fashion, or at all. At December 31, 2009, the net book value of in-orbit satellites was $1,516 million, none of which was insured.

We depend on the Communications Act for access to cable-affiliated programming and changes impacting that access could materially adversely affect us.

We purchase a substantial percentage of our programming from programmers that are affiliated with cable system operators, including key regional sports networks, or RSNs. Currently, under certain provisions of the Communications Act governing access to programming, cable-affiliated programmers generally must sell and deliver their programming services to all MVPDs on non-discriminatory terms and conditions. The Communications Act and the FCC rules also prohibit certain types of exclusive programming contracts involving programming from cable-affiliated programmers.

Any change in the Communications Act or the FCC's rules that would permit programmers that are affiliated with cable system operators to refuse to provide such programming or to impose discriminatory terms or conditions could materially adversely affect our ability to acquire programming on a cost-effective basis, or at all. The Communications Act prohibitions on certain cable industry exclusive contracting practices with cable-affiliated programmers were extended by the FCC through October 2012, though it is currently considering proposals that could shorten the term of this extension if a cable operator could show that competition from new entrant MVPDs had reached a sufficient penetration level in the relevant marketing area.

In addition, certain cable providers have denied us and other MVPDs access to a limited number of channels created by programmers with which the cable providers are affiliated. In other cases, such programmers have denied MVPDs high definition feeds of such programming. The cable providers have asserted that they are not required to provide such programming (or resolution) due to the manner in which that programming is distributed, which they argue is not covered by the program access provisions of the Communications Act. The FCC recently adopted new rules under which such programming would also be subject to certain non-exclusivity and non-discrimination requirements. These rules have not yet gone into effect, and likely will be challenged in court. In addition, they will

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~~require~~programmers have denied MVPDs high definition feeds of such programming. The cable providers have asserted that they are not required to provide such programming (or resolution) due to the manner in which that programming is distributed, which they argue is not covered by the program access provisions of the Communications Act. The FCC recently adopted new rules under which such programming would also be subject to certain non-exclusivity and non-discrimination requirements. These rules have been challenged in court, however. In addition, they will require a further evidentiary showing by an MVPD seeking access to such programming. If these new rules are successfully challenged in court or we cannot make the required evidentiary showing, we may continue to be precluded from obtaining such programming, which in turn could materially adversely affect our ability to compete in regions serviced by those cable providers. Although the FCC also addressed some of these issues in a limited fashion by placing access conditions on certain regional sports networks affiliated with Time Warner Cable, Inc. and Comcast Corporation, as well as placing various program access conditions relating to Comcast Corporation's acquisition of control of NBC Universal, it is not clear that we will be able to assure continued access to this programming on fair and nondiscriminatory terms.

~~DIRECTV~~Our ~~itself~~parent is subject to similar restrictions with respect to certain programmers affiliated with us. The FCC imposed a number of conditions on its approval of Liberty Media's acquisition of News Corporation's interest in ~~DIRECTV~~our parent in 2007 which continues to apply. Among other things, those conditions require ~~DIRECTV~~our parent to offer national and regional programming services it controls to all MVPDs on non-exclusive and non-discriminatory terms and conditions, and prohibits ~~DIRECTV~~our parent from entering into exclusive arrangements with affiliated programmers or unduly ~~influencing~~ influencing such programmers in their dealings with other MVPDs. The conditions also require ~~DIRECTV~~our parent to engage in "baseball style" arbitration if elected by an MVPD where the parties cannot agree on terms and conditions for carriage of RSN programming owned, managed or controlled by ~~DIRECTV~~our parent. This condition ~~currently~~continues ~~applies~~to apply to the three RSNs ~~DIRECTV~~our parent acquired from Liberty Media in 2009.

Changes to and implementation of statutory copyright license requirements may negatively affect our ability to deliver local and distant broadcast stations, as well as other aspects of our business.

We carry the signals of distant broadcast stations pursuant to statutory copyright licenses contained in ~~the Satellite Home Viewer Improvement Act (SHVIA) and its successors, including the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA)~~SHVA. Critical provisions of SHVERA related to distant signals were due to expire at the end of 2009, but Congress has extended that deadline to February 28, 2010. Expiration of or changes to SHVERA, the FCC's interpretation, implementation and enforcement of provisions of SHVIA and SHVERA, as well as judicial decisions interpreting and enforcing these laws, could hamper our ability to retransmit distant network and superstation signals, reduce the number of our existing or future subscribers that can qualify for receipt of these signals, impose costs on us in connection with the process of complying with the rules, or subject us to fines, monetary damages or injunctions.

~~SHVERA~~SHVA, related laws, and FCC implementing rules also govern our provision of local broadcast signals. ~~While~~STELA ~~those~~itself ~~provisions~~directed ofa ~~SHVERA~~number doof ~~not~~federal ~~expire~~agencies onand ~~February 28,~~bodies ~~2010,~~to ~~they~~conduct proceedings ~~may~~to beevaluate ~~changed~~the bypossibility ~~Congress~~of significant changes to these laws. Such changes could limit our ability to deliver local broadcast signals. More generally, we have limited capacity, and the projected number of markets in which we can deliver local broadcast programming will continue to be constrained because of ~~SHVERA's~~the statutory "carry-one, carry-all" requirement and may be reduced depending on changes to that requirement, the FCC's interpretation of its rules in pending and future rulemaking and complaint proceedings, as well as judicial decisions interpreting must carry requirements. We may not be able to comply with these must carry rules, or compliance may mean that we are not able to use capacity that could otherwise be used for new or additional local or national programming services. In addition, the FCC has issued an increasing obligation for carriage of local digital broadcast transmissions in HD format. We may be unable to comply with this requirement in markets where we currently carry such signals without ceasing HD local service entirely in some markets, and would be precluded from launching additional markets currently planned.

In addition, the FCC has adopted rules requiring us to negotiate in good faith with broadcast stations seeking carriage outside of the mandatory carriage regime described elsewhere. The rules for "retransmission consent" negotiations, which are similar to those that have applied to broadcast ~~stations for years, require us to comply with certain indicia of good faith negotiation, as well as to~~

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~~demonstrate~~stations for years, require us to comply with certain indicia of good faith negotiation, as well as to demonstrate good faith under a "totality of the circumstances" test. Failure to comply with these rules could subject us to administrative sanctions and other penalties. Moreover, the FCC is considering changes to these and other rules related to retransmission consent, some of which could make negotiations more difficult, increase fees charged by broadcasters for carriage, or result in the increased withholding of broadcast signals.

Satellite programming signals have been stolen and may be stolen in the future, which could result in lost revenues and would cause us to incur incremental operating costs that do not result in subscriber acquisition.

The delivery of subscription programming requires the use of conditional access technology to limit access to programming to only those who subscribe and are authorized to view it. The conditional access system uses, among other things, encryption technology to protect the transmitted signal from unauthorized access. It is illegal to create, sell or otherwise distribute software or devices to circumvent that conditional access technology. However, theft of cable and satellite programming has been widely reported, and the access cards used in our conditional access system have been compromised in the past and could be compromised in the future.

We have undertaken various initiatives with respect to our conditional access system to further enhance the security of the DIRECTV signal. To help combat signal theft, we provide our subscribers with more advanced access cards that we believe significantly enhance the security of our signal. Currently, we believe these access cards have not been compromised. However, we cannot guarantee that those advanced access cards will prevent the theft of our satellite programming signals in the future. Furthermore, there can be no assurance that we will succeed in developing the technology we need to effectively restrict or eliminate signal theft. If our current access cards are compromised, our revenue and our ability to contract for video and audio services provided by programmers could be materially adversely affected. In addition, our operating costs could increase if we attempt to implement additional measures to combat signal theft.

The ability to maintain FCC licenses and other regulatory approvals is critical to our business.

If we do not obtain all requisite U.S. regulatory approvals for the construction, launch and operation of any of our existing or future satellites for the use of frequencies at the orbital locations planned for these satellites or for the provision of service, or the licenses obtained impose operational restrictions on us, our ability to generate revenue and profits could be materially adversely affected. In addition, under certain circumstances, existing licenses are subject to revocation or modification and upon expiration, renewal may not be granted. If existing licenses are not renewed, or are revoked or materially modified, our ability to generate revenue could be materially adversely affected.

In certain cases, satellite system operators are obligated by governmental regulation and procedures of the ~~ITU~~International Telecommunications Union to coordinate the operation of their systems with other users of the radio spectrum in order to avoid causing interference to those other users. Coordination may require a satellite system operator to reduce power, avoid operating on certain frequencies, relocate its satellite to another orbital location and/or otherwise modify planned or existing operations. For example, the FCC has conditionally granted Spectrum Five authority to provide ~~DBS~~direct broadcast satellite service using frequencies assigned to it by the Government of the Netherlands from an orbital slot located halfway between slots at which we currently operate. Other operators have filed similar requests. We believe this closer proximity, if ultimately implemented, would significantly increase the risk of interference which could adversely affect the quality of service provided to our subscribers. We may not be able to successfully coordinate our satellites to the extent we are required to do so, and any modifications we make in the course of coordination, or any inability to successfully coordinate, may materially adversely affect our ability to generate revenue. In addition, the FCC is currently conducting a rulemaking proceeding to consider, among other things, the adoption of operating parameters under which such "tweener" systems would be automatically deemed coordinated.

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to do so, and any modifications we make in the course of coordination, or any inability to successfully coordinate, may materially adversely affect our ability to generate revenue. In addition, the FCC is currently conducting a rulemaking proceeding to consider, among other things, the adoption of operating parameters under which such "tweener" systems would be automatically deemed coordinated.

Other regulatory risks include, among others:

•: the relocation of satellites to different orbital locations if the FCC determines that relocation is in the public interest;
•: the denial by the FCC of an application to replace an existing satellite with a new satellite, or to operate a satellite beyond the term of its current authorization, or to operate an earth station to communicate with such satellite;
•: the loss of authorizations to operate satellites on certain frequencies at certain locations if we do not construct, launch and operate satellites for those locations by certain dates; and
•: the authorization by the United States or foreign governments of the use of frequencies by third party satellite or terrestrial facilities that have the potential to interfere with communication to or from our satellites, which could interfere with our contractual obligations or services to subscribers or other business operations.

All of our FCC satellite authorizations are subject to conditions imposed by the FCC in addition to the FCC's general authority to modify, cancel or revoke those authorizations. Use of FCC licenses and other authorizations are often subject to conditions, including technical requirements and implementation deadlines. Failure to comply with such requirements, or comply in a timely manner, could lead to the loss of authorizations and could have a material adverse effect on our ability to generate revenue. For example, loss of an authorization could potentially reduce the amount of programming and other services available to our subscribers. The materiality of such a loss of authorization would vary based upon, among other things, the orbital location at which the frequencies may be used.

Moreover, some of our authorizations and future applications may be subject to petitions and oppositions, and there can be no assurance that our authorizations will not be canceled, revoked or modified or that our applications will not be denied. Moreover, the FCC has adopted new rules for licensing satellites that may limit our ability to file applications and secure licenses in the future.

Congress has continued to shape the scope of the FCC's regulatory authority and enact legislation that affects our business. In addition, FCC proceedings to implement legislation and enact additional regulations are ongoing. The outcomes of these legislative or regulatory proceedings or their effect on our business cannot be predicted.

We control a substantial portion of interaction with our customers and we may not be as efficient or effective as our outsourced providers resulting in higher costs.

We have a number of insourced call centers and installation service providers to handle customer service calls, installations and repairs. We may not be as efficient or effective as our outsourced providers resulting in higher costs. Also, there is a risk that our customer satisfaction could be impacted, which may lead to higher subscriber churn and an inability to attract new subscribers. In addition, our outsourced providers could encounter financial difficulties, which may disrupt our ability to make installation service calls or to provide a level of customer service we expect, and which also may lead to higher subscriber churn and an inability to attract new subscribers.

We have significant debt.

We have debt totaling $~~6.8~~10,472 ~~billion~~million as of December 31, ~~2009~~2010. If we do not have sufficient income or other sources of cash, it could affect our ability to service debt and pay other obligations.

We may not be able to obtain or retain certain foreign regulatory approvals.

There can be no assurance that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we operate, or that applicable restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the

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authorizations necessary Weto ~~face~~operate ~~risks~~satellites ~~arising~~or ~~from~~provide ~~possible~~satellite ~~union~~service ~~legislation~~internationally incould ~~the~~have ~~United~~a ~~States~~material adverse effect on our ability to generate revenue and our overall competitive position.

~~There~~ isOur aParent ~~possibility that the proposed Employee Free Choice Act, or EFCA,~~ may behave ~~enacted.~~a ~~The~~significant ~~EFCA,~~indemnity ~~also~~obligation ~~referred~~ to asLiberty ~~the "card check" bill~~Media, ifwhich ~~passed~~is innot ~~its~~limited ~~current form could significantly change the nature of labor relations~~ in ~~the~~amount ~~United~~or ~~States,~~subject ~~specifically, how union elections and contract negotiations are conducted. With respect~~ to ~~our~~any ~~owned and operated home service provider installation business~~cap, itif ~~would~~parts beof ~~easier~~the ~~for~~Liberty ~~unions~~Transaction ~~to win elections and we could face arbitrator-imposed labor scheduling, costs and~~or ~~standards.~~Liberty's ~~Therefore,~~2008 ~~the~~Transaction ~~EFCA~~with ~~could~~News ~~impose~~Corporation ~~more~~are ~~labor~~treated ~~relations~~as ~~requirements and union activity on our business, thereby potentially increasing our costs, and could have~~ a ~~material~~taxable ~~adverse effect on our overall competitive position~~transaction. ~~Currently, neither we nor most of our outsourced home service provider installation vendors have any unions.~~

Despite Weobtaining ~~may~~a ~~not~~private beletter ~~able~~ruling from the Internal Revenue Service (the "IRS") and an opinion of legal counsel to ~~obtain~~the oreffect that ~~retain~~parts of the Liberty Transaction qualified as a tax-free distribution for U.S. federal income tax purposes, the continuing validity of such ruling and opinion is subject to the accuracy of factual representations and certain ~~foreign~~assumptions. ~~regulatory~~Any ~~approvals~~inaccuracy in such representations could invalidate the ruling, and failure to comply with any undertakings made in connection with such tax opinion could alter the conclusions reached in such opinion. Even if parts of the Liberty Transaction otherwise qualify for tax-free treatment, it would result in a significant U.S. federal income tax liability to Liberty Media if one or more persons acquire a 50% or greater interest in the DIRECTV common stock as part of a plan or series of related transactions that includes the Liberty Transaction. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. Liberty Media or our Parent might inadvertently cause or permit a prohibited change in the ownership of our Parent to occur, thereby triggering a tax liability to Liberty Media.

~~There~~In addition, ~~can~~Liberty beMedia noentered ~~assurance~~into ~~that~~a ~~any~~tax ~~current~~matters ~~regulatory~~agreement ~~approvals~~with ~~held~~News byCorporation usin ~~are,~~connection orwith ~~will~~its ~~remain,~~2008 ~~sufficient~~transaction inwith ~~the~~News ~~view~~Corporation, ofpursuant ~~foreign regulatory~~to ~~authorities,~~which orLiberty ~~that~~Media agreed, ~~any~~among ~~additional~~other ~~necessary~~things, ~~approvals~~to ~~will~~indemnify beNews ~~granted~~Corporation onand acertain ~~timely~~related ~~basis~~persons orfor attaxes ~~all,~~resulting infrom ~~all~~actions ~~jurisdictions~~taken inby ~~which~~Liberty weMedia ~~operate,~~ or its affiliates that ~~applicable~~cause ~~restrictions~~such intransaction ~~those~~(or related ~~jurisdictions~~restructuring ~~will~~transactions) not beto ~~unduly~~qualify ~~burdensome.~~as ~~The~~tax-free ~~failure~~transactions. toLiberty ~~obtain~~Media's ~~the~~indemnification ~~authorizations~~obligations ~~necessary~~ to ~~operate~~News ~~satellites~~Corporation orand ~~provide~~certain ~~satellite~~related ~~service~~persons ~~internationally~~are ~~could~~not ~~have~~limited ain ~~material adverse effect~~amount onor ~~our~~subject ~~ability~~ to ~~generate~~any ~~revenue and our overall competitive position~~cap.

Under a WeTax ~~may~~Sharing ~~have~~Agreement abetween ~~significant~~Liberty Media and our Parent, in certain circumstances our Parent is obligated to indemnify Liberty Media and certain related persons for any losses and taxes resulting from the failure of the Liberty Transaction to be tax-free transactions and from any losses resulting from Liberty Media's indemnity ~~obligation~~obligations to News Corporation under the tax matters agreement between News Corporation and Liberty Media,. ~~which~~If our Parent is required to indemnify Liberty Media or certain related persons under the circumstances set forth in the Tax Sharing Agreement, we may be subject to substantial liabilities not limited in amount or subject to any cap. In such a circumstance, ifwe ~~parts~~may ofbe ~~the~~required ~~merger~~to ~~transactions~~make ~~are~~payments ~~treated~~or asdividends ato satisfy such ~~taxable~~liabilities ~~transaction~~that could either breach covenants in our credit facilities and bond indentures or require additional or accelerated payments, which could materially adversely affect our financial position and short term operating results.

~~Despite~~ ~~obtaining~~We amay ~~private~~be ~~letter~~required ~~ruling from the IRS and an opinion of legal counsel~~ to ~~the~~forgo ~~effect~~certain ~~that parts of the merger~~ transactions with Liberty Media qualified as a tax-free distribution for U.S. federal income tax purposes, the continuing validity of such ruling and opinion is subject to the accuracy of factual representations and certain assumptions. Any inaccuracy in ~~such~~order ~~representations could invalidate the ruling or failure~~ to ~~comply~~avoid ~~with any undertakings made in connection with such tax opinion, could alter~~ the ~~conclusions~~risk ~~reached in such opinion. Even if parts~~ of ~~the~~incurring ~~merger transactions otherwise qualify for tax-free treatment, it would result in a~~ significant ~~U.S. federal income~~ tax ~~liability to Liberty Media if one or more persons acquire a 50% or greater interest in the DIRECTV common stock as part of a plan or series of~~ -related ~~transactions that includes the merger transactions within a certain time frame~~liabilities. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. Liberty Media or DIRECTV might inadvertently cause or permit a prohibited change in the ownership of DIRECTV to occur, thereby triggering a tax liability to Liberty Media.

~~In addition,~~We ~~Liberty~~might ~~Media~~be ~~entered~~required ~~into~~to aforgo ~~tax~~certain ~~matters~~transactions ~~agreement~~that ~~with~~might ~~News~~have ~~Corporation~~otherwise inbeen ~~connection~~advantageous ~~with~~in ~~the~~order ~~News/Liberty~~to ~~transaction~~preserve inthe tax-free ~~2008,~~treatment ~~pursuant~~of tothe ~~which~~ Liberty ~~Media~~Transaction. ~~agreed, among~~In ~~other things~~particular, towe ~~indemnify~~might ~~News~~be ~~Corporation~~required ~~and~~to forgo certain ~~related~~transactions, ~~persons~~including ~~for~~asset ~~taxes~~dispositions ~~resulting~~or ~~from~~other ~~actions~~strategic ~~taken~~transactions byfor ~~Liberty~~some period ~~Media~~of ortime ~~its~~following ~~affiliates that cause~~ the ~~News/~~Liberty ~~transaction~~Transaction ~~(or related~~so ~~restructuring~~as ~~transactions)~~ not to ~~qualify~~trigger asany ~~tax-free~~liability ~~transactions.~~under ~~Liberty~~the ~~Media's~~tax indemnification obligations ~~to News Corporation and certain related persons are not limited in amount or subject to any cap~~.

Under a Tax Sharing Agreement between Liberty Media and our parent, DIRECTV is obligated to indemnify Liberty Media and certain related persons for any losses and taxes resulting from the failure of the merger transactions to be tax-free transactions in certain circumstances and from any losses resulting from Liberty Media's indemnity obligations to News Corporation under the tax matters agreement between News Corporation and Liberty. If DIRECTV is required to indemnify Liberty

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DIRECTV HOLDINGS LLC

~~Media or~~ ~~certain~~We ~~related~~rely ~~persons~~on ~~under~~network ~~the~~and ~~circumstances~~information ~~set~~systems ~~forth~~and inother ~~the Tax Sharing Agreement~~technology, weand ~~may~~a bedisruption ~~subject to substantial liabilities not limited in amount~~ or ~~subject~~failure toof ~~any cap. In~~ such ~~a circumstance~~networks, wesystems ~~may be required to make payments~~ or ~~dividends~~technology toas ~~satisfy~~a ~~such~~result ~~liabilities~~of, ~~that~~misappropriation ~~could~~of ~~either~~data or ~~breach~~other ~~covenants~~malfeasance, inas ~~our~~well ~~credit~~as ~~facilities~~outages, ~~and~~natural ~~bond~~disasters, ~~indentures~~accidental orreleases ~~require~~of ~~additional~~information or ~~accelerated~~ ~~payments~~similar events, ~~which~~may ~~could~~disrupt ~~materially adversely affect~~ our ~~financial position and short term operating results~~business.

Because Wenetwork ~~may~~and beinformation ~~required~~systems and other technologies are critical to ~~forgo~~our ~~certain~~operating ~~transactions~~activities, network or information system shutdowns caused by events such as computer hacking, dissemination of computer viruses, worms and other destructive or disruptive software, and other malicious activity, as well as power outages, natural disasters such as earthquakes, terrorist attacks and similar events, pose increasing risks. Such an event could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our broadcast centers, other properties, equipment and data. Such an event also could result in ~~order~~large expenditures necessary to ~~avoid~~repair or replace such networks or information systems or to protect them from similar events in the ~~risk~~future. Significant incidents could result in a disruption of ~~incurring~~our ~~significant~~operations, ~~tax-related~~customer dissatisfaction, ~~liabilities~~or a loss of customers or revenues.

WeFurthermore, our ~~might~~operating activities could be ~~required~~subject to ~~forgo~~risks ~~certain~~caused ~~transactions~~by ~~that~~misappropriation, ~~might~~misuse, ~~have~~leakage, ~~otherwise~~falsification ~~been~~and ~~advantageous~~accidental inrelease ~~order~~or toloss ~~preserve~~of ~~the~~information maintained in our ~~tax-free~~information ~~treatment~~technology ofsystems ~~the~~and ~~News/Liberty~~networks, ~~transaction~~including customer, personnel and vendor data. InWe ~~particular~~could be exposed to significant costs if such risks were to materialize, weand ~~might~~such events could damage our reputation and credibility and have a negative impact on our revenues. We also could be required to ~~forgo~~expend ~~certain~~significant ~~transactions,~~capital ~~including~~and ~~asset~~other ~~dispositions~~resources orto ~~other~~remedy ~~strategic~~any ~~transactions~~such ~~for~~security ~~some~~breach. As a result of ~~period~~the increasing awareness concerning the importance of ~~time~~safeguarding ~~following~~personal information, the ~~Liberty~~potential ~~Transaction~~misuse soof assuch ~~not~~information toand ~~trigger~~legislation ~~any~~that ~~liability~~has ~~under~~been adopted or is being considered regarding the ~~tax~~protection, ~~indemnification~~privacy ~~obligations~~and security of personal information, information-related risks are increasing, particularly for businesses like ours that handle a large amount of personal customer data.

We face risks arising from the outcome of various legal proceedings.

We are involved in various legal proceedings, including those arising in the ordinary course of business, such as consumer class actions and those described under the caption "Legal Proceedings" in Part I, Item 3 incorporated by reference herein. Such matters include investigations and legal actions by ~~state~~the ~~attorneys~~Federal Trade ~~general~~Commission where regulators may seek monetary damages and may also seek to require or prohibit certain actions by ~~the~~us ~~Company~~ with regard to ~~its~~our current or potential customers. While we do not believe that any of these proceedings alone or in the aggregate will have a material effect on our consolidated financial position, an adverse outcome in one or more of these matters or the imposition of conditions by regulators on the conduct of our business could be material to our consolidated results of operations and cash flows for any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

We may face other risks described from time to time in periodic reports filed by us with the SEC.

We urge you to consider the above risk factors carefully in evaluating forward- looking statements contained in this Annual Report. The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report and we undertake no obligation to publicly update these forward- looking statements to reflect subsequent events or circumstances.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

***

ITEM 2. PROPERTIES

As of December 31, 2009, we had approximately 190 owned and leased locations operating in the United States. The major locations include eight administrative offices, two broadcast centers and six call centers.

***

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ITEM 2. PROPERTIES

As of December 31, 2010, we had approximately 220 owned and leased locations operating in the United States. The major locations include eight administrative offices, two broadcast centers and six call centers.

***

ITEM 3. LEGAL PROCEEDINGS

(a) Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we became or were a party during the year ended December 31, ~~2009~~2010 or subsequent thereto, but before the filing of the report, are summarized below:

Intellectual Property Litigation. We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits can be analyzed by us at this stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. No assurance can be given that any adverse outcome would not be material to our consolidated financial position.

