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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                        to


Commission file number 1-31945

THE DIRECTV GROUP, INC.(Exact name of registrant as specified in its charter)

DELAWARE

52-1106564(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:

Title of Each Class

Name of Exchange on Which RegisteredCommon, $0.01 par value

NASDAQ Global Select Market


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 ý No o

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 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. o

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 ý

Accelerated filer o

Non-accelerated filer o (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

As of June 30, 2008, the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates was
$14,919,056,948. This amount excludes Liberty Media Corporation's approximately 49% ownership interest in our outstanding common stock as of such date.

As
of February 23, 2009, the registrant had outstanding 1,017,293,625 shares of common stock.

Documents
incorporated by reference are as follows:

Document

Part and Item Number of Form 10-K
into which IncorporatedThe DIRECTV Group, Inc. Notice of Annual Meeting of Stockholders and Proxy Statement for Annual Meeting of Stockholders to be held on June 2,
2009

Part I, Item 5
Part III, Items 10 through 14




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THE DIRECTV GROUP, INC.

TABLE OF CONTENTS



Page No.Part IItem 1. Business


3Item 1A. Risk Factors


22Item 1B. Unresolved Staff Comments


34Item 2. Properties


34Item 3. Legal Proceedings


34Item 4. Submission of Matters to a Vote of Security Holders


35Part IIItem 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities


36Item 6. Selected Financial Data


38Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations


39Item 7A. Quantitative and Qualitative Disclosures About Market Risk


64Item 8. Financial Statements and Supplementary Data


65Report of Independent Registered Public Accounting Firm


65Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and
2006


66Consolidated Balance Sheets as of December 31, 2008 and 2007


67Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income for the
Years Ended December 31, 2008, 2007 and 2006


68Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
2006


69Notes to the Consolidated Financial Statements


70Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure


108Item 9A. Controls and Procedures


108Item 9B. Other Information


111Part IIIItem 10. Directors, Executive Officers and Corporate Governance


111Item 11. Executive Compensation


111Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


111Item 13. Certain Relationships and Related Transactions, and Director Independence


111Item 14. Principal Accounting Fees and Services


111Part IVItem 15. Exhibits and Financial Statement Schedules


111Signatures


120


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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 or phrases. Similarly, statements that describe our
objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties including, without limitation, risk factors
discussed in more detail in Item 1A of this Annual Report, which could cause our actual results to differ materially from historical results or 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 publicly update these
forward-looking statements to reflect subsequent events or circumstances.

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PART I

ITEM 1.    BUSINESS

The DIRECTV Group, Inc., which we refer to as The DIRECTV Group, the company, we or us, is a leading provider of digital television entertainment in the
United States and Latin America. Our two business segments, DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location, are engaged in acquiring, promoting, selling
and/or distributing digital entertainment programming via satellite to residential and commercial subscribers.



On
February 27, 2008, Liberty Media Corporation, or Liberty Media, and News Corporation completed a transaction in which Liberty Media acquired News Corporation's approximately
41% interest in us, which we refer to as the Liberty Transaction. On April 3, 2008, Liberty Media announced that it had purchased an additional 78.3 million shares of our common stock in
a private transaction. Currently, Liberty Media owns approximately 53.6% of our outstanding common stock, however Liberty Media has agreed to limit its voting rights to approximately 47.9%.

In
January 2009, Liberty Media filed with the Securities and Exchange Commission, or SEC, a preliminary proxy statement requesting shareholder approval for a redemption proposal which
would allow Liberty Media to redeem a portion of the outstanding shares of its Liberty Entertainment common stock, a tracking stock, using shares of a newly formed, wholly owned subsidiary of Liberty
Media, Liberty Entertainment, Inc., or LEI. As described further in the proxy statement, LEI would hold Liberty Media's approximately 54% interest in The DIRECTV Group, a 100% interest in each
of FUN Technologies, Inc. and Liberty Sports Holdings LLC, a 73% interest in PicksPal, Inc., a 50% interest in GSN, LLC and up to $300 million in cash and cash
equivalents, together with $2 billion of indebtedness, and an associated equity collar relating to The DIRECTV Group share acquisition in April 2008. The redemption proposal is subject to the
satisfaction of various conditions including, but not limited to, an effective registration statement, the receipt of a tax ruling and applicable shareholder approvals. Successful implementation of
the redemption proposal will result in the split-off of LEI as a separately traded public company.