Finisar Corporation. As previously reported, we were successful in 2008 getting the jury verdict in the Finisar case vacated on appeal. The original verdict found the patent to be valid and willfully infringed, and the jury awarded approximately $79 million in damages. The trial court increased the damages award by $25 million because of the jury finding of willful infringement and awarded pre-judgment interest of $13 million. DIRECTV was also ordered to pay into escrow $1.60 per new set-top receiver manufactured for use with the DIRECTV system beginning June 17, 2006 and continuing until the patent expires in 2012 or was otherwise found to be invalid. On April 18, 2008, the Court of Appeals reversed the verdict of the district court in part, vacated the findings of infringement, and remanded for further proceedings on the remaining issues finding that the district court had applied erroneous interpretations of certain terms of the claims. On remand, we sought and obtained summary judgment on the invalidity of all remaining claims, and the case against DIRECTV was dismissed on May 19, 2009. Finisar filed a Notice of Appeal with the Fifth Circuit Court of Appeals, and oral argument on the appeal was held on January 6, 2010. On January 8, 2010, the Court of Appeals affirmed per curiam the grant of summary judgment on all claims. This case is now resolved and there will be no further proceedings in this matter.

Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class action lawsuits in state and federal courts challenging the early cancellation fees we assess our customers when they do not fulfill their programming commitments. Several of these lawsuits are pending—some in California state court purporting to represent statewide classes, and some in federal courts purporting to represent nationwide classes. The lawsuits seek both monetary and injunctive relief. While the theories of liability vary, the lawsuits generally challenge these fees under state consumer protection laws as both unfair and inadequately disclosed to customers. Each of the lawsuits is at an early stage. Where possible, we are moving to compel these cases to arbitration in accordance with our Customer Agreement, but in states such as California where the enforceability of the arbitration provision is limited, we intend to defend against these allegations in court. We believe that our early cancellation fees are adequately disclosed, and represent reasonable estimates of the costs we incur when customers cancel service before fulfilling their programming commitments.

From time to time, we receive investigative inquiries or subpoenas from state and federal authorities with respect to alleged violations of state and federal statutes. These inquiries may lead to legal proceedings in some cases. ~~Currently,~~We ~~DIRECTV~~have ~~U.S.~~received isa request for information from the ~~subject~~Federal ofTrade anCommission, ~~investigation~~or byFTC, aon ~~multistate~~issues ~~group~~similar ofto ~~state~~those ~~attorneys~~resolved ~~general~~with ~~regarding~~the ~~alleged~~multistate ~~violations~~group of state ~~their~~attorneys ~~respective~~general ~~state~~discussed ~~consumer protection~~in ~~statutes~~(b) below. ~~The~~We ~~state~~are ofcooperating ~~Washington,~~with ~~originally~~the aFTC ~~part~~by ofproviding ~~the~~information ~~multistate~~about ~~group,~~our ~~filed~~sales anand ~~action~~marketing inpractices ~~Washington~~and ~~state~~customer complaints.

Other. We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

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~~court in December 2009 seeking injunctive relief and civil penalties of up to $2,000 per violation of Washington's Consumer Protection Act.~~ (b) The ~~multistate investigation and the Washington~~ ~~lawsuit~~following ~~allege~~previously areported ~~variety~~legal ofproceedings ~~purported~~were ~~violations~~terminated ofduring the ~~statutes,~~fourth ~~but~~quarter ~~primarily~~ended ~~allege that we do not adequately disclose the terms and conditions of consumer offers~~December 31, ~~including~~2010: subscriber commitments and early cancellation fees. We are cooperating with the multistate group by providing information about our sales and marketing practices and customer complaints. We are defending the Washington lawsuit.

~~Other. We~~In December ~~are~~2010, ~~subject~~we toentered ~~other~~into ~~legal~~a ~~proceedings~~settlement ~~and~~agreement ~~claims~~with ~~that~~a ~~arise~~multistate ingroup ~~the~~of ~~ordinary~~state ~~course~~attorneys general to resolve concerns regarding alleged violations of ~~our~~their ~~business~~respective state consumer protection statutes. The ~~amount~~state of Washington, originally a part of the multistate group, filed an action in Washington state court in December 2009, and that litigation was settled on the ~~ultimate~~same ~~liability~~substantive terms as reached with the multistate group. We did not admit any wrongdoing in entering into the settlement. We agreed to formalize many business improvements made in the last few ~~respect~~years and to ~~such~~further ~~actions~~improve isother ~~not~~practices. ~~expected~~We paid a total of $14.25 million to ~~materially~~the ~~affect~~states ~~our~~as ~~financial~~costs ~~position~~of investigation and attorneys fees, ~~results~~and ofhas ~~operations~~agreed orto ~~liquidity.~~implement a restitution program for consumers who send eligible complaints.

~~(b) The~~ ~~following~~ ITEM ~~previously~~4. (Removed ~~reported~~and ~~legal proceedings were terminated during the fourth quarter ended December 31, 2009: None.~~ Reserved)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

***

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All of DIRECTV Holdings LLC's equity is indirectly owned by DIRECTV. All of DIRECTV Financing Co., Inc.'s common equity is owned by DIRECTV Holdings LLC. There is no established public trading market for our equity. Dividends on equity will be paid when and if declared by our Boards of Directors. None of our equity is subject to outstanding options or warrants.

***

ITEM 6. SELECTED FINANCIAL DATA

Omitted.

***

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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~~ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~ CONTENTS

The following is a discussion of our results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. Information in this section is organized as follows:

•: Summary Results of Operations and Financial Condition
•: Significant Transactions Affecting the Comparability of the Results of Operations
•: Key Terminology
•: Executive Overview and Outlook
•: Results of Operations
•: Liquidity and Capital Resources
•: Contractual Obligations
•: Off-Balance Sheet Arrangements
•: Contingencies
•: Certain Relationships and Related Party Transactions
•: Critical Accounting Estimates
•: Accounting Changes and New Accounting Pronouncements

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SUMMARY RESULTS OF OPERATIONS AND FINANCIAL CONDITION

	Years Ended December 31,
	2009			2008			2007
	2010			2009			2008
	(Dollars in Millions)
Consolidated Statements of Operations Data:
Revenues	$	1820,~~671~~268		$	1718,~~310~~671		$	1517,~~527~~310
Total operating costs and expenses		16,~~261~~978			1416,~~980~~261			1314,~~125~~980
Operating profit		23,~~410~~290			2,~~330~~410			2,~~402~~330
Interest income		45			374			6937
Interest expense		(~~348~~488	)		(~~315~~348	)		(~~216~~315	)
Other, net		(175	)		5(17	)		(5	)
Income before income taxes		2,~~049~~802			2,~~057~~049			2,~~250~~057
Income tax expense		(~~794~~1,051	)		(~~807~~794	)		(~~891~~807	)
Net income	$	1,~~255~~751		$	1,~~250~~255		$	1,~~359~~250

	December 31,
	2009			2008
	2010			2009
	(Dollars in Millions)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	~~1,716~~687		$	1,~~149~~716
Total current assets		32,~~560~~836			23,~~946~~560
Total assets		1211,~~408~~400			12,~~546~~408
Total current liabilities		3,~~388~~355			3,~~006~~388
Long-term debt		610,~~500~~472			56,~~725~~500
Total owner's equity		1,451			2,647
Total owner's equity (deficit)		(3,621	)		1,451

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	Years Ended December 31,
	2009			2008			2007
	2010			2009			2008
	(Dollars in Millions)
Other Data:
Operating profit before depreciation and amortization(1)
Operating profit	$	23,~~410~~290		$	2,~~330~~410		$	2,~~402~~330
Add: Depreciation and amortization expense		21,~~275~~926			2,~~061~~275			12,~~448~~061
Operating profit before depreciation and amortization	$	45,~~685~~216		$	4,~~391~~685		$	34,~~850~~391
Operating profit before depreciation and amortization margin		25.17	%		25.41	%		2425.84	%
Cash flow information
Net cash provided by operating activities	$	3,~~691~~905		$	3,~~277~~691		$	23,~~909~~277
Net cash used in investing activities		(1,~~496~~555	)		(1,~~857~~496	)		(21,~~335~~857	)
Net cash used in financing activities		(13,~~628~~379	)		(1,~~073~~628	)		(1,~~128~~073	)
Free cash flow(2)
Net cash provided by operating activities	$	3,~~691~~905		$	3,~~277~~691		$	23,~~909~~277
Less: Cash paid for property and equipment		(~~443~~477	)		(~~501~~443	)		(~~621~~501	)
Less: Cash paid for subscriber leased equipment—subscriber acquisitions		(~~564~~651	)		(~~599~~564	)		(~~762~~599	)
Less: Cash paid for subscriber leased equipment—upgrade and retention		(~~419~~316	)		(~~537~~419	)		(~~774~~537	)
Less: Cash paid for satellites		(59113	)		(~~128~~59	)		(~~169~~128	)
Free cash flow	$	2,~~206~~348		$	12,~~512~~206		$	~~583~~1,512

⁽¹⁾

Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, can be calculated by adding amounts under the caption "Depreciation and amortization expense" to "Operating profit." This measure should be used in conjunction with GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Our management and DIRECTV use operating profit before depreciation and amortization to evaluate the operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting from prior business acquisitions. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and DIRECTV separately measure and budget for capital expenditures and business acquisitions.

Reference should be made to the notes to the Consolidated Financial Statements.

We believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other communications, entertainment and media service providers. We believe that investors use current and projected operating profit before depreciation and amortization and similar measures to estimate our current or prospective enterprise value and make investment decisions. This metric provides investors with a means to compare operating results exclusive of depreciation and amortization expense. Our management believes this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the capitalization of intangible assets, potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.

Operating profit before depreciation and amortization margin is calculated by dividing operating profit before depreciation and amortization by Revenues.

⁽²⁾

Free cash flow, which is a financial measure that is not determined in accordance with GAAP, can be calculated by deducting amounts under the captions "Cash paid for property and equipment," "Cash paid for

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subscriber leased equipment—subscriber acquisitions," "Cash paid for subscriber leased equipment—upgrade and retention" and "Cash paid for satellites" from "Net cash provided by operating activities" from the Consolidated Statements of Cash Flows. This financial measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Our management and DIRECTV use free cash flow to evaluate the cash generated by our current subscriber base, net of capital expenditures, for the purpose of allocating resources to activities such as adding new subscribers, retaining and upgrading existing subscribers, for additional capital expenditures and other capital investments or transactions and as a measure of performance for incentive compensation purposes. We believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance to other communications, entertainment and media companies. We believe that investors also use current and projected free cash flow to determine the ability of revenues from our current and projected subscriber base to fund required and discretionary spending and to help determine our financial value.

SIGNIFICANT TRANSACTIONS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

~~Acquisitions~~Acquisition

180 Connect. In July 2008, we acquired 100% of 180 Connect's outstanding common stock and exchangeable shares. Simultaneously, in a separate transaction, UniTek USA, LLC acquired 100% of 180 Connect's cable service operating unit and operations in certain of our installation services markets in exchange for satellite installation operations in certain markets and $7 million in cash. These transactions provide us with ownership and control over a significant portion of our home service provider network. We paid $91 million in cash, net of the $7 million we received from UniTek USA, for the acquisition, including the equity purchase price, repayment of assumed debt and related transaction costs.

~~Other~~Financing ~~Developments~~Transactions

In ~~addition~~2010, towe ~~the~~issued ~~item~~$6.0 billion ~~described~~of ~~above~~senior notes resulting in $5,978 million ~~the~~of ~~following~~proceeds, ~~items~~net ~~had~~of adiscount, ~~significant~~and ~~effect~~repaid the $2,205 million of remaining principal on the ~~comparability~~Term Loans of ~~our~~its ~~operating~~senior ~~results~~secured ~~and financial~~credit ~~position~~facility. asThe repayment of ~~and~~the ~~for~~Term ~~the~~Loans ~~years~~resulted ~~ended~~in ~~December 31~~a 2010 pre-tax charge recorded in "Other, net" ~~2009~~in our Consolidated Statements of Operations of $16 million, ~~2008~~$10 million after tax resulting from the write-off of deferred debt issuance and ~~2007:~~other transaction costs.

~~Lease~~ In 2009, ~~Program. On~~we ~~March~~issued $2.0 1,billion ~~2006,~~of wesenior ~~introduced~~notes aresulting ~~new~~in ~~set-top~~$1,990 million ~~receiver~~of ~~lease~~proceeds, ~~program~~net of discount. ~~Prior~~Also toin ~~March 1~~2009, ~~2006,~~ we ~~expensed most~~purchased ~~set-top~~and ~~receivers~~redeemed ~~provided~~its tothen ~~new~~outstanding $910 million ~~and~~8.375% ~~existing~~senior ~~subscribers~~notes, ~~upon~~resulting ~~activation~~in as a ~~subscriber~~2009 ~~acquisition~~pre-tax orcharge ~~upgrade~~of ~~and~~$34 million, ~~retention~~$21 million ~~cost~~after intax, ~~the~~of ~~Consolidated~~which ~~Statements~~$29 million ofresulted ~~Operations. Subsequent~~from toa ~~the~~premium ~~introduction~~paid for ofthe ~~our~~redemption ~~lease~~and ~~program,~~$5 million weresulted ~~lease~~from ~~most~~the ~~set~~write-~~top~~off ~~receivers~~of ~~provided~~deferred todebt ~~new~~issuance costs and ~~existing~~other ~~subscribers,~~transaction ~~and~~costs. ~~therefore~~The ~~capitalize~~charge ~~the~~was ~~set-top~~recorded ~~receivers~~ in ~~"Property~~ ~~and equipment~~"Other, net" in ~~the~~ our Consolidated ~~Balance~~Statements ~~Sheets~~of Operations.

~~The~~In ~~following~~2008, ~~table~~we ~~sets~~issued ~~forth~~$1.5 billion ~~the~~in ~~amount~~senior ofnotes, ~~set-top~~and ~~receivers~~borrowed we$1 billion ~~capitalized,~~under ~~and~~a ~~depreciation~~new ~~expense~~Term weLoan ~~recorded~~of ~~under~~our ~~the~~senior ~~lease~~secured ~~program~~credit ~~for~~facility, ~~the~~resulting ~~years~~in ~~ended~~proceeds, net of ~~December~~discount, of $2,490 ~~31:~~million.

	2009		2008		2007
	(Dollars in Millions)
Capitalized subscriber leased equipment:
Cash paid for subscriber leased equipment—subscriber acquisitions	$	564	$	599	$	762
Cash paid for subscriber leased equipment—upgrade and retention		419		537		774
Total subscriber leased equipment capitalized	$	983	$	1,136	$	1,536
Depreciation expense—subscriber leased equipment	$	1,333	$	1,100	$	645

KEY TERMINOLOGY

Revenues. We earn revenues mostly from monthly fees we charge subscribers for subscriptions to basic and premium channel programming, HD programming and access fees, pay-per-view programming, and seasonal and live sporting events. We also earn revenues from monthly fees that we charge subscribers with multiple non-leased set-top receivers (which we refer to as mirroring fees), monthly fees we charge subscribers for leased set-top receivers, monthly fees we charge subscribers for

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~~Financing~~digital video ~~Transactions. On~~recorder, ~~September 22~~or DVR, ~~2009~~service, wehardware ~~issued~~revenues ~~$1 billion~~from insubscribers ~~five~~who ~~year~~lease ~~4.750%~~or ~~senior~~purchase ~~notes~~set-top ~~due~~receivers infrom ~~2014~~us, atour apublished ~~0.3% discount resulting~~programming inguide, ~~$997 million~~warranty ofservice ~~proceeds.~~fees Weand advertising ~~also issued $1 billion in 10 year 5~~services.~~875%~~ ~~senior~~Revenues ~~notes~~are ~~due~~reported innet ~~2019~~of atcustomer acredits ~~0.7%~~and ~~discount~~discounted ~~resulting in $993 million of proceeds~~promotions.

~~On September 22,~~ Broadcast ~~2009,~~programming weand ~~purchased,~~other These ~~pursuant~~costs toprimarily ainclude ~~tender~~license ~~offer,~~fees ~~$583 million~~for ofsubscription ~~our~~service ~~then~~programming, ~~outstanding~~pay-per-view programming, ~~$910 million~~live ~~8.375%~~sports ~~senior~~and ~~notes~~other atevents. aOther ~~price~~costs ofinclude ~~103.125%~~expenses ~~plus accrued~~associated ~~and~~with ~~unpaid~~the ~~interest,~~publication ~~for~~and adistribution ~~total~~ of ~~$603 million.~~our Onprogramming ~~September 23~~guide, ~~2009,~~continuing weservice ~~exercised~~fees ~~its~~paid ~~right~~ to ~~redeem~~third ~~the~~parties ~~remaining $327 million of the 8.375% senior notes at a price~~for ofactive ~~102.792%~~subscribers, ~~plus~~warranty ~~accrued~~service costs and ~~unpaid~~production ~~interest.~~costs Wefor ~~redeemed the remaining 8.375% senior notes~~ on-air ~~October 23,~~advertisements ~~2009~~we ~~for~~sell ato ~~total~~third ~~of $339 million~~parties.

~~The purchase~~ Subscriber ofservice ~~our 8~~expenses.~~375%~~ Subscriber ~~senior~~service ~~notes~~expenses ~~resulted~~include inthe acosts ~~2009~~of ~~pre-tax~~customer ~~charge~~call ~~of $34 million~~centers, ~~$21 million after tax~~billing, ofremittance ~~which~~processing ~~$29 million~~and certain ~~resulted from the~~home ~~premium~~services ~~paid~~expenses, ~~for~~such ~~redemption~~as ~~of our 8.375% senior notes and $5 million resulted from the write~~in-~~off~~home ofrepair ~~deferred debt issuance~~ costs ~~and other transaction costs~~. ~~The charge was recorded in "Other, net" in our Consolidated Statements of Operations.~~

~~In May 2008,~~ Broadcast weoperations ~~issued $1~~expenses.~~5 billion~~ These inexpenses ~~senior~~include ~~notes~~broadcast ~~and~~center ~~amended~~operating ~~our~~costs, ~~senior~~signal ~~secured~~transmission ~~credit~~expenses ~~facility~~(including tocosts of ~~include a new $1.0 billion Term Loan C. The senior notes~~collecting ~~bear~~signals ~~interest~~for atour alocal ~~rate~~channel ofofferings), ~~7.625%~~ and ~~the~~costs ~~principal balance is due in May 2016. The Term Loan C currently bears interest at a rate~~ of ~~5.25%~~monitoring, maintaining and ~~was~~insuring ~~issued~~our ~~at a 1% discount~~satellites. ~~Principal payments~~Also onincluded ~~the~~are ~~Term~~engineering ~~Loan C~~expenses ~~began~~associated ~~on September 30, 2008. The principal is payable in installments~~ with ~~the~~deterring ~~final~~theft ~~installment~~of ~~due~~our ~~in April 2013~~signal.

Subscriber ~~KEY~~acquisition ~~TERMINOLOGY~~ costs. These costs include the cost of set-top receivers and other equipment, commissions we pay to national retailers, independent satellite television retailers, dealers and telcos, and the cost of installation, advertising, marketing and customer call center expenses associated with the acquisition of new subscribers. Set-top receivers leased to new subscribers are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for subscriber acquisitions is included in "Cash paid for subscriber leased equipment—subscriber acquisitions" in the Consolidated Statements of Cash Flows.

~~Revenues~~Upgrade and retention costs. WeUpgrade ~~earn~~and ~~revenues~~retention ~~mostly~~costs ~~from~~are ~~monthly~~associated ~~fees~~with weupgrade ~~charge~~efforts ~~subscribers~~ for ~~subscriptions~~existing tosubscribers ~~basic~~that ~~and~~we ~~premium~~believe will ~~channel~~result ~~programming,~~in HDhigher ~~programming and~~average ~~access~~monthly ~~fees,~~revenue ~~pay-~~per~~-view~~ ~~programming~~subscriber, ~~and~~or ~~seasonal~~ARPU, and ~~live~~lower ~~sporting events~~churn. WeOur ~~also~~upgrade ~~earn~~efforts ~~revenues~~include ~~from~~subscriber ~~monthly~~equipment ~~fees~~upgrade ~~that~~programs wefor ~~charge~~DVR, ~~subscribers~~HD ~~with~~and ~~multiple~~HD DVR receivers and local channels, our ~~non-leased~~multiple set-top ~~receivers~~receiver ~~(which~~offer weand ~~refer~~similar toinitiatives. asRetention ~~mirroring~~costs ~~fees),~~also ~~monthly~~include ~~fees~~the wecosts ~~charge~~of ~~subscribers~~installing and providing hardware under our movers program for ~~leased~~subscribers ~~set~~relocating to a new residence. Set-top receivers, ~~monthly~~leased ~~fees~~to weexisting ~~charge~~ subscribers ~~for~~under ~~digital~~upgrade ~~video~~and ~~recorder,~~retention orprograms ~~DVR,~~are ~~service~~capitalized in "Property and equipment, ~~hardware~~net" ~~revenues~~in ~~from~~the ~~subscribers~~Consolidated ~~who~~Balance ~~lease~~Sheets and ordepreciated ~~purchase~~over their useful lives. The amount of set-top receivers ~~from~~capitalized ~~us,~~each ~~our~~period ~~published~~for ~~programming~~upgrade ~~guide,~~and ~~warranty service~~retention ~~fees~~programs is included in "Cash paid for subscriber leased equipment—upgrade and ~~advertising~~retention" ~~services~~in the Consolidated Statements of Cash Flows.

~~Broadcast~~General ~~Programming~~ and ~~Other~~administrative expenses. ~~These~~General ~~costs~~and ~~primarily~~administrative expenses include ~~license~~departmental ~~fees~~costs for ~~subscription~~legal, ~~service~~administrative ~~programming~~services, ~~pay-per-view~~ ~~programming~~finance, marketing ~~live sports~~ and ~~other~~information ~~events~~technology. ~~Other~~These costs also include expenses ~~associated~~for ~~with~~bad ~~the~~debt ~~publication~~ and ~~distribution~~other ofoperating ~~our programming guide~~expenses, ~~continuing~~such ~~service~~as ~~fees~~legal ~~paid to third parties for active subscribers~~settlements, ~~warranty service costs~~ and ~~production~~ ~~costs~~gains ~~for~~or ~~on-air~~losses ~~advertisements~~from wethe ~~sell~~sale toor ~~third~~disposal ~~parties.Subscriber Service Expenses. Subscriber service expenses include the costs~~ of ~~customer call centers, billing, remittance processing and certain home services expenses, such as in-home repair costs~~fixed assets.

~~Broadcast~~Average ~~Operations~~monthly ~~Expenses~~revenue per subscriber. ~~These~~We ~~expenses~~calculate ~~include~~ARPU ~~broadcast~~by ~~center~~dividing ~~operating~~average ~~costs,~~monthly ~~signal~~revenues ~~transmission~~for ~~expenses~~the period (~~including~~total ~~costs~~revenues during ofthe ~~collecting~~period ~~signals~~divided ~~for~~by ~~our~~the ~~local~~number ~~channel~~of ~~offerings~~months in the period), ~~and~~by ~~costs~~average subscribers for the period. We calculate average subscribers for the period by adding the number of ~~monitoring,~~subscribers ~~maintaining~~as of the beginning of the period and ~~insuring~~for ~~our~~each ~~satellites.~~quarter ~~Also~~end ~~included~~in ~~are~~the ~~engineering~~current ~~expenses~~year ~~associated~~or ~~with~~period ~~deterring~~and ~~theft~~dividing by the sum of ~~our~~the ~~signal~~number of quarters in the period plus one.

~~Subscriber~~ Average ~~Acquisition~~monthly ~~Costs~~subscriber churn. ~~These~~Average ~~costs~~monthly ~~include~~subscriber churn represents the ~~cost~~number of ~~set-top~~subscribers ~~receivers~~whose ~~and~~service ~~other~~is ~~equipment~~disconnected, expressed ~~commissions~~as ~~we pay to national~~a ~~retailers,~~percentage ~~independent~~of ~~satellite television retailers, dealers, telcos, and~~ the ~~cost~~average oftotal ~~installation,~~number ~~advertising, marketing and customer call center expenses associated with the acquisition~~ of ~~new~~ subscribers. ~~Set-top~~We ~~receivers~~calculate ~~leased~~average tomonthly ~~new~~subscriber ~~subscribers~~churn ~~are~~by ~~capitalized~~dividing ~~in "Property and equipment, net" in~~ the ~~Consolidated~~average ~~Balance~~monthly ~~Sheets~~number ~~and depreciated over their useful lives. The amount~~ of ~~set-top receivers capitalized each period for subscriber acquisitions is included in~~

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~~"Cash~~disconnected ~~paid~~subscribers for ~~subscriber~~the ~~leased~~period ~~equipment-~~(total ~~subscriber~~subscribers ~~acquisitions"~~disconnected, innet of reconnects, during the ~~Consolidated~~period ~~Statements~~divided by the number of ~~Cash~~months ~~Flows~~in the period) by average subscribers for the period.

Upgrade and Retention Costs. Upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe will result in higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD and HD DVR receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and providing hardware under our movers program for subscribers relocating to a new residence. Set-top receivers leased to existing subscribers under upgrade and retention programs are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is included in "Cash paid for subscriber leased equipment- upgrade and retention" in the Consolidated Statements of Cash Flows.

General and Administrative Expenses. General and administrative expenses include departmental costs for legal, administrative services, finance, marketing and information technology. These costs also include expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or disposal of fixed assets.

Average Monthly Revenue Per Subscriber. We calculate ARPU by dividing average monthly revenues for the period (total revenues during the period divided by the number of months in the period) by average subscribers for the period. We calculate average subscribers for the period by adding the number of subscribers as of the beginning of the period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one.