We
were incorporated in Delaware in 1977, and our common stock trades on the The NASDAQ Global Select Market under the ticker symbol "DTV."

DIRECTV U.S.

Through DIRECTV U.S., we provide over 17.6 million subscribers with access to hundreds of channels of digital-quality video pictures and
CD-quality audio programming that we transmit directly to subscribers' homes or businesses via high-powered geosynchronous satellites.

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THE DIRECTV GROUP, INC.

We
believe we provide one of the most extensive collections of programming available in the MVPD industry. We currently distribute more than 2,000 digital video and audio channels,
including about 200 basic entertainment and music channels, 40 premium movie channels, over 50 regional and specialty sports networks, over 125 Spanish and other foreign language special interest
channels, over 31 pay-per-view movie and event choices, and about 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 channels in the subscriber's home market. As of December 31, 2008,
we provided local channel coverage in standard definition to approximately 150 markets, covering about 95% of U.S. television households. In addition, we provided HD local channels in 119 markets
representing approximately 89% of U.S. TV households. With the expected launch of an additional satellite in the second half of 2009, we expect to further expand our offering of HD channels.

We
also provide premium professional and collegiate sports programming such as the NFL SUNDAY TICKET package, which allows subscribers to view the largest selection of NFL
games available each Sunday during the regular season. Under our contract with the NFL, we have exclusive rights to provide this service through the 2010 season, including rights to provide related
HD, interactive and mobile services.

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



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Business Strategy

Our primary goal is to provide subscribers with the best television experience in the United States. Our strategy focuses on offering
subscribers differentiated and exclusive content, attaining leadership in technology, and enhancing sales, marketing, distribution and customer service.

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Infrastructure

Satellites.We currently have a fleet of eleven geosynchronous satellites, including ten 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 four Ka-Band satellites at our 99° WL (two) and 103° WL (two) orbital
locations. The 72.5° WL orbital location is used pursuant to an arrangement with Telesat Canada. As a part of the arrangement with Telesat, we have transferred three satellites, two of
which are no longer used as they were de-orbited at the end of their service lives and one of which is nearing the end of its useful life, to orbital locations controlled by Telesat, for
use by Telesat for its own services in Canada.

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THE DIRECTV GROUP, INC.

Satellite To Be Launched.DIRECTV 12 is planned for launch in the second half of 2009. DIRECTV 12 will operate from our 101°
WL orbital
location after successful completion of in-orbit testing. DIRECTV 12 will provide us with increased capability for local and national HD channels, as well as capacity for new interactive
and enhanced services once it becomes operational.

Satellite Risk Management.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. We expect to purchase launch insurance for DIRECTV 12 covering a portion of the satellite and launch vehicle costs in the event of a total failure. As of December 31, 2008,
the net book value of DIRECTV U.S.' in-orbit satellites was $1,688 million, of which $1,489 million was uninsured.

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 transmitted to our satellites. We designed each broadcast center and uplink facility with redundant
systems to minimize service interruptions.

Installation Network.The DIRECTV home service provider, or HSP, installation and service network performs installation, upgrades
and other service
call work for us. In 2008, we entered into several transactions that brought a significant portion of this HSP network activity in-house. We now directly employ nearly 4,000 technicians
and utilize an additional 11,000 technicians from nine outsourced companies around the United States. The combined workforce completed approximately 93% of all in-home visits in 2008. We
set the standards for the quality of installation and service, perform quality control, manage inventory and monitor the overall service network performance for nearly all of the third-party
installation network.

Customer Service Centers.As of December 31, 2008, we used 30 customer service centers employing over 16,000 customer
service representatives.
Most of these customer service centers are operated by Convergys Customer Management Group, Inc., Precision Response Corporation, Sitel Operating Corporation and N.E.W. Customer Service
Companies, Inc. 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.

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THE DIRECTV GROUP, INC.

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. 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. 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. Our over 17.6 million subscribers represent
approximately 18% of MVPD subscribers at December 31, 2008.



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DIRECTV LATIN AMERICA

DTVLA is the leading provider of DTH digital television services throughout Latin America and the Caribbean, which includes Puerto Rico. DTVLA provides a wide
selection of high-quality local and international programming under the DIRECTV and SKY brands to approximately 2.2 million subscribers in PanAmericana and approximately
1.6 million subscribers in Brazil. Our 41% owned affiliate, Sky Mexico, has more than 1.7 million subscribers in Mexico and certain countries in Central America.