Average Monthly Subscriber Churn. Average monthly subscriber churn represents the number of subscribers whose service is disconnected, expressed as a percentage of the average total number of subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of disconnected subscribers for the period (total subscribers disconnected, net of reconnects, during the period divided by the number of months in the period) by average subscribers for the period.

Subscriber Count. The total number of subscribers represents the total number of subscribers actively subscribing to our service, including seasonal subscribers, subscribers who are in the process of relocating and commercial equivalent viewing units. In March 2008, we implemented a change in our commercial pricing and packaging to increase our competitiveness. As a result, during the first quarter of 2008, we made a one-time downward adjustment to the subscriber count of approximately 71,000 subscribers related to commercial equivalent viewing units.

SAC. We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing total subscriber acquisition costs for the period by the number of gross new subscribers acquired during the period. We calculate total subscriber acquisition costs for the period by adding together "Subscriber acquisition costs" expensed during the period and the amount of cash paid for equipment leased to new subscribers during the period.

EXECUTIVE OVERVIEW AND OUTLOOK

The United States is continuing to undergo a period of ~~substantial~~ economic uncertainty. As discussed in "Competition" in Item 1, in addition to cable and satellite system operators, we are experiencing increasing competition from telcos and other emerging digital media distribution providers. APlease ~~more~~refer ~~severe downturn~~to in"Risk ~~economic~~Factors" ~~activity~~in Item 1A orfor a further ~~competitive~~discussion ~~pressures~~of ~~could~~risks ~~have~~which amay ~~detrimental~~affect ~~impact on our~~ forecasted ~~revenue,~~results ~~operating~~or ~~margins,~~our ~~net~~business ~~subscriber~~generally. ~~additions, free cash~~

Our revenue growth is generated by both increases in the average monthly rates we earn from subscribers, or ARPU, and increases in the total number of subscribers. In 2011, we expect revenue growth in the mid to high single digit percentage range.

In 2011, we expect that the anticipated growth in revenues will be partially offset by higher programming costs, including the costs associated with our contract with the NFL, resulting in operating profit before depreciation and amortization growth in the low to mid single digit percentage range.

In 2011, we expect capital expenditures to be slightly higher than in 2010.

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~~flow and~~ ~~net~~Year ~~income.~~Ended ~~Please refer to "Risk Factors" in Item~~December 1A31, ~~for~~2010 aCompared ~~further~~with ~~discussion~~the ofYear ~~risks~~Ended ~~which~~December 31, ~~may affect forecasted results or our business generally.~~ 2009

~~Our revenue~~The ~~growth~~following istable ~~generated~~provides byoperating ~~both~~results ~~increases in the average monthly rates we earn from subscribers, or ARPU,~~ and ~~increases~~a insummary ~~the total number~~ of ~~subscribers.~~key ~~In 2010, we expect revenue growth in the mid-to-high single digit percentage range. We anticipate higher ARPU growth in 2010, offset by a reduction in revenue growth from net~~ subscriber ~~additions compared~~data: ~~to 2009.~~

In 2010, as a result of the anticipated growth in revenues, the economies of scale in our business, and lower gross subscriber additions, we expect operating profit before depreciation and amortization growth in the low-teens percentage range, an anticipated improvement compared to the 6.7% operating profit before depreciation and amortization growth achieved in 2009.

										Change

				2010			2009			$			%
				(Dollars in Millions, Except Per Subscriber Amounts)
Revenues				$	20,268		$	18,671		$	1,597			8.6	%
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			8,699			8,027			672			8.4	%
		Subscriber service expenses			1,340			1,268			72			5.7	%
		Broadcast operations expenses			273			274			(1	)		(0.4	)%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			2,631			2,478			153			6.2	%
		Upgrade and retention costs			1,106			1,045			61			5.8	%
		General and administrative expenses			1,003			894			109			12.2	%
	Depreciation and amortization expense				1,926			2,275			(349	)		(15.3	)%

			Total operating costs and expenses		16,978			16,261			717			4.4	%

Operating profit				$	3,290		$	2,410		$	880			36.5	%

Other data:
Operating profit before depreciation and amortization				$	5,216		$	4,685		$	531			11.3	%
Total number of subscribers (000's)					19,223			18,560			663			3.6	%
ARPU				$	89.71		$	85.48		$	4.23			4.9	%
Average monthly subscriber churn %					1.53	%		1.53	%		—			0.0	%
Gross subscriber additions (000's)					4,124			4,273			(149	)		(3.5	)%
Subscriber disconnections (000's)					3,461			3,334			127			3.8	%
Net subscriber additions (000's)					663			939			(276	)		(29.4	)%
Average subscriber acquisition costs—per subscriber (SAC)				$	796		$	712		$	84			11.8	%

Subscribers. In 2010, wegross ~~expect~~subscriber ~~capital~~additions ~~expenditures~~decreased primarily due to ~~approximate~~the ~~capital~~impact ~~expenditures~~of ~~reported~~the ~~for~~transition to digital broadcast in 2009 and lower additions from our regional telco partners as a result of a more challenging competitive environment. Net subscriber additions decreased from 2009 due to the decrease in gross additions and higher subscriber disconnections associated with the larger subscriber base. Average monthly subscriber churn remained unchanged from 1.53% in 2009.

Revenues. Our revenues increased as a result of higher ARPU and the larger subscriber base. The increase in ARPU resulted primarily from price increases on programming packages, higher HD and DVR service fees.

Operating profit before depreciation and amortization. The improvement of operating profit before depreciation and amortization was primarily due to the gross profit generated from the higher revenues, partially offset by higher subscriber acquisition and upgrade and retention costs and higher general and administrative expenses.

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Broadcast programming and other costs increased due to the larger number of subscribers in 2010 and annual program supplier rate increases. Subscriber service expenses increased primarily due to a larger subscriber base in 2010 and costs associated with service quality improvement initiatives.

Subscriber acquisition costs increased from 2009 primarily due to higher subscriber demand for advanced products as well as increased dealer commissions. SAC per subscriber, which includes the cost of capitalized set-top receivers, increased primarily due to higher subscriber demand for advanced products and increased dealer commissions compared to 2009. Under our lease program, we capitalized $651 million of set-top receivers in 2010 and $564 million in 2009 for new subscriber acquisitions.

Upgrade and retention costs increased in 2010 due to increased marketing costs and costs related to advanced product upgrades. Under our lease program we capitalized $316 million of set-top receivers in 2010 and $419 million in 2009 for subscriber upgrades. The decrease in the capitalized amount of set-top receivers is due to a decrease in the cost of advanced products.

General and administrative expenses increased in 2010 primarily due to increased labor and benefit costs related to higher incentive compensation and increased headcount as well as higher bad debt expense associated with higher revenue.

Operating profit. The increase in operating profit was primarily due to higher operating profit before depreciation and amortization and lower depreciation and amortization expense in 2010 as a result of decreased subscriber equipment capitalization and completion of the amortization of subscriber related and orbital slot intangible assets.

Interest expense. The increase in interest expense was from an increase in the average debt balance compared to 2009, partially offset by a decrease in weighted average interest rates.

Income Tax Expense. The increase in income tax expense was primarily due to the higher income before income taxes.

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Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008

The following table provides operating results and a summary of key subscriber data:

										Change

				2009			2008			$			%
				(Dollars in Millions, Except Per Subscriber Amounts)
Revenues				$	18,671		$	17,310		$	1,361			7.9	%
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			8,027			7,424			603			8.1	%
		Subscriber service expenses			1,268			1,139			129			11.3	%
		Broadcast operations expenses			274			265			9			3.4	%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			2,478			2,191			287			13.1	%
		Upgrade and retention costs			1,045			1,027			18			1.8	%
		General and administrative expenses			894			873			21			2.4	%
	Depreciation and amortization expense				2,275			2,061			214			10.4	%

			Total operating costs and expenses		16,261			14,980			1,281			8.6	%

Operating profit				$	2,410		$	2,330		$	80			3.4	%

Other data:
Operating profit before depreciation and amortization				$	4,685		$	4,391		$	294			6.7	%
Total number of subscribers (000's)⁽¹⁾					18,560			17,621			939			5.3	%
ARPU				$	85.48		$	83.90		$	1.58			1.9	%
Average monthly subscriber churn %					1.53	%		1.47	%		—			4.1	%
Gross subscriber additions (000's)					4,273			3,904			369			9.5	%
Subscriber disconnections (000's)					3,334			3,043			291			9.6	%
Net subscriber additions (000's)					939			861			78			9.1	%
Average subscriber acquisition costs—per subscriber (SAC)				$	712		$	715		$	(3	)		(0.4	)%

⁽¹⁾: As discussed above in "Key Terminology," during 2008, we had a one-time downward adjustment to our subscriber count of approximately 71,000 subscribers related to commercial equivalent viewing units. This adjustment did not affect our revenue, operating profit, cash flows, net subscriber additions or average monthly subscriber churn.

Subscribers. In 2009, gross subscriber additions increased primarily due to more aggressive promotions, marketing of the AT&T/DIRECTV bundle which began in February 2009, higher demand for advanced services and the impact of the transition to digital programming by broadcasters in the first half of 2009. Net subscriber additions increased from 2008 primarily due to the increase in gross additions, partially offset by higher subscriber disconnections due to a higher average monthly churn rate on a larger subscriber base. Average monthly subscriber churn increased primarily due to stricter upgrade and retention policies for existing customers as well as more aggressive competitor promotions combined with a weaker economy.

Revenues. Our revenues increased as a result of the larger subscriber base and higher ARPU. The increase in ARPU resulted primarily from price increases on programming packages, higher HD and

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DVR product penetration, partially offset by more competitive customer promotions, the elimination of satellite lease revenue and lower premium movie package buy rates.

Operating profit before depreciation and amortization. The improvement of operating profit before depreciation and amortization was primarily due to the gross profit generated from the higher revenues, partially offset by higher subscriber acquisition costs principally related to the increase in gross subscriber additions.

Broadcast programming and other costs increased due to the larger number of subscribers in 2009 and annual program supplier rate increases. Subscriber service expenses increased primarily due to a larger subscriber base in 2009 and costs associated with service quality improvement initiatives.

Subscriber acquisition costs increased primarily due to an increase in gross subscriber additions compared to 2008 and increased marketing and advertising costs. SAC per subscriber, which includes the cost of capitalized set-top receivers, decreased primarily due to lower set-top receiver costs and greater savings related to the increased usage of refurbished set-top receivers through our lease program.

Upgrade and retention costs increased in 2009 primarily due to the larger subscriber base, partially offset by decreased installation costs and decreased spending on other programs due to stricter spending policies.

General and administrative expenses increased in 2009 primarily due to increased labor and benefit expense from the increase in headcount within our owned and operated home service provider installation business, partially offset by a $14 million charge in 2008 for the write-off of accounts receivable for equipment and other costs incurred to effect the orderly transition of services from one of our home service providers that ceased operations.

Operating profit. The increase in operating profit was primarily due to higher operating profit before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2009 resulting from the capitalization of set-top receivers under the lease program.

Interest income and expense. The decrease in interest income to $4 million in 2009 from $37 million in 2008 was due to lower interest rates, partially offset by a higher average cash balance. The increase in interest expense to $348 million in 2009 from $315 million in 2008 was due to an increase in the average debt balance compared to 2008, partially offset by decreased interest rates.

Income Tax Expense. We recognized income tax expense of $794 million in 2009 compared to $807 million in 2008. The lower income tax expense in 2009 is primarily attributable to the lower income before income taxes.

39 LIQUIDITY AND CAPITAL RESOURCES

~~Table~~ Our principal sources of ~~Contents~~liquidity are our cash, cash equivalents and the cash flow that we generate from our operations. Additionally, from 2008 to 2010 we completed multiple financing transactions that have resulted in approximately $10.5 billion of net cash proceeds. We have also experienced significant growth in net cash provided by operating activities and free cash flow. We expect that net cash provided by operating activities to continue to grow and believe that our existing cash balances and cash provided by operations will be sufficient to fund our existing business plan. Additionally, in February 2011, we entered into a new $2 billion revolving credit facility, which is available until 2016. We may borrow under this facility to fund share repurchases or to fund strategic investment opportunities should they arise.

DIRECTV HOLDINGS LLC

Year Ended December 31, 2008 Compared with the Year Ended December 31, 2007

The following table provides operating results and a summary of key subscriber data:

										Change
				2008			2007			$			%
				(Dollars in Millions, Except Per Subscriber Amounts)
Revenues				$	17,310		$	15,527		$	1,783			11.5	%
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			7,424			6,681			743			11.1	%
		Subscriber service expenses			1,139			1,137			2			0.2	%
		Broadcast operations expenses			265			216			49			22.7	%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			2,191			1,901			290			15.3	%
		Upgrade and retention costs			1,027			958			69			7.2	%
		General and administrative expenses			873			784			89			11.4	%
	Depreciation and amortization expense				2,061			1,448			613			42.3	%
			Total operating costs and expenses		14,980			13,125			1,855			14.1	%
Operating profit				$	2,330		$	2,402		$	(72	)		(3.0	)%
Other data:
Operating profit before depreciation and amortization				$	4,391		$	3,850		$	541			14.1	%
Total number of subscribers (000's)(1)					17,621			16,831			790			4.7	%
ARPU				$	83.90		$	79.05		$	4.85			6.1	%
Average monthly subscriber churn %					1.47	%		1.51	%		—			(2.6	)%
Gross subscriber additions (000's)					3,904			3,847			57			1.5	%
Subscriber disconnections (000's)					3,043			2,969			74			2.5	%
Net subscriber additions (000's)					861			878			(17	)		(1.9	)%
Average subscriber acquisition costs—per subscriber (SAC)				$	715		$	692		$	23			3.3	%

Subscribers. In 2008, gross subscriber additions increased primarily due to growth in the direct sales and retail distribution channels due in large part to more attractive promotions and higher demand for HD and DVR services, partially offset by the loss of a distribution relationship with BellSouth during the last three quarters of 2008. Average monthly subscriber churn decreased primarily due to increased sales of HD and DVR services as well as from lower involuntary churn associated with the continued effect of stringent credit policies. Net subscriber additions declined slightly from 2007 as the increase in gross additions was offset by higher subscriber disconnections.

Revenues. Revenues increased as a result of higher ARPU and the larger subscriber base. The increase in ARPU resulted primarily from price increases on programming packages, higher HD and DVR service fees, and an increase in lease fees due to higher average number of receivers per

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~~subscriber,~~ At ~~partially~~December 31, ~~offset~~2010, byour ~~more~~cash ~~competitive~~and ~~customer~~cash ~~promotions~~equivalents ~~and~~totaled ~~slightly~~$687 million ~~lower~~compared ~~upfront~~with ~~equipment~~$1,716 million ~~fees~~at December 31, 2009.

~~Operating~~ We have ~~profit~~received ~~before~~capital ~~depreciation~~contributions and ~~amortization. The~~have ~~improvement~~borrowed ofamounts ~~operating~~from ~~profit~~our ~~before~~Parent ~~depreciation~~in ~~and~~the ~~amortization~~past ~~was primarily~~to ~~due~~fund ~~to the~~certain ~~gross~~transactions. ~~profit~~We ~~generated~~may ~~from~~also ~~the~~provide ~~higher~~dividends ~~revenues,~~to ~~partially~~our ~~offset~~Parent byor ~~higher~~fund ~~subscriber~~other ~~acquisition~~cash requirements, ~~upgrade~~including ~~and~~additional ~~retention~~share ~~costs~~repurchase ~~for~~programs ~~the~~or ~~increased~~other ~~number~~distributions ofto ~~new~~its ~~and~~stockholders, ~~existing~~or ~~customers~~to ~~adding~~fund HDstrategic investment opportunities should they arise. We may use available cash and ~~DVR~~cash ~~services~~equivalents, ascash ~~well~~from asoperations, ~~increased~~or ~~general~~incur ~~and~~additional ~~administrative~~borrowings, ~~costs~~which may include borrowings under our $2 billion revolving credit facility, to fund such dividends or strategic investment opportunities.

~~Broadcast~~As ~~programming~~a ~~and~~measure ~~other~~of ~~costs~~liquidity, ~~increased~~the ~~due~~current toratio ~~annual~~(ratio ~~program~~of ~~supplier~~current ~~rate~~assets ~~increases~~to ~~and~~current ~~the~~liabilities) ~~larger~~was ~~number~~0.85 ofat ~~subscribers~~December 31, in2010 ~~2008~~and 1.05 ~~Subscriber~~at ~~service~~December 31, ~~expenses~~2009. ~~remained~~Working capital ~~essentially~~decreased ~~flat~~$691 million ~~with~~to a ~~larger~~$519 million ~~subscriber~~deficit ~~base~~at inDecember 31, ~~2008~~2010 ~~due to the cost savings~~ from a ~~decline~~deficit inof ~~customer~~$172 million ~~call~~at ~~volume~~December 31, ~~and~~2009. aThe ~~lower~~decrease ~~call~~during ~~handle~~the ~~time.~~period ~~Broadcast~~was ~~operations~~mostly due ~~expense~~to ~~increased~~the increase in ~~2008~~our ~~due primarily~~cash toused ~~costs~~in tofinancing ~~support~~activities ~~advanced~~resulting ~~services,~~from HDthe ~~enhancements~~changes ~~and~~discussed ~~VOD~~below.

Subscriber acquisition costs increased due to higher sales, marketing and advertising costs and higher costs associated with the acquisition of higher quality and advanced product customers. SAC per subscriber, which includes the cost of capitalized set-top receivers, increased due to higher sales, marketing and advertising costs and higher costs associated with the acquisition of higher quality and advanced product customers, partially offset by lower set-top receiver costs.

Upgrade and retention costs increased in 2008 due to an increase in the movers program and other marketing programs.

General and administrative expenses increased in 2008 primarily due to a $25 million one-time gain recognized in the second quarter of 2007 related to hurricane insurance recoveries, a $14 million charge in 2008 for the write-off of accounts receivable for equipment and other costs incurred to effect the orderly transition of services from one of our home service providers that ceased operations, $24 million in charges associated with the settlement of multiple legal proceedings and an increase in labor and benefit costs.

Operating profit. The increase in operating profit was primarily due to higher operating profit before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2008 resulting from the capitalization of set-top receivers under the lease program.

Interest income and expense. The decrease in interest income to $37 million in 2008 from $69 million in 2007 was due to lower interest rates and lower average cash balances due mostly from the remittance of $3.4 billion in dividends to our Parent. The increase in interest expense to $315 million in 2008 from $216 million in 2007 was due to an increase in the average debt balance compared to 2007 and lower capitalization of interest cost in 2008. We capitalized $18 million of interest costs in 2008 and $51 million in 2007. The reduction in the capitalization of interest costs was due to the successful completion and launch of two satellites.

Income Tax Expense. We recognized income tax expense of $807 million in 2008 compared to $891 million in 2007. The lower income tax expense in 2008 is primarily attributable to the lower income before income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are our cash, cash equivalents and the cash flow that we generate from our operations. From 2007 to 2009 we experienced significant growth in net cash provided by operating activities and free cash flow. We expect net cash provided by operating activities and free cash flow to continue to grow and believe that our existing cash balances and cash provided by

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operations will be sufficient to fund our existing business plan. Additionally, as of December 31, 2009, we had the ability to borrow up to $500 million under our existing credit facility, which is available until 2011. Borrowings under this facility may be required to fund strategic investment opportunities should they arise.

At December 31, 2009, our cash and cash equivalents totaled $1.7 billion compared with $1.1 billion at December 31, 2008.

As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 1.05 at December 31, 2009 and 0.98 at December 31, 2008. Working capital increased by $232 million to $172 million at December 31, 2009 from a working capital deficit of $60 million at December 31, 2008. The increase during the period was mostly due to the increase in our cash and cash equivalent balances resulting from the changes discussed below.

Summary Cash Flow Information

	Years Ended December 31,
	2009			2008			2007
	2010			2009			2008
	(Dollars in Millions)
Net cash provided by operating activities	$	3,~~691~~905		$	3,~~277~~691		$	23,~~909~~277
Net cash used in investing activities		(1,~~496~~555	)		(1,~~857~~496	)		(21,~~335~~857	)
Net cash used in financing activities		(13,~~628~~379	)		(1,~~073~~628	)		(1,~~128~~073	)
Free cash flow:
Net cash provided by operating activities	$	3,~~691~~905		$	3,~~277~~691		$	23,~~909~~277
Less: Cash paid for property and equipment		(~~443~~477	)		(~~501~~443	)		(~~621~~501	)
Less: Cash paid for subscriber leased equipment—subscriber acquisitions		(~~564~~651	)		(~~599~~564	)		(~~762~~599	)
Less: Cash paid for subscriber leased equipment—upgrade and retention		(~~419~~316	)		(~~537~~419	)		(~~774~~537	)
Less: Cash paid for satellites		(59113	)		(~~128~~59	)		(~~169~~128	)
Free cash flow	$	2,~~206~~348		$	12,~~512~~206		$	~~583~~1,512

Cash Flows Provided By Operating Activities

The increases in net cash provided by operating activities in ~~2009~~2010 and ~~2008~~2009 were primarily due to our higher operating profit before depreciation and amortization, which resulted from the higher gross profit generated from an increase in revenues. Cash paid for income taxes was $775 million in 2010, $529 million in 2009 and ~~lower~~$753 million ~~payments~~in 2008. The increase in cash paid for income taxes in 2010 resulted mainly from increased income from continuing operations and prior year tax credits taken in 2009.

Cash Flows Used In Investing Activities

During ~~both~~ 2008 and 2009, we experienced a reduction in set-top receiver costs and benefited from the use of refurbished set-top receivers from our lease program, which resulted in a reduction in capital expenditures for property and equipment in 2008 and 2009. From 2009 to 2010, capital expenditures for set-top receivers remained relatively consistent.

~~Also~~During ~~during 2007~~2008, ~~2008~~2009 and ~~2009~~2010, we were in the process of constructing three satellites. WeTwo ~~have completed and placed two~~ of ~~these~~those satellites ~~into~~have ~~service,~~been ~~which~~completed ~~resulted~~and inplaced ~~decreasing satellite~~into ~~capital expenditures over the three year period~~service. We expect to place the ~~last~~third satellite ~~of these satellites~~ in service in the second ~~quarter~~half of ~~2010~~2013. Additionally, our capital expenditures for broadcast facilities and equipment to support our HD programming has decreased from 2007 to 2009 as we have largely completed the build out of the infrastructure necessary to launch HD programming both locally and nationally.

~~Additionally, we paid $11 million in 2009 and $97 million in 2008 for investments, net of cash acquired, in various companies. Significant acquisistions are described in Note 12 of the Notes to the~~ 41

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Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Our cash spending on investments is discretionary and we may fund strategic investment opportunities should they arise in the future.

Cash Flows Used in Financing Activities

During ~~2009~~2010, we had $15,~~990~~978 million of net cash proceeds from the issuance of senior notes ~~which were completed in September 2009~~. We also repaid $12,~~018~~323 million of our long-term debt. ~~During 2008~~Additionally, we had $2,490 million of net cash proceeds from the issuance of senior notes and borrowings under our senior secured credit facility which were completed in May 2008 as described in Note 7 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Also, we paid cash dividends to our Parent in the amounts of $26,~~500~~900 million in ~~2009~~2010, $32,~~400~~500 million in ~~2008~~2009 and $13,~~050~~400 million in ~~2007~~2008. We We have provided $1,500 million in additional dividends to our Parent in ~~2010~~2011 and will likely continue to provide additional dividends to our Parent to fund its cash requirements, including the $36.50 billion share repurchase program announced February ~~18,~~ ~~2010~~2011 or other distributions to shareholders, or to fund strategic investment opportunities should they arise. We may use available cash and cash equivalents, cash from operations, or incur additional borrowings, which may include borrowings under our $~~500~~2 ~~million~~billion revolving credit facility, to fund such dividends.

We anticipate additional borrowings in the future in order to achieve our target of outstanding long-term debt of 2.5 times our operating profit before depreciation and amortization.

Free Cash Flow

Free cash flow increased ~~from~~in ~~2007~~2010 as compared to 2009 due to an increase in net cash provided by operating activities ~~described above, and the decrease in capital expenditures~~. The decrease in capital expenditures resulted from lower costs for set-top receivers capitalized under our lease program and lower capital expenditures for satellite and broadcast facilities and equipment to support HD programming.

During 2010, we expect continued free cash flow growth primarily as a result of the anticipated increase in operating profit before depreciation and amortization.

Debt

At December 31, ~~2009~~2010, we had $610,~~808~~472 million in total outstanding borrowings, bearing a weighted average interest rate of 5.24%. Our outstanding borrowings ~~primarily~~ consist of notes payable ~~and amounts borrowed under our senior secured credit facility~~ as more fully described in Note 7 of the Notes to the Consolidated Financial Statements in Item 8, Part II of this Annual Report, which we incorporate herein by reference.

Our notes payable ~~and senior secured credit facility~~ mature as follows: $~~308 million in 2010~~1, ~~$108~~000 million in ~~2011~~2014, $~~20 million in 2012~~2, ~~$1,887~~200 million in ~~2013,~~ ~~$1,000 million~~2015 ~~in 2014~~ and $37,~~500~~300 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured credit facility, which could result from a computation that we are required to make at each year end under the credit agreement. We were not required to make a prepayment for the years ended December 31, 2009 and 2008.

~~Covenants~~ ~~and~~Revolving ~~Restrictions. The~~Credit senior secured credit facility requires us to comply with certain financial covenants. The senior notes and the senior secured credit facility also include covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another entity, (vi) sell, assign, lease or otherwise dispose of all or substantially all of its assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions as provided in the credit agreement and senior notes Facility

43 In February 2011, our senior secured credit facility was terminated and replaced by a new five year, $2.0 billion revolving credit facility. We pay a commitment fee of .30% per year for the unused commitment under the revolving credit facility, and borrowings will bear interest at an annual rate of (i) the London interbank offer rate (LIBOR) (or for Euro advances the EURIBOR rate) plus 1.50% or at our option (ii) the higher of the prime rate plus 0.50% or the Fed Funds Rate plus 1.00%. The commitment fee and the annual interest rate may be increased or decreased under certain conditions, which include changes in our long-term, unsecured debt ratings. The revolving credit facility is unsecured and has been fully and unconditionally guaranteed, jointly and severally, by substantially all of our current and certain of our future domestic subsidiaries on a senior unsecured basis.

Covenants and Restrictions. The revolving credit facility requires us to maintain at the end of each fiscal quarter a specified ratio of indebtedness to adjusted net income. The revolving credit facility also includes covenants that restrict our ability to, among other things, (i) incur additional subsidiary indebtedness, (ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all or substantially all of its assets, and (vi) change its lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes could become immediately payable and its revolving credit facility could be terminated. As of February 7, 2011, the closing date of the revolving credit facility, we were in

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~~indentures.~~compliance ~~Our~~with ~~4.750%~~all ~~and~~such ~~5.875% senior notes are rated as investment grade and have fewer~~ covenants ~~and restrictions than our other senior notes~~. ~~Should~~The ~~we fail to comply with these covenants, all or a portion of its borrowings under the~~ senior notes and ~~senior~~revolving ~~secured~~ credit facility ~~could~~also ~~become~~provide ~~immediately~~that ~~payable~~the ~~and~~borrowings ~~its~~may ~~revolving credit facility could~~ be ~~terminated.~~required ~~At December 31, 2009, we were in compliance with all such covenants and we expect~~ to ~~continue to~~ be inprepaid ~~compliance~~if ~~with~~certain ~~all covenants~~ change-in-control events ~~2010~~occur.

Contingencies

~~Several~~National ~~factors~~Football ~~may~~League ~~affect~~Strike ~~our~~or ~~ability~~Lockout. We have a contract with the National Football League for the exclusive rights to ~~fund~~distribute the NFL Sunday Ticket Package to our ~~operations~~subscribers. ~~and~~The ~~commitments~~NFL's ~~that~~collective webargaining ~~discuss~~agreement inwith ~~"Contractual~~its ~~Obligations", "Off-Balance~~players ~~Sheet~~expires ~~Arrangements"~~before ~~and~~the ~~"Contingencies"~~beginning ~~below~~of the 2011-2012 NFL season. InIf ~~addition,~~there ~~our~~is ~~future~~a players' ~~cash~~strike ~~flows~~or ~~may~~an beowners' lockout and no games are played or a reduced ifschedule weis ~~experience~~played, ~~among~~we ~~other~~would ~~things,~~still ~~significantly~~be ~~higher~~obligated ~~subscriber additions~~to ~~than~~make ~~planned,~~certain ~~increased~~contractual payments to the NFL for such season. Our subscriber ~~churn~~revenues would decrease if NFL games are not played or ~~upgrade~~a full season is lost and ~~retention~~cash ~~costs,~~flows ~~higher~~from ~~than~~operating ~~planned~~activities ~~capital~~would ~~expenditures~~decrease ~~for~~from ~~satellites~~lower ~~and~~revenues ~~broadcast~~because ~~equipment~~we would still be obligated to make certain contractual payments to the NFL. We will be able to partially offset these payments through provisions such as credits in the following year, ~~satellite~~reimbursements ~~anomalies~~for orgames ~~signal~~not ~~theft~~played and orits rights to an extra season if wethe ~~are~~entire ~~required~~season tois ~~make~~cancelled, but in the near term a ~~prepayment~~strike or lockout could have a material adverse effect on our ~~term~~cash ~~loans~~flows ~~under~~from ~~our~~operating ~~senior~~activities ~~secured~~primarily ~~credit~~due to ~~facility.~~payments ~~Additionally,~~we ~~our~~may ~~ability~~have to ~~borrow~~make ~~under~~to the ~~senior~~NFL, ~~secured~~including ~~credit~~minimum ~~facility~~contractual isobligations, ~~contingent~~an ~~upon us~~optional ~~meeting~~advance ~~financial~~payment that may be requested by the NFL and ~~other~~the ~~covenants~~loss ~~associated~~of ~~with~~subscriber ~~its~~revenue, ~~facility~~as well as possibly ~~more~~resulting ~~fully~~in ~~described~~reduced ~~above~~subscriber additions and higher churn.

Other. Several factors may affect our ability to fund our operations and commitments that we discuss in "Contractual Obligations", "Off-Balance Sheet Arrangements" and "Contingencies" below. In addition, our future cash flows may be reduced if we experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and retention costs, higher than planned capital expenditures for satellites and broadcast equipment, or satellite anomalies or signal theft. Additionally, our ability to borrow under its revolving credit facility is contingent upon our meeting a financial and other covenants associated with its facility as more fully described above.

CONTRACTUAL OBLIGATIONS

The following table sets forth our contractual obligations as of December 31, ~~2009~~2010, including the future periods in which payments are expected. Additional details regarding these obligations are provided in the Notes to the Consolidated Financial Statements in Part II, Item 8 referenced in the table.

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars in Millions)
Long-term debt obligations (Note 7)(a)	$	916,~~102~~750	$	~~665~~575	$	~~830~~1,154	$	32,~~473~~053	$	412,~~134~~968
Purchase obligations (Note 13)(b)		87,~~297~~214		1,~~671~~870		3,~~450~~461		21,~~539~~843		~~637~~40
Operating lease obligations (Note 13)(c)		~~232~~281		4156		6780		4636		78109
Other long-term liabilities reflected on the Consolidated Balance Sheets under GAAP (Notes 13)(d),(e)		~~198~~130		~~104~~69		7134		1117		1210
Total	$	1724,~~829~~375	$	2,~~481~~570	$	4,~~418~~729	$	63,~~069~~949	$	413,~~861~~127

^(a): Long-term debt obligations include interest calculated based on the rates in effect at December 31, 2010, however, the obligations do not reflect potential prepayments required under its indentures.
^(b): Purchase obligations consist primarily of broadcast programming commitments, regional professional team rights agreements, service contract commitments and satellite launch contracts. Broadcast programming

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commitments include guaranteed minimum contractual commitments that are typically based on a flat fee or a minimum number of required subscribers subscribing to the related programming. Actual payments may exceed the minimum payment requirements if the actual number of subscribers subscribing to the related programming exceeds the minimum amounts. Service contract commitments include minimum commitments for the purchase of services that have been outsourced to third parties, such as billing services, telemetry, tracking and control services and broadcast center services. In most cases, actual payments, which are typically based on volume, usually exceed these minimum amounts.

^(c): Certain of our operating leases contain escalation clauses and renewal or purchase options, which we do not consider in the amounts disclosed.
^(d): Other long-term liabilities consist of the amounts we owe to National Rural Telecommunications Cooperative, or NRTC, for the purchase of distribution rights and to the NRTC members that elected the long-term payment option resulting from the NRTC acquisition transactions in 2004, capital lease obligations, including interest, and satellite contracts.
^(e): Payments due by period for other long-term liabilities reflected on the Consolidated Balance Sheet under GAAP do not include payments that could be made related to our net unrecognized tax benefits liability, which amounted to $65 million as of December 31, 2010. The timing and amount of any future payments is not reasonably estimable, as such payments are dependent on the completion and resolution of examinations with tax authorities. We do not expect a significant payment related to these obligations within the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, ~~2009~~2010, we were contingently liable under standby letters of credit and bonds in the aggregate amount of $21 million for insurance deductibles.

CONTINGENCIES

For a discussion of "Contingencies", see Note 13 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

For a discussion of "Certain Relationships and Related-Party Transactions," see Note 11 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates, judgments and assumptions that affect amounts reported. Management bases its estimates, judgments and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported for future periods may be affected by changes in those estimates. The following represents what we believe are the critical accounting policies that may involve a higher degree of estimation, judgment and complexity. For a summary of our significant accounting policies, including those discussed below, see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report.

~~Multi-Year~~Income ~~Programming Contracts for Live Sporting Events~~Taxes. We ~~charge~~must ~~the~~make ~~cost~~certain ofestimates ~~multi-year~~and ~~programming~~judgments ~~contracts for live sporting events with minimum guarantee payments, such as our agreement with the NFL, based on the contractual rates~~ in ~~the~~determining ~~contract~~provisions ~~per~~for ~~season,~~income ~~unless~~taxes. ~~the~~These ~~contractual~~estimates ~~rates~~and ~~are inconsistent with the~~judgments ~~relative~~occur ~~value of the programming from season to season,~~ in ~~which case we record~~ the ~~expense based on the ratio of each period's sports programming package revenues to the estimated total package~~ ~~revenues~~calculation ~~to be earned over the contract period. Management evaluates estimated total programming package revenues at least annually. Estimates~~ of ~~forecasted~~tax revenues rely on assumptions regarding the number of subscribers to a given sporting events package and the estimated package price throughout the contract. While we base our estimates on past experience and other relevant factorscredits, ~~actual results~~tax ~~could~~benefits ~~differ from our estimates. If actual results were to significantly vary from forecasted amounts, the profit recorded on such contracts in a future period could vary from current rates~~ and ~~the resulting change in profits recorded could be material to our consolidated results of operations.~~

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~~Income Taxes. We must make certain estimates and judgments in determining provisions for income taxes. These estimates and judgments occur in the calculation of tax credits, tax benefits and~~ deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We assess the recoverability of deferred tax assets at each reporting date and where applicable, record a valuation allowance to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. Our assessment includes an analysis of whether deferred tax assets will be realized in the ordinary course of operations based on the available positive and negative evidence, including the scheduling of deferred tax liabilities and forecasted income from operating activities. The underlying assumptions we use in forecasting future taxable income require significant judgment. In the event that actual income from operating activities differs from forecasted amounts, or if we change our estimates of forecasted income from operating activities, we could record additional charges or reduce allowances in order to adjust the carrying value of deferred tax assets to their realizable amount. Such adjustments could be material to our consolidated financial statements.

In addition, the recognition of a tax benefit for tax positions involves dealing with uncertainties in the application of complex tax regulations. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. We provide for taxes for uncertain tax positions where assessments have not been received. We believe such tax reserves are adequate in relation to the potential for additional assessments. Once established, we adjust these amounts only when more information is available or when an event occurs necessitating a change to the reserves. Future events such as changes in the facts or law, judicial decisions regarding the application of existing law or a favorable audit outcome will result in changes to the amounts provided.

Contingent Matters. Determining when, or if, an accrual should be recorded for a contingent matter, including but not limited to legal and tax issues, and the amount of such accrual, if any, requires a significant amount of management judgment and estimation. We develop our judgments and estimates in consultation with outside counsel based on an analysis of potential outcomes. Due to the uncertainty of determining the likelihood of a future event occurring and the potential financial statement impact of such an event, it is possible that upon further development or resolution of a contingent matter, we could record a charge in a future period that would be material to our consolidated financial statements.

Depreciable Lives of Leased Set-Top Receivers. We currently lease most set-top receivers provided to new and existing subscribers and therefore capitalize the cost of those set-top receivers. We depreciate capitalized set-top receivers over a three year estimated useful life, which is based on, among other things, management's judgment of the risk of technological obsolescence. Changes in the estimated useful lives of set-top receivers capitalized could result in significant changes to the amounts recorded as depreciation expense. ~~Based~~We onregularly evaluate the ~~book~~estimated ~~value~~useful life of ~~the~~our set-top receivers ~~capitalized~~and asit ofis ~~December 31,~~possible that we may change the useful life of ~~2009,~~set-top ifreceivers in the near term. If we ~~extended~~had changed the depreciable life of ~~the~~our set-top receivers byas ~~one~~of ~~half~~January 1, of2010 ato ~~year~~four years, itannual depreciation for 2010 would ~~result~~have indecreased anby ~~approximately~~over $~~200~~300 million ~~reduction in annual depreciation expense~~.

Valuation of Long-Lived Assets. We evaluate the carrying value of long-lived assets to be held and used, other than goodwill and intangible assets with indefinite lives, when events and circumstances warrant such a review. We consider the carrying value of a long-lived asset impaired when the anticipated undiscounted future cash flow from such asset is separately identifiable and is less than its carrying value. In that event, we recognize a loss based on the amount by which the carrying value exceeds the fair value of the long-lived asset. We determine fair value primarily using the estimated future cash flows associated with the asset under review, discounted at a rate commensurate with the risk involved, and other valuation techniques. We determine losses on long-lived assets to be disposed

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~~risk involved, and other valuation techniques. We determine losses on long-lived assets to be disposed~~ of in a similar manner, except that we reduce the fair value for the cost of disposal. Changes in estimates of future cash flows could result in a write-down of the asset in a future period.

Valuation of Goodwill and Intangible Assets with Indefinite Lives. We evaluate the carrying value of goodwill and intangible assets with indefinite lives annually in the fourth quarter or more frequently when events and circumstances change that would more likely than not result in an impairment loss. We completed our annual impairment testing during the fourth quarter of ~~2009~~2010, and determined that there was no impairment of goodwill or intangible assets with indefinite lives. As of December 31, ~~2009~~2010, the fair value of the Company and our intangible assets with indefinite lives significantly exceed their carrying values. See Note 5 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

The goodwill evaluation requires the estimation of our business as a whole. We determine fair values primarily using estimated cash flows discounted at a rate commensurate with the risk involved, when appropriate. Estimation of future cash flows requires significant judgment about future operating results, and can vary significantly from one evaluation to the next. Risk adjusted discount rates are not fixed and are subject to change over time. As a result, changes in estimated future cash flows and/or changes in discount rates could result in a write-down of goodwill or intangible assets with indefinite lives in a future period, which could be material to our consolidated financial statements.

ACCOUNTING CHANGES AND NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of ~~accounting changes and~~ new accounting pronouncements see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

SECURITY RATINGS

Debt ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations as they come due and expected loss given a default. Ratings in the Baa range for Moody's Investors Service, and the BBB range for Standard & Poor's Ratings Services, or S&P, and the BBB range for Fitch Ratings, generally indicate adequate current protection of interest payments and principal security, with certain protective elements lacking. Ratings in the Ba range for Moody's and the BB range for S&P and Fitch, generally indicate moderate protection of interest and principal payments, potentially outweighed by exposure to uncertainties or adverse conditions. In general, lower ratings result in higher borrowing costs. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization.

Currently, we have the following security ratings:

	Senior Secured	Senior Unsecured	Corporate	Outlook
Standard & Poor's	BBB-	BBB-	BBB-	Stable
Moody's	Baa2	Ba2	Ba1	Stable
Fitch	BBB	BBB-	BBB-	Stable

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion and the estimated amounts generated from the sensitivity analyses referred to below include forward-looking statements of market risk which assume for analytical purposes that certain adverse market conditions may occur. Actual future market conditions may differ materially from such assumptions and the amounts noted below are the result of analyses used for the purpose of assessing possible risks and the mitigation thereof. Accordingly, you should not consider the forward-looking statements as our projections of future events or losses.

Interest Rate Risk

WeFrom ~~are~~time to time, we may be subject to fluctuating interest rates for variable rate borrowings, which may adversely impact our consolidated results of operations and cash flows. We had outstanding debt of $610,~~808~~472 million at December 31, ~~2009~~2010, which consisted ~~of fixed rate borrowings of $4~~entirely,~~490 million~~ ~~and variable rate borrowings~~ of ~~$2,316 million. As of December 31, 2009, a hypothetical one percentage point increase in interest rates related to~~ our ~~outstanding~~fixed ~~variable~~ rate ~~debt would have increased our annual interest expense by approximately $23 million~~borrowings.

***

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
DIRECTV Holdings LLC
El Segundo, California

We have audited the accompanying consolidated balance sheets of DIRECTV Holdings LLC (the "Company") as of December 31, ~~2009~~2010 and ~~2008~~2009, and the related consolidated statements of operations, changes in owner's equity (deficit), and cash flows for each of the three years in the period ended December 31, ~~2009~~2010. Our audits also included the financial statement ~~schedule~~ schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of DIRECTV Holdings LLC at December 31, ~~2009~~2010 and ~~2008~~2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2009~~2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, ~~2009~~2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, ~~2010~~2011 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Los Angeles, California February 25, ~~2010~~2011

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CONSOLIDATED STATEMENTS OF OPERATIONS

			Years Ended December 31,
			2009			2008			2007
			2010			2009			2008
			(Dollars in Millions)
Revenues			$	1820,~~671~~268		$	1718,~~310~~671		$	1517,~~527~~310
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		8,~~027~~699			78,~~424~~027			67,~~681~~424
		Subscriber service expenses		1,~~268~~340			1,~~139~~268			1,~~137~~139
		Broadcast operations expenses		~~274~~273			~~265~~274			~~216~~265
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		2,~~478~~631			2,~~191~~478			12,~~901~~191
		Upgrade and retention costs		1,~~045~~106			1,~~027~~045			~~958~~1,027
		General and administrative expenses		~~894~~1,003			~~873~~894			~~784~~873
	Depreciation and amortization expense			21,~~275~~926			2,~~061~~275			12,~~448~~061
		Total operating costs and expenses		16,~~261~~978			1416,~~980~~261			1314,~~125~~980
Operating profit				23,~~410~~290			2,~~330~~410			2,~~402~~330
Interest income				45			374			6937
Interest expense				(~~348~~488	)		(~~315~~348	)		(~~216~~315	)
Other, net				(175	)		5(17	)		(5	)
Income before income taxes				2,~~049~~802			2,~~057~~049			2,~~250~~057
Income tax expense				(~~794~~1,051	)		(~~807~~794	)		(~~891~~807	)
Net income			$	1,~~255~~751		$	1,~~250~~255		$	1,~~359~~250

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

			December 31,
			2009			2008
			2010			2009
			(Dollars in Millions)
ASSETS
Current assets
	Cash and cash equivalents		$	~~1,716~~687		$	1,~~149~~716
	Accounts receivable, net			1,~~421~~735			1,~~308~~421
	Inventories			~~200~~227			~~182~~200
	Deferred income taxes			60—			4660
	Prepaid expenses and other			~~163~~187			~~261~~163
		Total current assets		32,~~560~~836			23,~~946~~560
Satellites, net				1,~~870~~794			1,~~980~~870
Property and equipment, net				2,~~998~~832			32,~~348~~998
Goodwill				3,~~167~~176			3,~~189~~167
Intangible assets, net				~~582~~495			~~871~~582
Other assets				~~231~~267			~~212~~231
		Total assets	$	1211,~~408~~400		$	12,~~546~~408
LIABILITIES AND OWNER'S EQUITY
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
Current liabilities
	Accounts payable and accrued liabilities		$	2,~~727~~977		$	2,~~582~~727
	Unearned subscriber revenues and deferred credits			~~353~~378			~~316~~353
	Current portion of long-term debt			~~308~~—			~~108~~308
		Total current liabilities		3,~~388~~355			3,~~006~~388
Long-term debt				610,~~500~~472			56,~~725~~500
Deferred income taxes				~~559~~906			~~405~~559
Other liabilities and deferred credits				~~510~~288			~~763~~510
Commitments and contingencies
Owner's equity
Owner's equity (deficit)
	Capital stock and additional paid-in capital			~~1,076~~7			21,~~403~~076
	Retained earnings			375			244
	Retained earnings (Accumulated deficit)			(3,628	)		375
		Total owner's equity		1,451			2,647
		Total owner's equity (deficit)		(3,621	)		1,451
		Total liabilities and owner's equity	$	12,408		$	12,546
		Total liabilities and owner's equity (deficit)	$	11,400		$	12,408

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC CONSOLIDATED STATEMENTS OF CHANGES IN OWNER'S EQUITY (DEFICIT)

	Capital stock and additional paid-in capital			Retained earnings (Accumulated deficit)			Total owner's equity (deficit)
	(Dollars in Millions)
Balance at January 1, 2007	$	3,786		$	602		$	4,388
Balance at January 1, 2008	$	2,782		$	1,958		$	4,740
Net income					1,359			1,359
Dividend to Parent		(1,050	)					(1,050	)
Capital contribution from Parent		41						41
Adjustment to initially record cumulative effect of adopting accounting standard for uncertainty in income taxes, net of tax					(3	)		(3	)
Other		5						5
Balance at December 31, 2007		2,782			1,958			4,740
Net income					1,250			1,250
Dividend to Parent		(436	)		(2,964	)		(3,400	)
Capital contribution from Parent		43						43
Other		14						14
Balance at December 31, 2008		2,403			244			2,647
Balance at December 31, 2009		2,403			244			2,647
Net income					1,255			1,255
Dividend to Parent		(1,376	)		(1,124	)		(2,500	)
Capital contribution from Parent		44						44
Other		5						5
Balance at December 31, 2009	$	1,076		$	375		$	1,451
Net income					1,751			1,751
Dividend to Parent		(1,146	)		(5,754	)		(6,900	)
Capital contribution from Parent		67						67
Other		10						10
Balance at December 31, 2010	$	7		$	(3,628	)	$	(3,621	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Years Ended December 31,
				2009			2008			2007
				2010			2009			2008
				(Dollars in Millions)
Cash Flows From Operating Activities
Net income				$	1,~~255~~751		$	1,~~250~~255		$	1,~~359~~250
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
	Depreciation and amortization				21,~~275~~926			2,~~061~~275			12,~~448~~061
	Amortization of deferred revenues and deferred credits				(4836	)		(~~104~~48	)		(98104	)
	Share-based compensation expense				4467			4344			4143
	Deferred income taxes				~~229~~278			52229			~~162~~52
	Other				20			1120			11
	Change in other operating assets and liabilities
		Accounts receivable, net			(~~121~~329	)		93(121	)		~~(120~~93	)
		Inventories			(1027	)		22(10	)		~~(47~~22	)
		Prepaid expenses and other			98(26	)		~~(109~~98	)		3(109	)
		Accounts payable and accrued liabilities			~~(76~~245	)		(4776	)		~~138~~(47	)
		Unearned subscriber revenues and deferred credits			3325			(433	)		60(4	)
		Other, net			(811	)		9(8	)		~~(48~~9	)
			Net cash provided by operating activities		3,~~691~~905			3,~~277~~691			23,~~909~~277
Cash Flows From Investing Activities
	Cash paid for property and equipment				(~~443~~477	)		(~~501~~443	)		(~~621~~501	)
	Cash paid for subscriber leased equipment—subscriber acquisitions				(~~564~~651	)		(~~599~~564	)		(~~762~~599	)
	Cash paid for subscriber leased equipment—upgrade and retention				(~~419~~316	)		(~~537~~419	)		(~~774~~537	)
	Cash paid for satellites				(59113	)		(~~128~~59	)		(~~169~~128	)
	Investment in companies, net of cash acquired				(111	)		(9711	)		—(97	)
	Other				—3			5—			(95	)
			Net cash used in investing activities		(1,~~496~~555	)		(1,~~857~~496	)		(21,~~335~~857	)
Cash Flows From Financing Activities
	Cash proceeds from debt issuance				15,~~990~~978			21,~~490~~990			—2,490
	Debt issuance costs				(1444	)		(1914	)		—(19	)
	Repayment of long-term debt				(12,~~018~~323	)		(531,018	)		(1053	)
	Repayment of other long-term obligations				(9099	)		(9890	)		(7298	)
	Cash dividends to Parent				(26,~~500~~900	)		(32,~~400~~500	)		(13,~~050~~400	)
	Excess tax benefit from share-based compensation				49			74			47
			Net cash used in financing activities		(13,~~628~~379	)		(1,~~073~~628	)		(1,~~128~~073	)
Net increase (decrease) in cash and cash equivalents					~~567~~(1,029	)		~~347~~567			~~(554~~347	)
Cash and cash equivalents at beginning of the year					1,~~149~~716			~~802~~1,149			~~1,356~~802
Cash and cash equivalents at end of the year				$	~~1,716~~687		$	1,~~149~~716		$	~~802~~1,149
Supplemental Cash Flow Information
Cash paid for interest				$	~~341~~392		$	~~289~~341		$	~~211~~289
Cash paid for income taxes					~~529~~775			~~753~~529			~~730~~753

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Business

DIRECTV Holdings LLC is an indirect, wholly-owned subsidiary of DIRECTV and consists of DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV U.S., we or us and sometimes refer to DIRECTV as our Parent. We are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the multi-channel video programming distribution, or MVPD, industry in the United States.

On November 19, 2009, The DIRECTV Group, Inc., or DIRECTV Group, and Liberty Media Corporation, which we refer to as Liberty or Liberty Media, obtained shareholder approval of and closed a series of related transactions which we refer to collectively as the Liberty Transaction. The Liberty Transaction included the split-off of certain of the assets of the Liberty Entertainment group into Liberty Entertainment, Inc., or LEI, which was then split-off from Liberty. Following the split-off, DIRECTV Group and LEI merged with subsidiaries of DIRECTV. As a result of the Liberty Transaction, DIRECTV Group, which is comprised of the DIRECTV U.S. and DIRECTV Latin America businesses, and LEI, which held Liberty's 57% interest in DIRECTV Group, a 100% interest in three regional sports networks, a 65% interest in GSN, approximately $120 million in cash and cash equivalents and approximately $2.1 billion of indebtedness and a related series of equity collars became wholly-owned subsidiaries of DIRECTV. DIRECTV Holdings remained a direct subsidiary of DIRECTV Group and became an indirect subsidiary of DIRECTV.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

We include the accounts of DIRECTV Holdings and our majority owned subsidiaries, after elimination of intercompany accounts and transactions, in the accompanying consolidated financial statements.

Use of Estimates in the Preparation of the Consolidated Financial Statements

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, which requires us to make estimates and assumptions that affect amounts reported herein. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results reported in future periods may be affected by changes in those estimates.

Revenue Recognition

We recognize subscription and pay-per-view revenues when programming is broadcast to subscribers. We recognize subscriber fees for multiple set-top receivers, our published programming guide, warranty services and equipment rental as revenue, as earned. We recognize advertising revenues when the related services are performed. We defer programming payments received from subscribers in advance of the broadcast as "Unearned subscriber revenues and deferred credits" in the Consolidated Balance Sheets until earned. We recognize revenues to be received under contractual commitments on a straight- line basis over the minimum contractual period. We report revenues net of customer credits and discounted promotions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Broadcast Programming and Other

We recognize the costs of television programming distribution rights when we distribute the related programming. We recognize the costs of television programming rights to distribute live sporting events for a season or tournament to expense using the straight-line method over the course of the season or tournament. However, we charge the cost of multi-year programming contracts for live sporting events with minimum guarantee payments, such as ~~DIRECTV~~our ~~U.S.'~~ agreement with the NFL, based on the contractual rates in the contract per season, unless the contractual rates are inconsistent with the relative value of the programming from season to season, in which case we record the expense based on the ratio of each period's sports programming package revenues to the estimated total package revenues to be earned over the contract period. We evaluate estimated total contract revenues at least annually.

We defer advance payments in the form of cash and equity instruments from programming content providers for carriage of their signal and recognize them as a reduction of "Broadcast programming and other" in the Consolidated Statements of Operations on a straight-line basis over the related contract term. We record equity instruments at fair value based on quoted market prices or values determined by management.

Subscriber Acquisition Costs

Subscriber acquisition costs consist of costs we incur to acquire new subscribers. We include the cost of set-top receivers and other equipment, commissions we pay to national retailers, independent satellite television retailers, dealers, telephone communication companies and the cost of installation, advertising, marketing and customer call center expenses associated with the acquisition of new subscribers in subscriber acquisition costs. We expense these costs as incurred, or when subscribers activate the DIRECTV® service, as appropriate, except for the cost of set-top receivers leased to new subscribers which we capitalize in "Property and equipment, net" in the Consolidated Balance Sheets. Although paid in advance, the retailer or dealer earns substantially all commissions paid for customer acquisitions over 12 months from the date of subscriber activation. Should the subscriber cancel our service during the 12 month service period, we are reimbursed for the unearned portion of the commission by the retailer or dealer and record a decrease to subscriber acquisition costs. We include the amount of our set-top receivers capitalized each period for subscriber acquisition activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipment—subscriber acquisitions." See Note 4 below for additional information.

Upgrade and Retention Costs

Upgrade and retention costs consist primarily of costs we incur for loyalty programs offered to existing subscribers. The costs for loyalty programs include the costs of installing or providing hardware under our movers program (for subscribers relocating to a new residence), multiple set-top receiver offers, digital video recorder, or DVR, high-definition, or HD, local channel upgrade programs and other similar initiatives, and third party commissions we incur for the sale of additional set-top receivers to existing subscribers. We expense these costs as incurred, except for the cost of set-top receivers leased to existing subscribers which we capitalize in "Property and equipment, net" in the Consolidated Balance Sheets. We include the amount of our set-top receivers capitalized each period for upgrade and retention activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipment—upgrade and retention." See Note 4 below for additional information.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit and highly liquid investments we purchase with original maturities of three months or less.

Inventories

We state inventories at the lower of average cost or market. Inventories consist of finished goods for DIRECTV System equipment and DIRECTV System access cards.

Property and Equipment, Satellites and Depreciation

We carry property and equipment, and satellites at cost, net of accumulated depreciation. The amounts we capitalize for satellites currently being constructed and those that have been successfully launched include the costs of construction, launch, launch insurance, incentive obligations and ~~related~~ capitalized interest. We ~~generally~~ generally compute depreciation using the straight-line method over the estimated useful lives of the assets. We amortize leasehold improvements over the lesser of the life of the asset or term of the lease.

Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives are carried at historical cost and are subject to write-down, as needed, based upon an impairment analysis that we must perform at least annually, or sooner if an event occurs or circumstances change that would more likely than not result in an impairment loss. We perform our annual impairment analysis in the fourth quarter of each year. If an impairment loss results from the annual impairment test, we would record the loss as a pre-tax charge to operating income.

We amortize other intangible assets using the straight-line method over their estimated useful lives, which range from 5 to 15 years.

Valuation of Long-Lived Assets

We evaluate the carrying value of long-lived assets to be held and used, other than goodwill and intangible assets with indefinite lives, when events and circumstances warrant such a review. We consider the carrying value of a long-lived asset impaired when the anticipated undiscounted future cash flow from such asset is separately identifiable and is less than its carrying value. In that event, we would recognize a loss based on the amount by which the carrying value exceeds the fair value of the long-lived asset. We determine fair value primarily using estimated future cash flows associated with the asset under review, discounted at a rate commensurate with the risk involved, or other valuation techniques. We determine losses on long-lived assets to be disposed of in a similar manner, except that we reduce the fair value for the cost of disposal.

Investments and Financial Instruments

We account for investments in which we own at least 20% of the voting securities or have significant influence under the equity method of accounting. We record equity method investments at cost and adjust for the appropriate share of the net earnings or losses of the investee. We record investee losses up to the amount of the investment plus advances and loans made to the investee, and financial guarantees made on behalf of the investee.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The carrying value of cash and cash equivalents, accounts receivable, investments and other assets, accounts payable, and amounts included in accrued liabilities and other meeting the definition of a financial instrument approximated their fair values at December 31, ~~2009~~2010 and ~~2008~~2009.

Debt Issuance Costs

We defer costs we incur to issue debt and amortize these costs to interest expense using the straight-line method over the term of the respective obligation.

Share-Based Payment

DIRECTV grants restricted stock units and common stock options to ~~our~~certain employees.

We record compensation expense equal to the fair value of stock-based awards at the date approved on a straight-line basis over the requisite service period of up to three years, reduced for estimated forfeitures and adjusted for anticipated payout percentages related to the achievement of performance targets.

Income Taxes

We join in the filing of DIRECTV's consolidated U.S. federal income tax return. We determine our income taxes based upon our tax sharing agreement with our Parent, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer.

We determine deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which we expect the differences to reverse. We must make certain estimates and judgments in determining income tax provisions, assessing the likelihood of recovering our deferred tax assets, and evaluating tax positions.

We recognize a benefit in "Income tax expense" in the Consolidated Statements of Operations for uncertain tax positions that are more-likely-than-not to be sustained upon examination, measured at the largest amount that has a greater than 50% likelihood of being realized upon settlement. Unrecognized tax benefits represent tax benefits taken or expected to be taken in income tax returns, for which the benefit has not yet been recognized in "Income tax expense" in the Consolidated Statements of Operations due to the uncertainty of whether such benefits will be ultimately realized. We recognize interest and penalties accrued related to unrecognized tax benefits in "Income tax expense" in the Consolidated Statements of Operations. Unrecognized tax benefits are recorded in "Income tax expense" in the Consolidated Statement of Operations at such time that the benefit is effectively settled.

Advertising Costs

We expense advertising costs primarily in "Subscriber acquisition costs" in the Consolidated Statements of Operations as incurred. Advertising expenses, net of payments received from programming content providers for marketing support, were $~~222~~229 million in ~~2009~~2010, $~~211~~222 million in ~~2008~~2009 and $~~178~~211 million in ~~2007~~2008.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Market Concentrations and Credit Risk

We sell programming services and extend credit, in amounts generally not exceeding $200 each, to a large number of individual residential subscribers throughout the United States. As applicable, we maintain allowances for anticipated losses.

Fair Value Measurement

We determine the fair value measurements of assets and liabilities based on the three level valuation hierarchy established for classification of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability and may be observable or unobservable. The three level hierarchy of inputs is as follows:



Level 1:		Valuation is based on quoted market prices in active markets for identical assets or liabilities.
Level 2:		Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable, for substantially the full term of the asset or liability.
Level 3:		Valuation is based upon other unobservable inputs that are not corroborated by market data.

Accounting Changes

Consolidation of Variable Interest Entities. On January 1, 2010, we adopted the revisions issued by the Financial Accounting Standards Board, or FASB, to consolidation accounting standards for variable interest entities, or VIEs. The new standard replaces the quantitative- based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity. Instead, the new approach is qualitative and focused on identifying which enterprise has the power to direct the activities of a VIE that most significantly impact the entity's performance and (1) the obligation to absorb the losses of an entity or (2) the right to receive benefits from the entity. As a result of the changed requirements, it is possible that an entity's previous assessment of a VIE will change, and the standard now requires ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. The adoption of these changes on January 1, 2010 did not have an effect on our consolidated results of operations and financial position

Noncontrolling interests. On January 1, 2009 we adopted new accounting standards for the accounting and reporting of noncontrolling interests in subsidiaries, also known as minority interests, in consolidated financial statements. The new standards also provide guidance on accounting for changes in the parent's ownership interest in a subsidiary and establishes standards of accounting for the deconsolidation of a subsidiary due to the loss of control. Reporting entities must now present certain noncontrolling interests as a component of equity and present net income and consolidated comprehensive income attributable to the parent and the noncontrolling interest separately in the consolidated financial statements. These new standards are required to be applied prospectively, except for the presentation and disclosure requirements, which must be applied retrospectively for all periods presented. Our adoption of these changes did not have any effect on our consolidated financial statements.

Business Combinations. On January 1, 2009 we adopted a new business combination accounting standard that requires the acquiring entity in a business combination to record 100% of all assets and liabilities acquired, including goodwill and any non-controlling interest, generally at their fair values for all business combinations, whether partial, full or step acquisitions. Under the new standard, certain contingent assets and liabilities, as well as contingent consideration, are also required to be recognized at fair value on the date of acquisition and acquisition-related transaction and restructuring costs will be expensed. Additionally, disclosures are required describing the nature and financial effect of the business combination and the standard also changes the accounting for certain income tax assets recorded in purchase accounting. The adoption of the new accounting requirements as required, on January 1, 2009, changed the way we account for adjustments to deferred tax asset valuation allowances recorded in purchase accounting for prior business combinations so that adjustments to these deferred tax asset valuation allowances will no longer be recorded to goodwill but rather adjustments will be recorded in "Income tax expense" in the Consolidated Statements of Operations. Additionally, the adoption of the new accounting guidance changed the accounting for all business combinations we consummate after January 1, 2009.

Fair Value Recognition, Measurement and Disclosure. On January 1, 2008 we adopted new accounting standards which permit, but do not require, companies to report at fair value the majority of recognized financial assets, financial liabilities and firm commitments. Under this standard, unrealized gains and losses on items for which the fair value option is elected are reported in earnings at each subsequent reporting date. Our adoption of these accounting standards did not have any effect on our consolidated financial statements, as we have not elected to report subject instruments at fair value. 56

On January 1, 2008 we adopted new accounting standards for fair value measurements which defines fair value, sets out a framework for measuring fair value under accounting principles generally accepted in the United States of America, or GAAP, and expands disclosures about fair value

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~measurements~~liabilities ofacquired, including goodwill and any non-controlling interest, generally at their fair values for all business combinations, whether partial, full or step acquisitions. Under the new standard, certain contingent assets and liabilities, as well as contingent consideration, are also required to ~~include~~be ~~disclosure~~recognized ~~about~~at ~~inputs~~fair ~~used~~value on the date of acquisition and acquisition-related transaction and restructuring costs will be expensed. Additionally, disclosures are required describing the nature and financial effect of the business combination and the standard also changes the accounting for certain income tax assets recorded in purchase accounting. The adoption of the ~~determination~~new accounting requirements as required, on January 1, 2009, changed the way we account for adjustments to deferred tax asset valuation allowances recorded in purchase accounting for prior business combinations so that adjustments to these deferred tax asset valuation allowances will no longer be recorded to goodwill but rather adjustments will be recorded in "Income tax expense" in the Consolidated Statements of ~~fair~~Operations. ~~value~~Additionally, ~~using~~the adoption of the ~~following~~new ~~three~~accounting ~~categories:~~guidance changed the accounting for all business combinations we consummate after January 1, 2009.

Level 1:		Quoted market prices in active markets for identical assets or liabilities.
Level 2:		Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3:		Unobservable inputs that are not corroborated by market data.

New Accounting Standard

~~The~~ Multiple Element Revenue Arrangements. In September 2009, the FASB approved a revised standard for revenue arrangements with multiple ~~new~~deliverables. Under ~~accounting~~the ~~standards~~revised ~~apply~~standard, ~~under~~the ~~other~~criteria for determining whether a deliverable should be considered a separate unit of accounting ~~pronouncements~~has ~~previously~~changed ~~issued~~to byremove ~~the~~a ~~Financial~~limitation ~~Accounting~~for ~~Standards~~separation ~~Board,~~to oronly ~~FASB,~~items ~~that~~with objective ~~require~~and orreliable ~~permit~~evidence of fair value ~~measurements~~. ~~Our~~Instead, ~~adoption~~the revised standard allows entities to use the "best estimate of selling price" in addition to third-party evidence or actual selling prices for determining the ~~new~~fair ~~accounting~~value ~~standards~~of ~~did~~a deliverable. The standard also includes additional disclosure requirements for revenue arrangements for multiple deliverables. We do not expect the adoption of the revised standard to have ~~any~~an effect on our consolidated results of operations and financial ~~statements~~position, when adopted, as required, on January 1, 2011.

~~Payments~~ ~~to Manufacturers and Resellers. On January~~Note 1,3: ~~2008~~Accounts we adopted new accounting standards which provide guidance to service providers regarding the proper reporting of consideration given to manufacturers or resellers of equipment necessary for an end-customer to receive its services. Depending on the circumstancesReceivable, ~~such consideration is reported as either an expense or a reduction of revenues. Our adoption of the new accounting standards did not have any effect on our consolidated financial statements.~~ Net

~~Uncertain~~ The ~~Tax~~following ~~Positions. We~~table ~~adopted~~sets ~~accounting~~forth ~~standards~~the ~~for~~amounts ~~accounting~~recorded for ~~uncertainty~~"Accounts ~~in income taxes on January 1~~receivable, ~~2007, the cumulative effect of which resulted in a $3 million decrease to~~ net"~~Retained~~ ~~earnings"~~ in ~~the~~our Consolidated Balance Sheets. Asas of ~~the date of adoption, our unrecognized tax benefits and accrued interest~~ ~~totaled $26~~December ~~million,~~31: including $3 million of tax positions the recognition of which would affect the annual effective income tax rate. As of the date of adoption, we have accrued $1 million in interest and penalties as part of our liability for unrecognized tax benefits. See Note 8 for additional information regarding unrecognized tax benefits.

Pensions. On December 31, 2007 our Parent adopted new accounting standards that requires the measurement of plan assets and benefit obligations as of the date of our fiscal year end and accordingly resulted in a change in our measurement date, which was previously November 30.

		2010			2009

		(Dollars in Millions)
Subscriber		$	1,085		$	887
Trade and other			696			563

Subtotal			1,781			1,450
Less: Allowance for doubtful accounts			(46	)		(29	)

	Accounts receivable, net	$	1,735		$	1,421

~~New Accounting Standards~~ 57

Consolidation of Variable Interest Entities. In June 2009, the FASB, issued revisions to consolidation accounting standards for variable interest entities, or VIEs. The new standard replaces the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity. Instead, the new approach is qualitative and focused on identifying which enterprise has the power to direct the activities of a VIE that most significantly impact the entity's performance and (1) the obligation to absorb the losses of an entity or (2) the right to receive benefits from the entity. As a result of the changed requirements, it is possible that an entity's previous assessment of a VIE will change, and the standard now requires ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. Disclosure requirements under the new standard have been enhanced, and now include disclosure of the method the entity used to determine whether they are the primary beneficiary of the VIE. We do not expect the adoption of these changes to have an effect on our consolidated results of operations and financial position, when adopted, as required, on January 1, 2010.

Multiple Element Revenue Arrangements. In September 2009, the FASB approved a revised standard for revenue arrangements with multiple deliverables. Under the revised standard, the criteria

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for determining whether a deliverable should be considered a separate unit of accounting has changed to remove a limitation for separation to only items with objective and reliable evidence of fair value. Instead, the revised standard allows entities to use the "best estimate of selling price" in addition to third-party evidence or actual selling prices for determining the fair value of a deliverable. The standard also includes additional disclosure requirements for revenue arrangements for multiple deliverables. We currently do not expect the adoption of the revised standard to have an effect on our consolidated results of operations and financial position, when adopted, as required, on January 1, 2011.

Note 3: Accounts Receivable, Net

The following table sets forth the amounts recorded for "Accounts receivable, net" in our Consolidated Balance Sheets as of December 31:

		2009			2008
		(Dollars in Millions)
Subscriber		$	887		$	807
Trade and other			563			533
Subtotal			1,450			1,340
Less: Allowance for doubtful accounts			(29	)		(32	)
	Accounts receivable, net	$	1,421		$	1,308

Note 4: Satellites, Net and Property and Equipment, Net

The following table sets forth the amounts recorded for "Satellites, net" and "Property and equipment, net" in our Consolidated Balance Sheets at December 31:

			~~2009~~2010			~~2008~~2009
			(Dollars in Millions)
Satellites		10-15	$	2,~~355~~739		$	2,~~483~~355
Satellites under construction				~~354~~70			~~292~~354
Total				2,~~709~~809			2,~~775~~709
Less: Accumulated depreciation				(~~839~~1,015	)		(~~795~~839	)
	Satellites, net		$	1,~~870~~794		$	1,~~980~~870
Land and improvements		—	$	2633		$	26
Buildings and leasehold improvements		6-30		~~301~~299			~~287~~301
Machinery and equipment		2-23		31,~~015~~541			21,~~911~~449
Subscriber leased set-top receivers		3-5		3,995			3,577
Capitalized software		3		1,889			1,566
Construction in progress		—		330			235
Subscriber leased set-top receivers		3		4,631			3,995
Total				7,667			7,036
Construction in progress		—		263			330
Less: Accumulated depreciation				(4,669	)		(3,688	)
Total				8,656			7,667
	Property and equipment, net		$	2,998		$	3,348
Less: Accumulated depreciation				(5,824	)		(4,669	)
	Property and equipment, net		$	2,832		$	2,998

60 We capitalized interest costs of $6 million in 2010, $18 million in 2009 and $18 million in 2008, as part of the cost of our property and satellites under construction. Depreciation expense was $1,834 million in 2010, $1,984 million in 2009 and $1,707 million in 2008.

The following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded under the lease program for each of the periods presented:

	Years ended December 31,

Capitalized subscriber leased equipment:	2010		2009		2008
	(Dollars in Millions)
Subscriber leased equipment—subscriber acquisitions	$	651	$	564	$	599
Subscriber leased equipment—upgrade and retention		316		419		537

Total subscriber leased equipment capitalized	$	967	$	983	$	1,136

Depreciation expense—subscriber leased equipment	$	1,145	$	1,333	$	1,100

We depreciate capitalized set-top receivers over a three year estimated useful life, which is based on, among other things, management's judgment of the risk of technological obsolescence. Changes in the estimated useful lives of set-top receivers capitalized could result in significant changes to the amounts recorded as depreciation expense. We regularly evaluate the estimated useful life of our set-top receivers and it is possible that we may change the useful life of set-top receivers in the near term. If we had changed the depreciable life of our set-top receivers as of January 1, 2010 to four years, annual depreciation for 2010 would have decreased by over $300 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We capitalized interest costs of $18 million in 2009, $18 million in 2008 and $51 million in 2007, as part of the cost of our property and satellites under construction. Depreciation expense was $1,984 million in 2009, $1,707 million in 2008 and $1,094 million in 2007.

On March 1, 2006, we introduced a set-top receiver lease program. Prior to March 1, 2006, most set-top receivers provided to new and existing subscribers were immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated Statements of Operations. Subsequent to the introduction of the lease program, we lease most set-top receivers provided to new and existing subscribers, and therefore capitalize the set-top receivers in "Property and equipment, net" in the Consolidated Balance Sheets. We depreciate capitalized set-top receivers over a three year estimated useful life and include the amount of set-top receivers capitalized each period in the Consolidated Statements of Cash Flows.

The following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded under the lease program for each of the periods presented:

	Years ended December 31,
Capitalized subscriber leased equipment:	2009		2008		2007
	(Dollars in Millions)
Subscriber leased equipment—subscriber acquisitions	$	564	$	599	$	762
Subscriber leased equipment—upgrade and retention		419		537		774
Total subscriber leased equipment capitalized	$	983	$	1,136	$	1,536
Depreciation expense—subscriber leased equipment	$	1,333	$	1,100	$	645

Note 5: Goodwill and Intangible Assets

The following table sets forth the changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets for the years ended December 31, ~~2009~~2010 and ~~2008~~2009:

		(Dollars in Millions)
Balance as of January 1, 2008		$	3,032
Balance as of January 1, 2009		$	3,189
Acquisition related to home service provider business			157
Balance as of December 31, 2008		$	3,189
Purchase or acquisition accounting adjustments:
	New acquisitions		24
	Finalization of prior acquisitions		(46	)
Balance as of December 31, 2009		$	3,167
	Acquisition accounting adjustments		9
Balance as of December 31, 2010		$	3,176

61 The following table sets forth the components for "Intangible assets, net" in the Consolidated Balance Sheets at:

				December 31, 2010						December 31, 2009

		Estimated Useful Lives (years)		Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
				(Dollars in Millions)
Orbital slots			Indefinite	$	432			$	432	$	432			$	432
72.5° WL orbital license			5		—	$	—		—		219	$	219		—
Subscriber related			5-10		13		5		8		1,348		1,309		39
Dealer network			15		130		99		31		130		90		40
Distribution rights			7		334		310		24		334		263		71

	Total intangible assets			$	909	$	414	$	495	$	2,463	$	1,881	$	582

Amortization expense for intangible assets was $92 million in 2010, $289 million in 2009 and $352 million in 2008.

Estimated amortization expense for intangible assets in each of the next five years and thereafter is as follows: $35 million in 2011, $11 million in 2012, $11 million in 2013, $5 million in 2014 and $1 million in 2015.

We performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2010, 2009 and 2008. The estimated fair values for each reporting unit and the orbital slots exceeded our carrying values, and accordingly, no impairment losses were recorded during 2010, 2009 or 2008. Additionally, there are no accumulated impairment losses as of December 31, 2010 and 2009.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the components for "Intangible assets, net" in the Consolidated Balance Sheets at:

				December 31, 2009						December 31, 2008
		Estimated Useful Lives (years)		Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
				(Dollars in Millions)
Orbital slots			Indefinite	$	432			$	432	$	432			$	432
72.5° WL orbital license			5		219	$	219		—		219	$	180		39
Subscriber related			5-10		1,348		1,309		39		1,348		1,116		232
Dealer network			15		130		90		40		130		79		51
Distribution rights			7		334		263		71		334		217		117
	Total intangible assets			$	2,463	$	1,881	$	582	$	2,463	$	1,592	$	871

Amortization expense for intangible assets was $289 million in 2009, $352 million in 2008 and $353 million in 2007.

Estimated amortization expense for intangible assets in each of the next five years and thereafter is as follows: $90 million in 2010, $34 million in 2011, $10 million in 2012, $10 million in 2013, $5 million in 2014 and $1 million thereafter.

We performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2009, 2008, and 2007. The estimated fair values for each reporting unit and the orbital slots exceeded our carrying values, and accordingly, no impairment losses were recorded during 2009, 2008, or 2007.

Note 6: Accounts Payable and Accrued Liabilities; Other Liabilities and Deferred Credits

The following represent significant components of "Accounts payable and accrued liabilities" in our Consolidated Balance Sheets as of December 31:

		2009		2008
		2010		2009
		(Dollars in Millions)
Programming costs		$	1,~~679~~611	$	1,~~532~~679
Accounts payable			~~302~~448		~~325~~302
Payroll and employee benefits			~~122~~174		96122
Interest payable			47138		4547
Property and income taxes			4536		3545
Other			~~532~~570		~~549~~532
	Total accounts payable and accrued liabilities	$	2,~~727~~977	$	2,~~582~~727

62 The following represent significant components of "Other liabilities and deferred credits" in our Consolidated Balance Sheets are as follows as of December 31:

		2010		2009

		(Dollars in Millions)
Other accrued taxes		$	70	$	229
Deferred credits			69		78
Programming costs			43		76
Other			106		127

	Total other liabilities and deferred credits	$	288	$	510

As of December 31, 2010, there were $17 million of amounts payable for satellites in "Accounts payable and accrued liabilities" on the Consolidated Balance Sheets which is considered a non-cash investing activity for purposes of the consolidated statements of Cash Flow for the year ended December 31, 2010.

Note 7: Debt

The following table sets forth our outstanding debt:

		December 31,

		2010		2009
		(Dollars in Millions)
Senior notes		$	10,472	$	4,492
Senior secured credit facility, net of unamortized discount of $7 million as of December 31, 2009			—		2,316

	Total debt		10,472		6,808
Less: Current portion of long-term debt			—		(308	)

	Long-term debt	$	10,472	$	6,500

The senior secured credit facility was secured by substantially all of our assets. As discussed below, in financing transactions in March and August 2010, we repaid the remaining balance of the Term Loans under our senior secured credit facility, which was terminated in February 2011. As of

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~The~~February 7, 2011, ~~significant~~we ~~components~~had ofthe ~~"Other~~ability ~~liabilities~~to ~~and~~borrow ~~deferred~~up ~~credits"~~to in$2 billion ~~our~~under ~~Consolidated~~a ~~Balance~~new ~~Sheets~~revolving ~~are~~credit asfacility ~~follows~~discussed asbelow. ~~of December 31:~~

		2009		2008
		(Dollars in Millions)
Other accrued taxes		$	229	$	202
Deferred credits			78		122
Programming costs			76		251
Other			127		188
	Total other liabilities and deferred credits	$	510	$	763

2010 Financing Transactions

On ~~Note~~August 717, 2010, pursuant to a registration statement, we issued the following senior notes: ~~Debt~~

The following table sets forth our outstanding debt:

	Principal		Proceeds, net of discount

	(Dollars in millions)
3.125% senior notes due in 2016	$	750	$	750
4.600% senior notes due in 2021		1,000		999
6.000% senior notes due in 2040		1,250		1,233

	$	3,000	$	2,982

		December 31,
		2009			2008
		(Dollars in Millions)
Senior notes		$	4,490		$	3,410
Senior secured credit facility, net of unamortized discount of $7 million as of December 31, 2009 and $9 million as of December 31, 2008			2,316			2,421
Unamortized bond premium			2			2
	Total debt		6,808			5,833
Less: Current portion of long-term debt			(308	)		(108	)
	Long-term debt	$	6,500		$	5,725

We incurred $19 million of debt issuance costs in connection with these transactions.

~~All~~On August 20, of2010, we repaid the ~~senior~~$1,220 million ~~notes~~of remaining principal on Term Loans A and ~~the~~B of our senior secured credit facility. ~~were~~The ~~issued~~repayment byof ~~us.~~Term ~~The~~Loans ~~senior~~A ~~secured~~and ~~credit~~B resulted ~~facility~~in isa ~~secured~~third byquarter ~~substantially all~~2010 pre-tax charge of $7 million, $4 million after tax, resulting from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our ~~assets~~Consolidated Statements of Operations.

On March 11, ~~2009~~2010, ~~Financing~~we ~~Transactions~~ issued the following senior notes:

On September 22, 2009, we issued $1,000 million in five-year 4.750% senior notes due in 2014 at a 0.3% discount resulting in $997 million of proceeds and $1,000 million in 10 year 5.875% senior notes due in 2019 at a 0.7% discount resulting in $993 million of proceeds in private placement transactions. Principal on these senior notes is payable upon maturity, while interest is payable semi-annually commencing April 1, 2010. We incurred $14 million of debt issuance costs in connection with these transactions. The senior notes have been fully and unconditionally guaranteed, jointly and severally, by substantially all of our current and certain of its future domestic subsidiaries on a senior unsecured basis. Pursuant to a registration rights agreement with the initial purchasers of the senior notes, we have filed a registration statement, whereby all holders of the original notes can elect to exchange their existing notes for registered notes with identical terms, except that the registered notes will be registered under the Securities Act of 1933, as amended and will not bear the legends restricting their transfer. We expect to complete the registration and exchange of these senior notes within the first half of 2010.

	Principal		Proceeds, net of discount

	(Dollars in millions)
3.550% senior notes due in 2015	$	1,200	$	1,199
5.200% senior notes due in 2020		1,300		1,298
6.350% senior notes due in 2040		500		499

	$	3,000	$	2,996

OnWe ~~September 22,~~incurred ~~2009, we purchased, pursuant to a tender offer,~~ $~~583~~17 million of ~~our~~debt ~~then~~issuance ~~outstanding~~costs ~~$910 million~~in ~~8.375%~~connection ~~senior~~with ~~notes~~these ~~at a price of 103~~transactions.~~125%~~ ~~plus accrued and unpaid interest, for a total of $603 million. On September 23, 2009, we exercised our right to redeem the remaining~~

63 On March 16, 2010, we repaid the $985 million of remaining principal on Term Loan C of our senior secured credit facility. The repayment of Term Loan C resulted in a first quarter 2010 pre-tax charge of $9 million, $6 million after tax, of which $6 million resulted from the write-off of unamortized discount and $3 million resulted from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~$327 million of~~ ~~the 8.375% senior notes at a price of 102.792% plus accrued and unpaid interest. On October 23,~~ 2009, weFinancing ~~redeemed the remaining $327 million of our 8.375% senior notes at a price of 102.792% plus accrued and unpaid interest for a total of $339 million.~~ Transactions

On September 22, 2009, we issued the following senior notes:

	Principal		Proceeds, net of discount

	(Dollars in millions)
4.750% senior notes due in 2014	$	1,000	$	997
5.875% senior notes due in 2019		1,000		993

	$	2,000	$	1,990

We incurred $14 million of debt issuance costs in connection with these transactions.

On September 22, 2009, we purchased, pursuant to a tender offer, $583 million of our then outstanding $910 million 8.375% senior notes at a price of 103.125% plus accrued and unpaid interest, for a total of $603 million. On September 23, 2009, we exercised our right to redeem the remaining $327 million of the 8.375% senior notes at a price of 102.792% plus accrued and unpaid interest. On October 23, 2009, we redeemed the remaining $327 million of our 8.375% senior notes at a price of 102.792% plus accrued and unpaid interest for a total of $339 million.

The redemption of our 8.375% senior notes resulted in a 2009 pre-tax charge of $34 million, $21 million after tax, of which $27 million resulted from the premium paid for redemption of our 8.375% senior notes and $7 million resulted from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.

2008 Financing Transactions

In May 2008, we completed financing transactions that included the issuance of senior notes and an amendment to our existing ~~senior~~ senior secured credit facility, asresulting ~~discussed below. We incurred $19 million of debt issuance costs~~ in ~~connection~~the ~~with~~following ~~these~~new ~~transactions.~~borrowings:

We issued $1,500 million in senior notes due in 2016 in a private placement transaction. The eight-year notes bear interest at 7.625%. Principal on the senior notes is payable upon maturity, while interest is payable semi-annually commencing November 15, 2008. The senior notes have been fully and unconditionally guaranteed, jointly and severally, by substantially all of our current and certain of its future domestic subsidiaries on a senior unsecured basis. On November 11, 2008, we completed an exchange offer in which holders of substantially all of the outstanding principal amount of the senior notes exchanged the original senior notes for registered notes with identical terms, except that the registered notes are registered under the Securities Act of 1933, as amended, and do not bear the legends restricting their transfer.

	Principal		Proceeds, net of discount

	(Dollars in millions)
7.625% senior notes due in 2016	$	1,500	$	1,500
Senior secured credit facility—Term Loan C		1,000		990

	$	2,500	$	2,490

We ~~also~~incurred ~~amended its senior secured credit facility to include a new~~ $~~1,000~~19 million ~~Term Loan C, which was issued at a 1% discount, resulting in $990 million~~ of ~~proceeds.~~ ~~Initially,~~debt ~~borrowings~~issuance ~~under~~costs ~~Term Loan C bear interest at 5.25%, however the rate is variable based on changes~~ in ~~the~~connection ~~London~~with ~~InterBank~~these ~~Offered Rate, or LIBOR~~transactions. The interest rate may be increased or decreased under certain conditions. The Term Loan C has a final maturity of April 13, 2013, and we began making quarterly principal payments totaling 1% annually on September 30, 2008. The senior secured credit facility is secured by substantially all of our assets and the assets of our current and certain of our future domestic subsidiaries and is fully and unconditionally guaranteed, jointly and severally, by substantially all of our current and certain of our future domestic subsidiaries.

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Senior Notes. The following table sets forth our outstanding senior notes balance ~~and fair value~~ as of December 31:

		Outstanding Balance				~~Fair value~~
		2009		2008		2009		2008
		2010		2009
		(Dollars in millions)
8.375% senior notes due in 2013		$	—	$	910	$	—	$	904
4.750% senior notes due in 2014, net of unamortized discount of $2 million as of December 31, 2010 and $3 million as of December 31, 2009		$	998	$	997
4.750% senior notes due in 2014, net of unamortized discount of $3 million as of December 31, 2009			997		—		1,017		—
6.375% senior notes due in 2015, includes unamortized bond premium of $2 million as of December 31, 2010 and December 31, 2009			1,002		1,002
6.375% senior notes due in 2015			1,000		1,000		1,038		911
3.550% senior notes due in 2015, net of unamortized discount of $1 million as of December 31, 2010			1,199		—
7.625% senior notes due in 2016			1,500		1,500		1,642		1,451
3.125% senior notes due in 2016			750		—
5.875% senior notes due in 2019, net of unamortized discount of $7 million as of December 31, 2009			993		—		1,016		—
7.625% senior notes due in 2016			1,500		1,500
	Total senior notes	$	4,490	$	3,410	$	4,713	$	3,266
5.875% senior notes due in 2019, net of unamortized discount of $6 million as of December 31, 2010 and $7 million as of December 31, 2009			994		993
5.200% senior notes due in 2020, net of unamortized discount of $2 million as of December 31, 2010			1,298		—
4.600% senior notes due in 2021, net of unamortized discount of $1 million as of December 31, 2010			999		—
6.350% senior notes due in 2040, net of unamortized discount of $1 million as of December 31, 2010			499		—
6.000% senior notes due in 2040, net of unamortized discount of $17 million as of December 31, 2010			1,233		—
	Total senior notes	$	10,472	$	4,492

The fair value of our senior notes was approximately $10,881 million at December 31, 2010 and $4,713 million at December 31, 2009. We calculated the fair values based on quoted market prices of our senior notes, which is a Level 1 input under the accounting guidance.

All of our senior notes were issued by us and have been, ~~or in the case of the 4.750% and 5.875% senior notes are in the process of being,~~ registered under the Securities Act of 1933, as amended. All of our senior notes are unsecured and have been fully and unconditionally guaranteed, jointly and severally, by substantially all of our ~~assets~~current and ~~additionally,~~certain of our ~~4.750%~~future ~~and~~domestic ~~5.875% senior~~subsidiaries ~~notes~~on ~~are~~a ~~rated~~senior asunsecured ~~investment grade~~basis. Principal on the senior notes is payable upon maturity, while interest is payable semi-annually.

Senior Secured Credit Facility. At December 31, ~~2009~~2010, our senior secured credit facility consisted of a $~~375 million six-year Term Loan A, a $962 million eight-year Term Loan B, a $979 million five-year Term Loan C and a $~~500 million undrawn six-year revolving credit facility. ~~The~~We ~~Term~~paid ~~Loan A, Term Loan B and Term Loan C components of the senior secured credit facility currently bear interest at~~ a ~~rate equal to the LIBOR plus 0.75%, 1.50% and 2.25%, respectively. The weighted average interest for the senior secured credit facilities at December 31, 2009 was 3.143%. In addition, we pay a~~ commitment fee of 0.175% per year for the unused commitment under the revolving credit facility. The ~~interest rate and commitment fee may be increased or decreased under certain conditions. The~~ senior secured credit facility iswas secured by substantially all of our assets and iswas fully and unconditionally guaranteed, jointly and severally by substantially all of our material domestic subsidiaries.

~~Our notes~~Revolving ~~payable~~Credit ~~and~~Facility. In ~~credit~~February ~~facility~~2011, ~~mature~~our assenior ~~follows:~~secured ~~$308 million~~credit infacility ~~2010,~~was ~~$108 million~~terminated inand ~~2011,~~replaced ~~$20 million~~by ina ~~2012,~~new ~~$1,887~~five ~~million in 2013~~year, $~~1,000~~2.0 ~~million~~billion inrevolving ~~2014~~credit ~~and~~facility. ~~$3,500 million~~We ~~thereafter.~~pay ~~These~~a ~~amounts~~commitment dofee ~~not~~of ~~reflect~~.30% ~~potential~~per ~~prepayments~~year ~~that~~for ~~may~~the beunused ~~required~~commitment under ~~our~~the ~~senior~~revolving ~~secured~~ credit facility, ~~which~~and ~~could~~borrowings ~~result from~~will abear ~~computation~~interest ofat ~~excess~~an ~~cash~~annual rate ~~flows~~of ~~that~~(i) the weLondon ~~may~~interbank beoffer ~~required~~rate to(LIBOR) ~~make~~(or atfor ~~each~~Euro ~~year~~advances ~~end~~the ~~under~~EURIBOR ~~the~~rate) ~~credit~~plus ~~agreement~~1.50% Weor ~~were~~at ~~not~~our ~~required~~option to(ii) the ~~make~~higher aof ~~prepayment for~~ the ~~years~~prime ~~ended~~rate ~~December 31, 2009,~~plus ~~2008,~~0.50% or ~~2007~~the Fed Funds Rate plus 1.00%. The ~~amount~~commitment offee ~~interest~~and ~~accrued~~the ~~related~~annual tointerest ~~our~~rate ~~outstanding~~may ~~debt~~be ~~was~~increased ~~$47 million~~or atdecreased ~~December 31~~under certain conditions, ~~2009~~which ~~and~~include ~~$45 million~~changes atin ~~December 31~~our long-term, ~~2008~~unsecured debt ratings. The revolving credit

Covenants and Restrictions. The senior secured credit facility requires us to comply with certain financial covenants. The senior notes and the senior secured credit facility also include covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain 63

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~transactions~~facility ~~with~~is ~~affiliates,~~unsecured ~~(v) merge~~and orhas ~~consolidate~~been ~~with~~fully ~~another~~and ~~entity,~~unconditionally ~~(vi) sell~~guaranteed, ~~assign,~~jointly ~~lease or otherwise dispose of all or substantially all of its assets,~~ and ~~(vii) make voluntary prepayments of certain debt~~severally, inby ~~each~~substantially ~~case subject to exceptions as provided in the credit agreement and senior notes indentures. Should we fail to comply with these covenants,~~ all ~~or a portion~~ of our ~~borrowings~~current ~~under the senior notes~~ and senior secured credit facility could become immediately payable and our revolving credit facility could be terminated. At December 31, 2009, we were in compliance with all such covenants. The senior notes and senior secured credit facility also provide that the borrowings may be required to be prepaid if certain ~~change-in-control~~ ~~events occur. In September 2008, Liberty Media became the majority owner~~ of ~~the~~our ~~DIRECTV~~future ~~Group's~~domestic ~~outstanding~~subsidiaries ~~common~~on ~~stock.~~a ~~There was no ratings decline for the~~ senior ~~notes associated with that event, and we were not required either to offer to redeem any of the senior notes pursuant to their respective indentures or to prepay any of the borrowings~~ ~~under~~unsecured ~~the senior secured credit facility~~basis.

~~Restricted~~ Our notes ~~Cash. Restricted~~payable ~~cash~~mature ofas follows: $21,000 million asin of2014, ~~December 31~~$2,200 million ~~2009~~in 2015 and $87,300 million asthereafter. ofThe ~~December 31,~~amount ~~2008 was included as part~~ of ~~"Prepaid~~interest ~~expenses~~accrued ~~and~~related ~~other"~~to in our outstanding ~~Consolidated~~debt ~~Balance~~was ~~Sheets.~~$138 million ~~These~~at ~~amounts~~December 31, ~~secure~~2010 ~~our~~and ~~letter~~$47 million ofat ~~credit~~December 31, ~~obligations~~2009. ~~Restrictions on the cash will be removed as the letters of credit expire.~~

Covenants and Restrictions. The revolving credit facility requires us to maintain at the end of each fiscal quarter a specified ratio of indebtedness to adjusted net income. The revolving credit facility also includes covenants that restrict our ability to, among other things, (i) incur additional subsidiary indebtedness, (ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vi) change our lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes could become immediately payable and our revolving credit facility could be terminated. As of February 7, 2011, the closing date for the revolving credit facility, we were in compliance with all such covenants. The senior notes and revolving credit facility also provide that the borrowings may be required to be prepaid if certain change-in-control events occur.

Note 8: Income Taxes

We base our income tax expense or benefit on reported "Income before income taxes." Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, which are available to us pursuant to our tax sharing agreement with our Parent and as measured by applying currently enacted tax laws.

Our income tax expense consisted of the following for the years ended December 31:

				2009			2008			2007
				2010			2009			2008
				(Dollars in Millions)
Current tax expense:
	U.S. federal			$	~~(532~~569	)	$	~~(691~~532	)	$	~~(633~~691	)
	State and local				~~(69~~41	)		~~(64~~69	)		~~(156~~64	)
		Total			~~(601~~610	)		~~(755~~601	)		~~(789~~755	)
Deferred tax expense:
	U.S. federal				~~(165~~372	)		~~(12~~165	)		~~(82~~12	)
	State and local				~~(28~~69	)		~~(40~~28	)		~~(20~~40	)
		Total			~~(193~~441	)		~~(52~~193	)		~~(102~~52	)
			Total income tax expense	$	~~(794~~1,051	)	$	~~(807~~794	)	$	~~(891~~807	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our income tax expense was different than the amount computed using the U.S. federal statutory income tax rate for the reasons set forth in the following table for the years ended December 31:

		2009			2008			2007
		2010			2009			2008
		(Dollars in Millions)
Expected expense at U.S. federal statutory income tax rate		$	~~(717~~981	)	$	~~(720~~717	)	$	~~(788~~720	)
U.S. state and local income tax expense, net of federal benefit			~~(64~~96	)		~~(77~~64	)		~~(102~~77	)
Tax credits and other			(13	)		(10	)		(1	)
Multistate tax planning			(17	)		—			—
	Total income tax expense	$	(794	)	$	(807	)	$	(891	)
Tax credits and other			(9	)		13			10
	Total income tax expense	$	1,051		$	794		$	807

Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities at December 31 were as follows:

		2009					2008
		2010					2009
		Deferred Tax Assets			Deferred Tax Liabilities		Deferred Tax Assets			Deferred Tax Liabilities
		(Dollars in Millions)
Depreciation and amortization		$	—		$	~~637~~957	$	—		$	~~503~~637
Accruals and advances			~~120~~172			85151		90120			5085
Programming contract liabilities			~~108~~40			—		~~143~~108			—
Prepaid expenses			—			1937		—			2619
State taxes			—			1216		—			2512
Net operating loss and tax credit carryforwards			2915			—		1729			—
Other temporary differences			84			98		38			69
	Subtotal		~~265~~231			~~762~~1,169		~~253~~265			~~610~~762
Valuation allowance			(2	)		—		(2	)		—
	Total deferred taxes	$	~~263~~229		$	~~762~~1,169	$	~~251~~263		$	~~610~~762

Included in "Accounts payable and accrued liabilities" in the Consolidated Balance Sheets is $34 million of current deferred tax liabilities at December 31, 2010.

We assessed the deferred tax assets for the respective periods for recoverability and, where applicable, we recorded a valuation allowance to reduce the total deferred tax assets to an amount that will, more likely than not, be realized in the future.

The valuation allowance balances of $2 million at December 31, ~~2009~~2010 and $2 million at December 31, ~~2008~~2009, are attributable to unused capital losses which are available for carry-forward.

As of December 31, ~~2009~~2010, we have $3529 million of federal net operating loss carryforward which expire between 2027 and 2028. The utilization of the federal net operating loss carryforward is subject to an annual limitation under Section 382 of the Internal Revenue Code, however we believe that we will have sufficient taxable income during the limitation period to utilize all of the carryforward.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

		Unrecognized tax benefits
		(Dollars in Millions)
Gross unrecognized tax benefits at January 1, 2007		$	25
Gross unrecognized tax benefits at January 1, 2008		$	88
	Increases in tax positions for prior years		31
	Increases in tax positions for the current year		32
Gross unrecognized tax benefits at December 31, 2007			88
	Increases in tax positions for prior years		76
	Increases in tax positions for the current year		21
	Settlements with taxing authorities		1
Gross unrecognized tax benefits at December 31, 2008			186
	Increases in tax positions for prior years		22
	Increases in tax positions for the current year		9
	Settlements with taxing authorities		(2	)
Gross unrecognized tax benefits at December 31, 2009		$	215
	Decreases in tax positions for prior years		(185	)
	Increases in tax positions for the current year		35
Gross unrecognized tax benefits at December 31, 2010		$	65

As of December 31, ~~2009~~2010, our unrecognized tax benefits totaled $~~215~~65 million, including $2242 million of tax positions the recognition of which would affect the annual effective income tax rate.

We ~~recognize~~recorded $3 million of interest and penalties ~~accrued~~ related to unrecognized tax benefits in "Income tax expense" in the Consolidated Statements of Operations. Asduring ofthe year ended December 31, ~~2009~~2010, we and have accrued $2310 million in interest and penalties as part of our liability for unrecognized tax benefits as of December 31, 2010.

We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions. For U.S. federal tax purposes, the tax years 2007 through 2009 remain open to examination. The California tax years 1994 through 2009 remain open to examination and the income tax returns in the other state tax jurisdictions in which we have operations are generally subject to examination for a period of 3 to 5 years after filing of the respective return.

We do not anticipate changes to the total unrecognized tax benefits in the next twelve months which will have a significant effect on our results of operations or financial position.

Note 9: Pension and Other Postretirement Benefit Plans

Most of our employees are eligible to participate in our Parent's funded non-contributory defined benefit pension plan, which provides defined benefits based on either years of service and final average salary, or eligible compensation while employed by us. We have not separately determined the accumulated benefit obligation and net assets available for benefits for our employees and do not include these items in our Consolidated Balance Sheets. In addition to pension benefits, DIRECTV charges us for the cost of certain other post-retirement benefits. The accumulated other post-retirement benefit obligation related to our employees has not been separately determined and is not included in the accompanying Consolidated Balance Sheets. We also participate in other health and welfare plans of DIRECTV. Our portion of the cost of these benefit plans, allocated from DIRECTV, amounted to $1924 million in ~~2009~~2010, $1619 million in ~~2008~~2009 and $16 million in ~~2007~~2008.

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Note 10: Share-Based Payment

Under The DIRECTV Group, Inc. Amended and Restated 2004 Stock Plan, or the DIRECTV Plan, as approved by our Parent's stockholders on June 5, 2007, shares, rights or options to acquire up to 21 million shares of common stock plus the number of shares that were granted under a former plan but which, after December 22, 2003 are forfeited, expire or are cancelled without the delivery of shares of common stock or otherwise result in the return of such shares to us, were authorized for grant through June 4, 2017, subject to the approval of the Compensation Committee of our Parent's Board of Directors. Under the DIRECTV Plan, our Parent issues new shares of its Class A common stock when restricted stock units are earned and when stock options are exercised.

Restricted Stock Units. The Compensation Committee of DIRECTV has granted restricted stock units under our Parent's stock plans to certain of our employees and executives. Annual awards are mostly performance-based, ~~with~~vest over three years and provide for final payments in shares of our Parent's Class A common stock. Final payment can be reduced or increased from the target award amounts based on our Parent company's performance over a three-year performance period in comparison with pre-established targets. We determine the fair value of restricted stock units based the closing stock price of our Parent's Class A common shares on the date of grant.

During the year ended December 31, ~~2009~~2010, our employees were granted 2.47 million restricted stock units with a weighted average grant-date fair value of $2131.2605 per share. During the year ended December 31, ~~2008~~2009, our employees were granted 2.34 million restricted stock units with a weighted average grant-date fair value of approximately $2321.1526 per share. During the year ended December 31, ~~2007~~2008, our employees were granted 2.53 million restricted stock units with a weighted average grant-date fair value of approximately $23.6915 per share. ~~The grant date fair value of restricted stock units is based on the closing stock price of our Parent's Class A common stock on the date of grant.~~

Stock Options. DIRECTV's Compensation Committee has also granted stock options to acquire our Parent's Class A common stock under our Parent's stock plans to certain of our employees and executives. The exercise price of options granted is equal to at least 100% of the fair market value of the common stock on the date the options were granted. These nonqualified options generally vest over one to five years, expire ten years from date of grant and are subject to earlier termination under certain conditions. During the year ended December 31, ~~2007~~2010, our employees were granted 1.20 million stock options with a grant-date fair value of approximately $812.2736 per share. No stock options were granted to our employees during 2008 orand 2009. The grant date fair value of common stock options is determined by our Parent using the Black-Scholes valuation model.

~~The following table presents amounts recorded related to share-based compensation for the years ended December 31:~~ 67

As of December 31, 2009, there was $50 million of unrecognized compensation costs related to unvested restricted stock units, which we expect to recognize as follows: $33 million in 2010 and $17 million in 2011.

As of December 31, 2009, our employees held 6.4 million stock options and 6.2 million restricted stock units.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents amounts recorded related to share-based compensation for the years ended December 31:

	2010		2009		2008

	(Dollars in Millions)
Share-based compensation expense recognized	$	67	$	44	$	43
Tax benefits associated with share-based compensation expense		26		17		16
Actual tax benefits realized for the deduction of share-based compensation expense		37		24		30

As of December 31, 2010, there was $75 million of unrecognized compensation costs related to unvested restricted stock units and stock options, which we expect to recognize as follows: $46 million in 2011 and $29 million in 2012.

As of December 31, 2010, our employees held 1.7 million stock options and 6.8 million restricted stock units.

Note 11: Related Party Transactions

In the ordinary course of our operations, we enter into transactions with related parties as discussed below.

DIRECTV and affiliates

We determine our income taxes based upon our tax sharing agreement with our Parent, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer. Payments made to our Parent under this tax sharing arrangement were $~~502~~754 million in ~~2009,~~2010 ~~$721 million in 2008~~ and $~~709~~502 million in ~~2007~~ 2009. We also receive an allocation of employee benefit expenses from DIRECTV. We believe that our consolidated financial statements reflect our cost of doing business in accordance with SEC Staff Accounting Bulletin No. 55, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity."

We paid dividends to our Parent in the amounts of $26,~~500~~900 million in ~~2009~~2010, $32,~~400~~500 million in ~~2008~~2009 and $13,~~050~~400 million in ~~2007~~2008 from available cash and cash equivalents. In addition, we paid $1,500 million in dividends to our Parent during January ~~and February 2010~~2011.

Beginning November 19, 2009, transactions with the regional sports networks which were acquired by DIRECTV on that date are also included as transactions with DIRECTV and affiliates.

Liberty Media, Liberty Global and Discovery Communications

~~Beginning~~On ~~with~~June 16, ~~Liberty's~~2010, ~~acquisition~~our ofParent ~~its~~completed ~~ownership~~a ~~interest~~transaction, inwhich ~~DIRECTV~~we ~~Group~~refer ~~from~~to ~~News~~as ~~Corporation~~the onMalone ~~February 27~~transaction, ~~2008~~with Dr. John Malone, ~~transactions~~his ~~with~~wife ~~Liberty~~and ~~Media~~certain ~~Corporation,~~trusts orfor ~~Liberty~~the ~~Media,~~benefit ~~and~~of ~~its~~their ~~affiliates~~children, ~~including~~which ~~its~~we ~~equity~~refer ~~method~~to ~~investees~~as the Malones', ~~may~~which beresulted ~~considered~~in tothe bereduction ~~related~~of ~~party~~the ~~transactions.~~Malones ~~Our~~voting ~~transactions~~interest ~~with~~in our Parent from approximately 24.3% ~~Liberty~~to ~~Media~~approximately 3% and ~~its~~Dr. Malone's ~~affiliates~~resignation ~~consist~~from ~~primarily~~our ofParent's ~~the~~Board ~~purchase~~ of ~~programming~~Directors.

~~Although~~Prior asto athe ~~result~~completion of the ~~Liberty~~Malone Transaction, ~~Liberty no longer has any equity interest in DIRECTV, John~~ Dr. Malone, was Chairman of the Board of Directors of DIRECTV and of Liberty Media~~, has~~. anDr. Malone ~~approximate~~also ~~24%~~had ~~voting interest in DIRECTV,~~ an approximate 3135% voting interest in ~~Discovery~~Liberty ~~Communications~~Media, ~~Inc.,~~ ~~or Discovery Communications, and~~ an approximate 4031% voting interest in ~~Liberty~~ ~~Global Inc., or Liberty Global, and serves as Chairman of Liberty Global, and certain of Liberty Media's management and directors also serve as directors of~~ Discovery Communications ~~or Liberty Global. As a result of this common ownership and management~~, ~~transactions with Discovery Communications and Liberty Global, and their subsidiaries or equity method investees may be considered to be related party transactions~~ Inc. ~~Our transactions with Discovery Communications and Liberty Global consist primarily of purchases of programming created~~, ~~owned~~ or ~~distributed by Discovery Communications and its subsidiaries and investees.~~

~~News Corporation and affiliates~~ 68

News Corporation and its affiliates were considered related parties until February 27, 2008, when News Corporation transferred its 41% interest in our Parent's common stock to Liberty Media. Accordingly, the following contractual arrangements with News Corporation and its affiliates are considered related party transactions and reported through February 27, 2008: purchase of programming, products and advertising; license of certain intellectual property, including patents; purchase of system access products, set-top receiver software and support services; sale of advertising space; purchase of employee services; and use of facilities.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Discovery Communications, an approximate 40% voting interest in Liberty Global Inc., or Liberty Global, and serves as Chairman of Liberty Global, and certain of Liberty Media's management and directors also serve as directors of Discovery Communications or Liberty Global. As a result of this common ownership and management, transactions with Liberty Media, Discovery Communications and Liberty Global and their subsidiaries or equity method investees were considered to be related party transactions through the completion of the Malone Transaction. Our transactions with Liberty Media, Discovery Communications and Liberty Global consisted primarily of purchases of programming created, owned or distributed by Liberty Media and Discovery Communications and its subsidiaries and investees.

The majority of payments under contractual arrangements with Liberty Media, Discovery Communications, Liberty Global and News Corporation entities relate to multi-year programming contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming.

News Corporation and affiliates

Other

Companies in which we hold equity method investments are also considered related parties.

Beginning November 19, 2009, transactions with the Game Show Network, which our Parent holds an equity method investment in, are also included as transactions with Other.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes sales and purchase transactions with related parties:

		2009		2008		2007
		2010		2009		2008
		(Dollars in Millions)
Sales:
Liberty Media and affiliates		$	5626	$	3656	$	—36
Discovery Communications, Liberty Global and affiliates			115		1011		—10
News Corporation and affiliates			—		2—		172
DIRECTV and affiliates			7		—7		—
Other			15		21		—2
	Total	$	7543	$	5075	$	1750
Purchases:
Liberty Media and affiliates		$	~~355~~143	$	~~267~~355	$	—267
Discovery Communications, Liberty Global and affiliates			~~219~~111		~~164~~219		—164
News Corporation and affiliates			—		~~157~~—		~~835~~157
DIRECTV and affiliates			753		—7		1—
Other			6991		3569		2335
	Total	$	~~650~~398	$	~~623~~650	$	~~859~~623

The following table sets forth the amount of accounts receivable from and accounts payable to related parties as of December 31:

	2009		2008
	2010		2009
	(Dollars in Millions)
Accounts receivable	$	239	$	2923
Accounts payable		~~166~~63		~~156~~166

The accounts receivable and accounts payable balances as of December 31, ~~2009~~2010 are primarily related to intercompany transactions with our Parent and ~~2008~~the accounts receivable and accounts payable balances as of December 31, 2009 are primarily related to affiliates of Liberty Media.

Note 12: ~~Acquisitions~~Acquisition

Home Services ~~Providers~~Provider

180 Connect. In July 2008, we acquired 100% of 180 Connect Inc.'s outstanding common stock and exchangeable shares. Simultaneously, in a a separate transaction, UniTek USA, LLC acquired 100% of 180 Connect's cable service operating unit and operations in certain of our installation services markets in exchange for satellite installation operations in certain markets and $7 million in cash. These transactions provide us with control over a significant portion of our home service provider network. We paid $91 million in cash, net of the $7 million we received from UniTek USA, for the acquisition, including the equity purchase price, repayment of assumed debt and related transaction costs.

71 We accounted for the 180 Connect acquisition using the purchase method of accounting, and began consolidating the results from the date of acquisition. The consolidated financial statements reflect the final allocation of the $91 million net purchase price to assets acquired and the liabilities assumed based on their estimated fair values at the date of acquisition using information currently available. The assets acquired included approximately $5 million in cash. The excess of the purchase

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~network.~~price Weover ~~paid~~the ~~$91 million~~estimated infair ~~cash,~~values ~~net~~ of the ~~$7 million~~net weassets ~~received~~has ~~from~~been ~~UniTek~~recorded ~~USA,~~as ~~for the acquisition~~goodwill, ~~including~~$28 million ~~the~~of ~~equity~~which ~~purchase~~will ~~price,~~be ~~repayment~~deductible offor ~~assumed~~tax ~~debt and related transaction costs~~purposes.

We accounted for the 180 Connect acquisition using the purchase method of accounting, and began consolidating the results from the date of acquisition. The December 31, 2009 consolidated financial statements reflect the final allocation of the $91 million net purchase price to assets acquired and the liabilities assumed based on their estimated fair values at the date of acquisition using information currently available. The assets acquired included approximately $5 million in cash. The excess of the purchase price over the estimated fair values of the net assets has been recorded as goodwill, $28 million of which will be deductible for tax purposes.

The following table sets forth the final allocation of the purchase price to the 180 Connect net assets acquired in July 2008 (dollars in millions):


Total current assets		$	18
Property and equipment			16
Goodwill			97
Investments and other assets			51

Total assets acquired		$	182

Total current liabilities		$	83
Other liabilities			8

Total liabilities assumed		$	91

	Net assets acquired	$	91

The following selected unaudited pro forma information is being provided to present a summary of the combined results of us and 180 Connect for 2008 as if the acquisition had occurred as of the beginning of the period, giving effect to purchase accounting adjustments. The pro forma data is presented for informational purposes only and may not necessarily reflect the results of our operations had 180 Connect operated as part of us for the period presented, nor are they necessarily indicative of the results of future operations. The pro forma information excludes the effect of non-recurring charges.

	Year Ended December 31, 2008

	(Dollars in Millions)
Revenues	$	17,310
Net income		1,208

Note 13: Commitments and Contingencies

Commitments

At December 31, ~~2009~~2010, minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for satellite transponder leases and real property and aggregated $~~232~~281 million, payable as follows: $4156 million in ~~2010~~2011, $3542 million in ~~2011~~2012, $3238 million in ~~2012~~2013, $3123 million in ~~2013~~2014, $1513 million in ~~2014~~2015 and $78109 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts disclosed. Rental expenses under operating leases were $6263 million in ~~2009~~2010, $5362 million in ~~2008~~2009 and $5253 million in ~~2007~~2008.

72 At December 31, 2010, our minimum payments under agreements to purchase broadcast programming, regional professional team rights and the purchase of services that we have outsourced to third parties, such as billing services, and satellite telemetry, tracking and control, satellite launch contracts and broadcast center services aggregated $7,214 million, payable as follows: $1,870 million in 2011, $1,939 million in 2012, $1,522 million in 2013, $1,202 million in 2014, $641 million in 2015 and $40 million thereafter.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At December 31, ~~2009~~2010, ~~our~~other ~~minimum~~long-term ~~payments~~obligations ~~under~~totaling agreements to purchase broadcast programming, regional professional team rights and the purchase of services that we have outsourced to third parties, such as billing services, and satellite telemetry, tracking and control, satellite launch contracts and broadcast center services aggregated $~~8,297~~119 million, are payable approximately as follows: $~~1,671~~64 million in ~~2010~~2011, $~~1,663~~16 million in ~~2011~~ 2012, $~~1,787~~14 million in ~~2012~~2013, $~~1,392~~11 million in ~~2013~~2014, $~~1,147million~~4 million in ~~2014~~2015 and $~~637~~10 million thereafter. These amounts are recorded in "Accounts payable and accrued liabilities" and "Other liabilities and deferred credits" in the Consolidated Balance Sheets.

At December 31, 2009, other long-term obligations totaling $183 million are payable approximately as follows: $97 million in 2010, $58 million in 2011, $9 million in 2012, $7 million in 2013, $3 million in 2014 and $9 million thereafter. These amounts are recorded in "Accounts payable and accrued liabilities" and "Other liabilities and deferred credits" in the Consolidated Balance Sheets.

Contingencies

~~Litigation. Litigation~~ isNational ~~subject~~Football toLeague ~~uncertainties~~Strike and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at December 31, 2009. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our consolidated financial statements. Lockout

~~Finisar~~ We ~~Corporation. As~~have ~~previously~~a ~~reported,~~contract wewith ~~were~~the ~~successful~~National inFootball ~~2008~~League ~~getting~~for the ~~jury~~exclusive ~~verdict~~rights into distribute the ~~Finisar~~NFL ~~case~~Sunday ~~vacated~~Ticket onPackage ~~appeal. The~~to ~~original~~our ~~verdict~~subscribers. ~~found~~The ~~the~~NFL's ~~patent~~collective tobargaining beagreement ~~valid~~with ~~and~~its ~~willfully~~players ~~infringed,~~expires ~~and~~before the ~~jury~~beginning ~~awarded~~of ~~approximately~~the ~~$79 million~~2011-2012 inNFL ~~damages~~season. ~~The~~If ~~trial~~there ~~court~~is ~~increased~~a ~~the~~players' ~~damages~~strike ~~award~~or byan ~~$25 million~~owners' ~~because~~lockout ofand ~~the~~no ~~jury~~games ~~finding~~are ofplayed ~~willful~~or ~~infringement~~a ~~and~~reduced ~~awarded~~schedule ~~pre-judgment~~is ~~interest~~played, ofwe ~~$13 million.~~would ~~DIRECTV~~still ~~was~~be ~~also~~obligated ~~ordered~~ to ~~pay~~make ~~into~~certain ~~escrow~~contractual ~~$1.60~~payments ~~per~~to ~~new~~the ~~set-top receiver~~NFL ~~manufactured~~ for ~~use~~such ~~with~~season. ~~the~~Our ~~DIRECTV~~subscriber ~~system~~revenues ~~beginning~~would ~~June 17,~~decrease ~~2006~~if NFL ~~and~~games ~~continuing~~are ~~until~~not ~~the~~played ~~patent~~or ~~expires~~a infull ~~2012~~season oris ~~was~~lost ~~otherwise~~and ~~found~~cash toflows befrom ~~invalid.~~operating Onactivities ~~April 18,~~would ~~2008,~~decrease ~~the Court~~from oflower ~~Appeals~~revenues ~~reversed~~because ~~the~~we ~~verdict~~would ofstill ~~the~~be ~~district~~obligated ~~court~~to inmake ~~part,~~certain ~~vacated~~contractual payments to the ~~findings~~NFL. ofWe ~~infringement,~~will ~~and~~be ~~remanded~~able ~~for~~to ~~further~~partially ~~proceedings~~offset onthese ~~the~~payments ~~remaining~~through ~~issues~~provisions ~~finding~~such ~~that~~as ~~the~~credits ~~district~~in ~~court had~~the ~~applied~~following ~~erroneous~~year, ~~interpretations~~reimbursements offor ~~certain~~games ~~terms~~not ofplayed ~~the~~and ~~claims.~~its Onrights ~~remand,~~to wean ~~sought~~extra ~~and~~season ~~obtained~~if ~~summary~~an entire ~~judgment~~season onwere ~~invalidity~~cancelled, ofbut ~~all~~in ~~remaining~~the ~~claims,~~near ~~and~~term ~~the~~a ~~case~~strike ~~against~~or ~~DIRECTV~~lockout ~~was dismissed~~could onhave ~~May 19,~~a ~~2009.~~material ~~Finisar~~adverse ~~filed~~effect aon ~~Notice~~our ofcash ~~Appeal,~~flows ~~and~~from ~~oral~~operating ~~argument~~activities onprimarily ~~the~~due ~~appeal~~to ~~was~~payments ~~held~~we onmay ~~January 6,~~have ~~2010.~~to Onmake ~~January 8,~~to the ~~2010~~NFL, ~~the~~including ~~Court~~minimum ofcontractual ~~Appeals~~obligations, ~~affirmed~~an ~~per curiam~~optional ~~the~~advance ~~grant~~payment ofthat ~~summary~~may ~~judgment~~be onrequested ~~all~~by ~~claims.~~the ~~This~~NFL ~~case~~and isthe ~~now~~loss ~~resolved~~of ~~and~~subscriber ~~there~~revenue, ~~will~~as bewell noas ~~further~~possibly ~~proceedings~~resulting in ~~this~~reduced ~~matter~~subscriber additions and higher churn.

~~Satellites We~~ may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and in-orbit failures if the premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact a satellite failure could have on our ability to provide service. At December 31, 2009, the net book value of in-orbit satellites was $1,516 million, all of which was uninsured. Litigation

Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at December 31, 2010. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our consolidated financial statements.

During the year ended December 31, 2010 an arbitration panel determined that, pursuant to a contractual indemnity provision, one of our vendors was required to reimburse us $28 million for legal fees and settlement payments incurred and pay accrued interest to us for patent infringement claims settled by us in previous periods. We received the cash payment during the year ended December 31, 2010 and recorded $25 million as a reduction to "General and administrative expenses" and $3 million as "Interest income" in the Consolidated Statements of Operations.

Finisar Corporation. As previously reported, we were successful in 2008 getting the jury verdict in the Finisar case vacated on appeal. The original verdict found the patent to be valid and willfully infringed, and the jury awarded approximately $79 million in damages. The trial court increased the damages award by $25 million because of the jury finding of willful infringement and awarded pre-judgment interest of $13 million. DIRECTV was also ordered to pay into escrow $1.60 per new set-top receiver manufactured for use with the DIRECTV system beginning June 17, 2006 and continuing until the patent expires in 2012 or was otherwise found to be invalid. On April 18, 2008, the Court of Appeals reversed the verdict of the district court in part, vacated the findings of infringement,

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and remanded for further proceedings on the remaining issues finding that the district court had applied erroneous interpretations of certain terms of the claims. On remand, we sought and obtained summary judgment on invalidity of all remaining claims, and the case against DIRECTV was dismissed on May 19, 2009. Finisar filed a Notice of Appeal, and oral argument on the appeal was held on January 6, 2010. On January 8, 2010, the Court of Appeals affirmed per curiam the grant of summary judgment on all claims. This case is now resolved and there will be no further proceedings in this matter.

Intellectual Property Litigation. We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits can be analyzed by us at this stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. No assurance can be given that any adverse outcome would not be material to our consolidated financial position.

Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class action lawsuits in state and federal courts challenging the early cancellation fees we assess our customers when they do not fulfill their programming commitments. Several of these lawsuits are pending—some in California state court purporting to represent statewide classes, and some in federal courts purporting to represent nationwide classes. The lawsuits seek both monetary and injunctive relief. While the theories of liability vary, the lawsuits generally challenge these fees under state consumer protection laws as both unfair and inadequately disclosed to customers. Each of the lawsuits is at an early stage. Where possible, we are moving to compel these cases to arbitration in accordance with our Customer Agreement, but in states such as California where the enforceability of the arbitration provision is limited, we intend to defend against these allegations in court. We believe that our early cancellation fees are adequately disclosed, and represent reasonable estimates of the costs we incur when customers cancel service before fulfilling their programming commitments.

From time to time, we receive investigative inquiries or subpoenas from state and federal authorities with respect to alleged violations of state and federal statutes. These inquiries may lead to legal proceedings in some cases. We have received a request for information from the Federal Trade Commission, or FTC, on issues similar to those resolved with the multistate group of state attorneys general discussed below. We are cooperating with the FTC by providing information about our sales and marketing practices and customer complaints.

In December 2010, we entered into a settlement agreement with a multistate group of state attorneys general to resolve concerns regarding alleged violations of their respective state consumer protection statutes. The state of Washington, originally a part of the multistate group, filed an action in Washington state court in December 2009, and that litigation was settled on the same substantive terms as reached with the multistate group. We did not admit any wrongdoing in entering into the settlement. We agreed to formalize many business improvements made in the last few years and to further improve other practices. We paid a total of $14.25 million to the 50 states as costs of investigation and attorneys fees, and has agreed to implement a restitution program for consumers who send eligible complaints.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Other We~~ ~~are contingently liable under standby letters of credit and bonds in the aggregate amount of $2 million at December 31, 2009.~~ Satellites

We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and in-orbit failures if the premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact a satellite failure could have on our ability to provide service. At December 31, 2010, the net book value of in-orbit satellites was $1,724 million, all of which was uninsured.

Other

We are contingently liable under standby letters of credit and bonds in the aggregate amount of $1 million at December 31, 2010.

Note 14: Condensed Consolidating Financial Statements

The following presents the condensed consolidating statements of operations for the years ended December 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, the condensed consolidating balance sheets as of December 31, ~~2009~~2010 and ~~2008~~2009, and the condensed consolidating statements of cash flows for the years ended December 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008 of DIRECTV Holdings together with DIRECTV Financing Co., Inc., or the Co-Issuers, and each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of DIRECTV Holdings.

Condensed Consolidating Statement of Operations For the Year Ended December 31, 2009

				Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
				(Dollars in Millions)
Revenues				$	332		$	18,671		$	(332	)	$	18,671
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			—			8,027			—			8,027
		Subscriber service expenses			—			1,268			—			1,268
		Broadcast operations expenses			—			274			—			274
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			—			2,478			—			2,478
		Upgrade and retention costs			—			1,045			—			1,045
		General and administrative expenses			—			1,226			(332	)		894
	Depreciation and amortization expense				—			2,275			—			2,275
			Total operating costs and expenses		—			16,593			(332	)		16,261
Operating profit					332			2,078			—			2,410
Equity in income of consolidated subsidiaries					1,275			—			(1,275	)		—
Interest income					4			—			—			4
Interest expense					(335	)		(13	)		—			(348	)
Other, net					(34	)		17			—			(17	)
Income before income taxes					1,242			2,082			(1,275	)		2,049
Income tax benefit (expense)					13			(807	)		—			(794	)
Net income				$	1,255		$	1,275		$	(1,275	)	$	1,255

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Operations For the Year Ended December 31, ~~2008~~2010

				Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
				(Dollars in Millions)
Revenues				$	~~287~~463		$	1720,~~310~~268		$	(~~287~~463	)	$	1720,~~310~~268
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			—			78,~~424~~699			—			78,~~424~~699
		Subscriber service expenses			—			1,~~139~~340			—			1,~~139~~340
		Broadcast operations expenses			—			~~265~~273			—			~~265~~273
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			—			2,~~191~~631			—			2,~~191~~631
		Upgrade and retention costs			—			1,~~027~~106			—			1,~~027~~106
		General and administrative expenses			—			1,~~160~~466			(~~287~~463	)		~~873~~1,003
	Depreciation and amortization expense				—			21,~~061~~926			—			21,~~061~~926
			Total operating costs and expenses		—			1517,~~267~~441			(~~287~~463	)		1416,~~980~~978
Operating profit					~~287~~463			2,~~043~~827			—			23,~~330~~290
Equity in income of consolidated subsidiaries					1,~~235~~776			—			(1,~~235~~776	)		—
Interest income					361			14			—			375
Interest expense					(~~298~~480	)		(178	)		—			(~~315~~488	)
Other, net					—(25	)		520			—			(5	)
Income before income taxes					1,~~260~~735			2,~~032~~843			(1,~~235~~776	)		2,~~057~~802
Income tax expense					(10	)		(797	)		—			(807	)
Income tax benefit (expense)					16			(1,067	)		—			(1,051	)
Net income				$	1,~~250~~751		$	1,~~235~~776		$	(1,~~235~~776	)	$	1,~~250~~751

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Operations For the Year Ended December 31, ~~2007~~2009

				Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
				(Dollars in Millions)
Revenues				$	67332		$	1518,~~527~~671		$	(67332	)	$	1518,~~527~~671
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			—			68,~~681~~027			—			68,~~681~~027
		Subscriber service expenses			—			1,~~137~~268			—			1,~~137~~268
		Broadcast operations expenses			—			~~216~~274			—			~~216~~274
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			—			12,~~901~~478			—			12,~~901~~478
		Upgrade and retention costs			—			~~958~~1,045			—			~~958~~1,045
		General and administrative expenses			—			~~851~~1,226			(67332	)		~~784~~894
	Depreciation and amortization expense				—			12,~~448~~275			—			12,~~448~~275
			Total operating costs and expenses		—			1316,~~192~~593			(67332	)		1316,~~125~~261
Operating profit					67332			2,~~335~~078			—			2,~~402~~410
Equity in income of consolidated subsidiaries					1,~~394~~275			—			(1,~~394~~275	)		—
Interest income					694			—			—			694
Interest expense					(~~193~~335	)		(2313	)		—			(~~216~~348	)
Other, net					—(34	)		(517	)		—			(517	)
Income before income taxes					1,~~337~~242			2,~~307~~082			(1,~~394~~275	)		2,~~250~~049
Income tax benefit (expense)					2213			(~~913~~807	)		—			(~~891~~794	)
Net income				$	1,~~359~~255		$	1,~~394~~275		$	(1,~~394~~275	)	$	1,~~359~~255

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating ~~Balance~~Statement ~~Sheet~~of Operations AsFor ofthe Year Ended December 31, ~~2009~~2008

				~~Co-Issuers~~	Co-Issuers		~~Guarantor Subsidiaries~~	Guarantor Subsidiaries		~~Eliminations~~	Eliminations		~~DIRECTV Holdings Consolidated~~	DIRECTV Holdings Consolidated
				~~(Dollars in Millions)~~	(Dollars in Millions)
ASSETS
Revenues					$	287		$	17,310		$	(287	)	$	17,310
Total current assets				$	1,756		$	1,854		$	(50	)	$	3,560
Operating costs and expenses
Satellites, net					—			1,870			—			1,870
	Costs of revenues, exclusive of depreciation and amortization expense
Property and equipment, net					—			2,998			—			2,998
		Broadcast programming and other				—			7,424			—			7,424
Goodwill					1,828			1,339			—			3,167
		Subscriber service expenses				—			1,139			—			1,139
Intangible assets, net					—			582			—			582
		Broadcast operations expenses				—			265			—			265
Other assets					10,228			3,873			(13,870	)		231
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Total assets				$	13,812		$	12,516		$	(13,920	)	$	12,408
		Subscriber acquisition costs				—			2,191			—			2,191
LIABILITIES AND OWNER'S EQUITY
		Upgrade and retention costs				—			1,027			—			1,027
Total current liabilities				$	380		$	3,057		$	(49	)	$	3,388
		General and administrative expenses				—			1,160			(287	)		873
Long-term debt					6,500			—			—			6,500
	Depreciation and amortization expense					—			2,061			—			2,061
Deferred income taxes					—			775			(216	)		559
			Total operating costs and expenses			—			15,267			(287	)		14,980
Other liabilities and deferred credits					5,481			510			(5,481	)		510
Operating profit						287			2,043			—			2,330
Owner's equity
Equity in income of consolidated subsidiaries						1,235			—			(1,235	)		—
	Capital stock and additional paid-in capital				1,076			4,526			(4,526	)		1,076
Interest income						36			1			—			37
	Retained earnings				375			3,648			(3,648	)		375
Interest expense						(298	)		(17	)		—			(315	)
		Total owner's equity			1,451			8,174			(8,174	)		1,451
Other, net						—			5			—			5
Total liabilities and owner's equity				$	13,812		$	12,516		$	(13,920	)	$	12,408
Income before income taxes						1,260			2,032			(1,235	)		2,057
Income tax expense						(10	)		(797	)		—			(807	)
Net income					$	1,250		$	1,235		$	(1,235	)	$	1,250

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheet As of December 31, ~~2008~~2010

			Co-Issuers			Guarantor Subsidiaries		Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
ASSETS
Total current assets			$	~~1,221~~743		$	12,~~821~~147	$	(9654	)	$	2,~~946~~836
Satellites, net				—			1,~~980~~794		—			1,~~980~~794
Property and equipment, net				—			32,~~348~~832		—			32,~~348~~832
Goodwill				1,~~827~~828			1,~~362~~348		—			3,~~189~~176
Intangible assets, net				—			~~871~~495		—			~~871~~495
Other assets				813,~~070~~032			16,~~739~~069		(918,~~597~~834	)		~~212~~267
Total assets			$	1115,~~118~~603		$	1114,~~121~~685	$	(918,~~693~~888	)	$	1211,~~546~~400
LIABILITIES AND OWNER'S EQUITY
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
Total current liabilities			$	~~216~~160		$	23,~~888~~247	$	(9852	)	$	3,~~006~~355
Long-term debt				510,~~725~~472			—		—			510,~~725~~472
Deferred income taxes				—			~~621~~1,123		(~~216~~217	)		~~405~~906
Other liabilities and deferred credits				28,~~530~~592			~~763~~289		(28,~~530~~593	)		~~763~~288
Owner's equity
	Capital stock and additional paid-in capital			~~2,403~~7			4,~~476~~602		(4,~~476~~602	)		~~2,403~~7
	Retained earnings			~~244~~(3,628	)		25,~~373~~424		(25,~~373~~424	)		~~244~~(3,628	)
		Total owner's equity		2,647			6,849		(6,849	)		2,647
		Total owner's equity (deficit)		(3,621	)		10,026		(10,026	)		(3,621	)
Total liabilities and owner's equity			$	11,118		$	11,121	$	(9,693	)	$	12,546
Total liabilities and owner's equity (deficit)			$	15,603		$	14,685	$	(18,888	)	$	11,400

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating ~~Statement~~Balance ~~of Cash Flows~~Sheet ~~For~~As ~~the~~of ~~Year Ended~~ December 31, 2009

			Co-Issuers			Guarantor Subsidiaries			~~DIRECTV Holdings Consolidated~~Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash flows from operating activities
ASSETS
	Net cash provided by operating activities		$	2,108		$	1,583		$	3,691
Total current assets			$	1,756		$	1,854		$	(50	)	$	3,560
Cash flows from investing activities
Satellites, net				—			1,870			—			1,870
	Cash paid for property and equipment			—			(443	)		(443	)
Property and equipment, net				—			2,998			—			2,998
	Cash paid for subscriber leased equipment—subscriber acquisitions			—			(564	)		(564	)
Goodwill				1,828			1,339			—			3,167
	Cash paid for subscriber leased equipment—upgrade and retention			—			(419	)		(419	)
Intangible assets, net				—			582			—			582
	Cash paid for satellites			—			(59	)		(59	)
Other assets				10,228			3,873			(13,870	)		231
	Investment in companies, net of cash acquired			—			(11	)		(11	)
Total assets			$	13,812		$	12,516		$	(13,920	)	$	12,408
		Net cash used in investing activities		—			(1,496	)		(1,496	)
LIABILITIES AND OWNER'S EQUITY
Cash flows from financing activities
Total current liabilities			$	380		$	3,057		$	(49	)	$	3,388
	Cash proceeds from debt issuance			1,990			—			1,990
Long-term debt				6,500			—			—			6,500
	Debt issuance costs			(14	)		—			(14	)
Deferred income taxes				—			775			(216	)		559
	Repayment of long-term debt			(1,018	)		—			(1,018	)
Other liabilities and deferred credits				5,481			510			(5,481	)		510
	Repayment of other long-term obligations			—			(90	)		(90	)
Owner's equity
	Cash dividends to Parent			(2,500	)		—			(2,500	)
	Capital stock and additional paid-in capital			1,076			4,526			(4,526	)		1,076
	Excess tax benefit from share-based compensation			—			4			4
	Retained earnings			375			3,648			(3,648	)		375
		Net cash used in financing activities		(1,542	)		(86	)		(1,628	)
		Total owner's equity		1,451			8,174			(8,174	)		1,451
Net increase in cash and cash equivalents				566			1			567
Total liabilities and owner's equity			$	13,812		$	12,516		$	(13,920	)	$	12,408
Cash and cash equivalents at beginning of the period				1,143			6			1,149
Cash and cash equivalents at the end of the period			$	1,709		$	7		$	1,716

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, ~~2008~~2010

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	12,~~335~~263		$	1,~~942~~642		$	3,~~277~~905
Cash flows from investing activities
	Cash paid for property and equipment			—			(~~501~~477	)		(~~501~~477	)
	Cash paid for subscriber leased equipment—subscriber acquisitions			—			(~~599~~651	)		(~~599~~651	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(~~537~~316	)		(~~537~~316	)
	Cash paid for satellites			—			(~~128~~113	)		(~~128~~113	)
	Investment in companies, net of cash acquired			—			(971	)		(971	)
	Other			—			53			53
		Net cash used in investing activities		—			(1,~~857~~555	)		(1,~~857~~555	)
Cash flows from financing activities
	Cash proceeds from debt issuance			25,~~490~~978			—			25,~~490~~978
	Debt issuance costs			(1944	)		—			(1944	)
	Repayment of long-term debt			(532,323	)		—			(532,323	)
	Repayment of other long-term obligations			—			(9899	)		(9899	)
	Cash dividends to Parent			(36,~~400~~900	)		—			(36,~~400~~900	)
	Excess tax benefit from share-based compensation			—			79			79
		Net cash used in financing activities		(~~982~~3,289	)		(9190	)		(13,~~073~~379	)
Net increase (decrease) in cash and cash equivalents				353			(6	)		347
Net increase in cash and cash equivalents				(1,026	)		(3	)		(1,029	)
Cash and cash equivalents at beginning of the period				~~790~~1,709			127			~~802~~1,716
Cash and cash equivalents at the end of the period			$	~~1,143~~683		$	64		$	~~1,149~~687

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, ~~2007~~2009

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	~~496~~2,108		$	21,~~413~~583		$	23,~~909~~691
Cash flows from investing activities
	Cash paid for property and equipment			—			(~~621~~443	)		(~~621~~443	)
	Cash paid for subscriber leased equipment-subscriber acquisitions			—			(762	)		(762	)
	Cash paid for subscriber leased equipment—subscriber acquisitions			—			(564	)		(564	)
	Cash paid for subscriber leased equipment-upgrade and retention			—			(774	)		(774	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(419	)		(419	)
	Cash paid for satellites			—			(~~169~~59	)		(~~169~~59	)
	Other			—			(9	)		(9	)
	Investment in companies, net of cash acquired			—			(11	)		(11	)
		Net cash used in investing activities		—			(21,~~335~~496	)		(21,~~335~~496	)
Cash flows from financing activities
	Repayment of long-term debt			(10	)		—			(10	)
	Cash proceeds from debt issuance			1,990			—			1,990
	Repayment of other long-term obligations			—			(72	)		(72	)
	Debt issuance costs			(14	)		—			(14	)
	Cash dividend to Parent			(1,050	)		—			(1,050	)
	Repayment of long-term debt			(1,018	)		—			(1,018	)
	Repayment of other long-term obligations			—			(90	)		(90	)
	Cash dividends to Parent			(2,500	)		—			(2,500	)
	Excess tax benefit from share-based compensation			—			4			4
		Net cash used in financing activities		(1,~~060~~542	)		(6886	)		(1,~~128~~628	)
Net (decrease) increase in cash and cash equivalents				(564	)		10			(554	)
Net increase in cash and cash equivalents				566			1			567
Cash and cash equivalents at beginning of the year				1,354			2			1,356
Cash and cash equivalents at beginning of the period				1,143			6			1,149
Cash and cash equivalents at the end of the year			$	790		$	12		$	802
Cash and cash equivalents at the end of the period			$	1,709		$	7		$	1,716

Note 15: Selected Quarterly Data (Unaudited)

The following table presents unaudited selected quarterly data for 2009 and 2008:

	1st		2nd		3rd		4th
	(Dollars in Millions)
2009 Quarters
Revenues	$	4,303	$	4,539	$	4,703	$	5,126
Operating profit		397		652		611		750
Net income		197		350		311		397
2008 Quarters
Revenues	$	4,049	$	4,196	$	4,324	$	4,741
Operating profit		593		717		532		488
Net income		332		402		266		250

***

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2008

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated

			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	1,335		$	1,942		$	3,277

Cash flows from investing activities
	Cash paid for property and equipment			—			(501	)		(501	)
	Cash paid for subscriber leased equipment—subscriber acquisitions			—			(599	)		(599	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(537	)		(537	)
	Cash paid for satellites			—			(128	)		(128	)
	Investment in companies, net of cash acquired			—			(97	)		(97	)
	Other			—			5			5

		Net cash used in investing activities		—			(1,857	)		(1,857	)

Cash flows from financing activities
	Cash proceeds from debt issuance			2,490			—			2,490
	Debt issuance costs			(19	)		—			(19	)
	Repayment of long-term debt			(53	)		—			(53	)
	Repayment of other long-term obligations			—			(98	)		(98	)
	Cash dividends to Parent			(3,400	)		—			(3,400	)
	Excess tax benefit from share-based compensation			—			7			7

		Net cash used in financing activities		(982	)		(91	)		(1,073	)

Net increase (decrease) in cash and cash equivalents				353			(6	)		347
Cash and cash equivalents at beginning of the period				790			12			802

Cash and cash equivalents at the end of the period			$	1,143		$	6		$	1,149

Note 15: Selected Quarterly Data (Unaudited)

The following table presents unaudited selected quarterly data for 2010 and 2009:

	1st		2nd		3rd		4th

	(Dollars in Millions)
2010 Quarters
Revenues	$	4,772	$	4,934	$	5,031	$	5,531
Operating profit		808		899		720		863
Net income		433		482		352		484
2009 Quarters
Revenues	$	4,303	$	4,539	$	4,703	$	5,126
Operating profit		397		652		611		750
Net income		197		350		311		397

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

***

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation as of the end of the year covered by this Annual Report on Form 10-K under the supervision and with the participation of management, including our principal executive officers and financial officers, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, our principal executive officers and our financial officers concluded that our disclosure controls and procedures were effective as of December 31, ~~2009~~2010.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended December 31, ~~2009~~2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Internal Control Over Financial Reporting

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, or GAAP, and includes those policies and procedures that:

•: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
•: provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
•: provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2009~~2010. In making this assessment, our management used the criteria established in

8283

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Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on their assessment and those criteria, management believes that, as of December 31, ~~2009~~2010, our internal control over financial reporting is effective.

Our independent registered public accounting firm has issued an audit report on internal control over financial reporting, which appears below.

8384

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of DIRECTV Holdings LLC
El Segundo, California

We have audited the internal control over financial reporting of DIRECTV Holdings LLC (the "Company") as of December 31, ~~2009~~2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2009~~2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule.

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as of and for the year ended December 31, 2009 of the Company and our report dated February 25, 2010 expressed an unqualified opinion on those financial statements and financial statement schedule.


/s/ DELOITTE & TOUCHE LLP

Los Angeles, California February 25, ~~2010~~2011

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ITEM 9B. OTHER INFORMATION

None.

***

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Omitted.

***

ITEM 11. EXECUTIVE COMPENSATION

Omitted.

***

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Omitted

***

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted.

***

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The aggregate fees Deloitte & Touche LLP billed for professional services in ~~2009~~2010 and ~~2008~~2009 were:

Type of Fees		~~2009~~2010			~~2008~~2009
		(Dollars in Millions)
Audit Fees and Audit-Related Services		$	3		$	3

"Audit Fees" are fees Deloitte & Touche LLP bills us for professional services for the audit of our consolidated financial statements included in Form 10-K and review of our consolidated financial statements included in Form 10-Qs. Deloitte & Touche LLP bills us for "Audit-Related Services," which are principally for accounting consultations and assurance and related services associated with our financing transactions. DIRECTV engages our accountant on our behalf to render audit and non-audit services for us.

***

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

		Page Number
1.	All Financial Statements	See Part II
2.	Financial Statement Schedule II-Valuation and Qualifying Accounts for the Years Ended December 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008
3.	Exhibits (Including Those Incorporated By Reference)

Exhibit Number		Exhibit Name
*3.1		Certificate of Formation of DIRECTV Holdings LLC dated as of June 11, 2002 (incorporated by reference to Exhibit 3.1 to the Form S-4 of DIRECTV Holdings LLC filed June 26, 2003 (SEC File No. 333-106529)).
*3.2		Certificate of Incorporation of DIRECTV Financing Co., Inc. dated as of February 5, 2003 (incorporated by reference to Exhibit 3.2 to the Form S-4 of DIRECTV Holdings LLC filed June 26, 2003 (SEC File No. 333-106529)).
*3.3		Limited Liability Company Agreement of DIRECTV Holdings LLC dated as of June 11, 2002 (incorporated by reference to Exhibit 3.9 to the Form S-4 of DIRECTV Holdings LLC filed June 26, 2003 (SEC File No. 333-106529)).
*3.4		Amended and Restated By-laws of DIRECTV Financing Co., Inc. (incorporated by reference to Exhibit 3.9 of the Form S-4 of DIRECTV Holdings, LLC filed on February 5, 2010 (SEC File No. 333-106529)).
*4.1		Indenture, dated as of June 15, 2005, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 10.1 to the ~~Current Report on~~ Form 8-K of ~~the~~ DIRECTV Holdings LLC ~~filed~~and onDIRECTV Financing Co, Inc. filed June 20, 2005 (SEC File No. 333-106529).)
*4.2		Form of 63/8% Senior Notes due 2015 (incorporated by reference to Exhibit 10.1 to the ~~Current Report on~~ Form 8-K of ~~the~~ DIRECTV Holdings LLC ~~filed~~and onDIRECTV Financing Co, Inc. filed June 20, 2005 (SEC File No. 333-106529).)
*4.3		Supplemental Indenture dated as of April 28, 2006 by and among LABC Productions, LLC, DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.8 to the Form 10-K of The DIRECTV Group, Inc. filed March 1, 2007 (SEC File No. 1-31945))
*4.4		Indenture, dated as of May 14, 2008, by and among DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 10.1 to the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed May 16, 2008 (SEC File No. 333-106529))
*4.5		Form of 75/8% Senior Notes due 2016 (included in Exhibit 4.4)

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Exhibit Number		Exhibit Name
*4.5		Form of 75/8% Senior Notes due 2016 (incorporated by reference to Exhibit 4.10 to the Form 10-K of The DIRECTV Group, Inc. filed February 26, 2009 (SEC File No. 1-31945))
*4.6		Indenture, dated as of September 22, 2009, by and among DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV Holdings, LLC filed on September 25, 2009 (SEC File No. 333-106529))
*4.6		Indenture, dated as of September 22, 2009, by and among DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV Holdings, LLC filed on September 25, 2009 (SEC File No. 333-106529)).
*4.7		Form of 43/4% Senior Notes due 2014 (included in Exhibit 4.6)
*4.7		Form of 43/4% Senior Notes due 2014 (included in Exhibit 4.6).
*4.8		Form of 57/8% Senior Notes due 2019 (included in Exhibit 4.6)
*4.9		Indenture, dated as of March 11, 2010, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV Holdings LLC filed on March 15, 2010 (SEC File No. 333-106529))
*4.10		Form of 3.550% Senior Notes due 2015 (included in Exhibit 4.9)
*4.11		Form of 5.200% Senior Notes due 2020 (included in Exhibit 4.9)
*4.12		Form of 6.35% Senior Notes due 2040 (included in Exhibit 4.9)
*4.13		Indenture, dated as of August 17, 2010, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 of the Form 8-K of DIRECTV Holdings LLC filed on August 23, 2010 (SEC File No. 333-106529))
*4.14		First Supplemental Indenture, dated as of August 17, 2010, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of the Form 8-K of DIRECTV Holdings LLC filed on August 23, 2010 (SEC File No. 333-106529)
*4.15		Form of 3.125% Senior Notes due 2016 (included in Exhibit 4.14)
*4.16		Form of 4.600% Senior Notes due 2021 (included in Exhibit 4.14)
*4.17		Form of 6.000% Senior Notes due 2040 (included in Exhibit 4.14)
*10.1		Intellectual Property License Agreement dated as of February 10, 2003, between HEC and DIRECTV Enterprises, LLC, as licensee (incorporated by reference to Exhibit 10.16 of the Form S-4 of DIRECTV Holdings LLC filed June 26, 2003 (SEC File No. 333-106529)).
*10.2		Credit Agreement dated as of April 13, 2005 by and among DIRECTV Holdings LLC, Bank of America, N.A., as Administrative Agent and Collateral Agent, the lenders party to the Credit Agreement, certain subsidiaries of the DIRECTV Holdings LLC, as guarantors, JP Morgan Chase Bank, N.A., as Syndication Agent, Credit Suisse First Boston, Goldman Sachs Credit Partners, L.P. and Citicorp North America, Inc. as Co-Documentation Agents, and Banc of America Securities LLC and J.P. Morgan Securities Inc., as Co-Lead Arrangers and Co-Book Managers (incorporated by reference to Exhibit 10.1 to the ~~Current Report on~~ Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005 (SEC File No. 333-106529)).
*10.3		Security Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as grantors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005 (SEC File No. 333-106529)).
*10.4		Pledge Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as pledgors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005 (SEC File No. 333-106529)).
*10.5		Amendment No. 1, dated as of May 14, 2008, by and among DIRECTV Holdings LLC, the Guarantors and Lenders signatory thereto and Bank of America, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.3 of the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed May 16, 2008 (SEC File No. 333-106529)).

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Exhibit Number		Exhibit Name
*10.6		Tranche C Term Loan Joinder Agreement, dated as of May 14, 2008, by and among DIRECTV Holdings LLC and Bank of America, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.4 of the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed May 16, 2008 (SEC File No. 333-106529)).
*10.3		Security Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as grantors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.2 to the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005 (SEC File No. 333-106529))
*10.7		Registration Rights Agreement dated as of September 22, 2009, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and the Initial Purchasers named therein (incorporated by reference to Exhibit 10.2 of the Form 8-K of DIRECTV Holdings LLC filed on September 25, 2009 (SEC File No. 333-106529))
*10.4		Pledge Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as pledgors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.3 to the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005 (SEC File No. 333-106529))
***31.1		Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").
*10.5		Amendment No.1, dated as of May 14, 2008, by and among DIRECTV Holdings LLC, the Guarantors and Lenders signatory thereto and Bank of America, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.3 of the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed May 16, 2008 (SEC File No. 333-106529))
*10.6		Tranche C Term Loan Joinder Agreement, dated as of May 14, 2008, by and among DIRECTV Holdings LLC and Bank of America, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.4 of the Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed May 16, 2008 (SEC File No. 333-106529))
*10.7		Credit Agreement dated as of February 7, 2011, by and among DIRECTV Holdings LLC and certain of DIRECTV Holdings LLC's subsidiaries as Guarantors, and Citibank, N.A., as Administrative Agent, the lenders party to the Credit Agreement, Barclays Capital, as Syndication Agent, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Royal Bank Of Scotland PLC and UBS AG, Stamford Branch as Co-Documentation Agents, and Citigroup Global Markets Inc., Barclays Capital, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBS Securities Inc. and UBS AG, Stamford Branch as Joint Lead Arrangers and Joint Bookrunners
**23		Consent of Deloitte & Touche LLP
***31.1		Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302.
***31.2		Certification of Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.
***31.3		Certification of Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
***31.4		Certification of Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
***32.1		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
***32.2		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.
***32.3		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
***32.4		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
****101.INS		XBRL Instance Document
****101.SCH		XBRL Taxonomy Extension Schema Document
****101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
****101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
****101.LAB		XBRL Taxonomy Extension Label Linkbase Document
****101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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*Incorporated by reference. **Filed herewith. ***Furnished not filed. ****Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

Exhibit Number		Exhibit Name

***32.2		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.
***32.3		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
***32.4		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
****101.INS		XBRL Instance Document
****101.SCH		XBRL Taxonomy Extension Schema Document
****101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
****101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
****101.LAB		XBRL Taxonomy Extension Label Linkbase Document
****101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*: Incorporated by reference.
**: Filed herewith.
***: Furnished not filed.
****: Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

A copy of any of the exhibits included in this Annual Report on Form 10-K, other than those as to which confidential treatment has been granted by the Securities and Exchange Commission, upon payment of a fee to cover the reasonable expenses of furnishing such exhibits, may be obtained by written request to us at the address set forth on the front cover, attention General Counsel.

***

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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Description		Balance at Beginning of year			Additions Charged to costs and expenses			Additions Charged to other accounts			Deductions			Balance at end of year
		(Dollars in Millions)
For the Year Ended December 31, 2010
Allowances Deducted from Assets
	Accounts receivable	$	(29	)	$	(244	)	$	(255	)(a)	$	482(b)		$	(46	)
For the Year Ended December 31, 2009
Allowances Deducted from Assets
	Accounts receivable	$	(32	)	$	(200	)	$	(238	)(a)	$	441(b)	~~(b)~~	$	(29	)
For the Year Ended December 31, 2008
Allowances Deducted from Assets
	Accounts receivable	$	(39	)	$	(181	)	$	(192	)(a)	$	380(b)	~~(b)~~	$	(32	)
For the Year Ended December 31, 2007
Allowances Deducted from Assets
	Accounts receivable	$	(39	)	$	(172	)	$	(158	)(a)	$	330	(b)	$	(39	)

(a): Primarily reflects the recovery of accounts previously written-off.
(b): Primarily relates to accounts written-off.

Reference should be made to the Notes to the Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	DIRECTV HOLDINGS LLC (Registrant)
Date: February 25, 2010	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle Executive Vice President and Chief Financial Officer
Date: February 25, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 25th day of February ~~2010~~ 2011 by the following persons on behalf of the Registrant and in the capacities indicated.

/s/ MICHAEL D. WHITE Michael D. White President, Chief Executive Officer and Director }Principal Executive Officer /s/ PATRICK T. DOYLE Patrick T. Doyle Executive Vice President, ~~and~~ Chief Financial Officer and Director }Principal Financial Officer /s/ JOHN F. MURPHY John F. Murphy Senior Vice President, Controller, and Chief Accounting Officer ~~and Director~~ }Principal Accounting Officer /s/ LARRY D. HUNTER Larry D. Hunter Executive Vice President, General Counsel and Director

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DIRECTV HOLDINGS LLC

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	DIRECTV FINANCING CO., INC. (Registrant)
Date: February 25, 2010	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle Executive Vice President and Chief Financial Officer
Date: February 25, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle Executive Vice President and Chief Financial Officer


/s/ MICHAEL D. WHITE Michael D. White	President and Chief Executive Officer	}Principal Executive Officer
/s/ PATRICK T. DOYLE Patrick T. Doyle	Executive Vice President and Chief Financial Officer	}Principal Financial Officer
/s/ JOHN F. MURPHY John F. Murphy	Senior Vice President, Controller and Chief Accounting Officer	}Principal Accounting Officer
/s/ LARRY D. HUNTER Larry D. Hunter	Executive Vice President, General Counsel and Director

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EXHIBIT INDEX

Exhibit Number		Exhibit Name
31.1		Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").
23		Consent of Deloitte & Touche LLP
31.1		Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302.
31.2		Certification of Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.
31.3		Certification of Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
31.4		Certification of Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
32.1		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
32.2		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.
32.3		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
32.4		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(Dollars in Millions)

Share-based compensation expense recognized

Tax benefits associated with share-based compensation expense

Actual tax benefits realized for the deduction of share-based compensation expense