In
2006 and 2007 we completed a series of transactions to strengthen our operating and financial performance, which included:



As
a result of these transactions, we own 100% of PanAmericana (which operates principally in South America and the Caribbean, including Puerto Rico), 74% of Sky Brazil (which operates
in Brazil), and 41% of Sky Mexico (which operates in Mexico, Central America and the Dominican Republic). Globo owns the other 26% of Sky Brazil and Televisa owns the other 59% of Sky Mexico. The
results of PanAmericana and Sky Brazil are consolidated in our results. We account for our 41% interest in Sky Mexico under the equity method of accounting.

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THE DIRECTV GROUP, INC.

In
connection with the approval of the Liberty Transaction in February 2008, the FCC required DTVLA to sever the "attributable interests" between its DIRECTV-Puerto Rico subsidiary and
Liberty Cablevision of Puerto Rico, Ltd., or LCPR, by February 26, 2009. We assumed responsibility for satisfaction, modification or waiver of this condition. In order to comply with
terms of the FCC order, effective February 25, 2009, we placed the shares of DIRECTV Puerto Rico into a trust and appointed an independent trustee who will be required to oversee the management
and operation of DIRECTV Puerto Rico, and will have the authority, subject to certain conditions, to divest ownership of DIRECTV Puerto Rico. We will continue to consolidate the results of DIRECTV
Puerto Rico following this transaction.

Key Strengths



Business Strategy

Our goal is to provide subscribers with the best television experience available. Our strategy focuses on leveraging our competitive
advantages that differentiate our service offerings from those of our competitors.



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Infrastructure

We provide services in PanAmericana and Brazil from leased transponders on two satellites. In January 2008, we successfully transferred
the broadcast of our Sky Brazil service to leased transponders on a new satellite, as the prior satellite was nearing the end of its useful life. Sky Mexico provides its services from leased
transponders on a separate satellite. Currently, these satellites do not have a backup, although we recently completed negotiations for the construction and launch of a backup satellite that would
serve Brazil and Mexico. We anticipate that this satellite will be available for operations no later than mid-2010.

See
Item 1A. "Risk Factors" below for additional information regarding satellite launch and operational risks.

Our
principal digital broadcast centers are located in the United States and Brazil. We also have several smaller satellite uplink facilities in the region.

Competition

The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets,
we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave
systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete
primarily on the basis of programming selection, price, technology and quality.

In
most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms,
and have established large subscriber bases and widespread brand recognition. They have typically offered analog services for lower monthly fees and with lower upfront installation and connection fees
than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and telephony services, and in some markets the major cable
operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and telephony services. In most cases, they discount the value of their programming
services in order to sell broadband and telephony services, which can adversely affect the attractiveness of our offers to subscribers.

In
addition to competition from cable services, we face increasing competition from other providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in
Peru, Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in Chile and has stated its intention to launch in other countries, including in Brazil, through its
affiliate Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in early 2009. These competitors have significant resources and have proven their ability to
grow their businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in support of their telephony and broadband offerings, which can increase our
churn and put pressure on our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to market our DTH service as an alternative to cable, traditionally our
principal competition. In addition, EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS Comunicaciones to offer a satellite television service in Mexico. The
new offering will use an existing MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells set-top boxes and provides satellite television
services to Dish Network in the United States. Echostar also announced that basic service will include 25 Spanish and English language channels for a monthly fee of 139 pesos or a little over $10 at
foreign exchange rates at year end 2008.

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THE DIRECTV GROUP, INC.

In a number of markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced
services, including video programming. These and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, telephony and video
services. However, to date only a very small number of such upgrades and build outs have been actively pursued on other than a test basis.

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 similar regulatory agencies in Latin America and, to a certain extent, by
the legislative branches, other federal agencies, and state and local authorities in the countries where we operate. 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
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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All
of our satellites and earth stations are or have been licensed by the FCC. Currently, three 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:



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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. 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.

In
Latin America, DTVLA and its subsidiaries are subject to laws and regulations in each country in which they operate that govern many of the same aspects of our operations as in the
United States,

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such
as landing rights for satellites; spectrum, earth station and other licenses; must carry and other requirements with respect to the channels we carry; regulations governing telemarketing and
customer service, etc. Regulatory regimes in Latin America are generally less developed than in the United States, as a result of which the application of existing laws and regulations to DBS
providers is at times uncertain. In addition, there are certain areas where regulations in Latin America are stricter than in the United States, such as regarding labor and consumer protection laws.
Foreign exchange laws in some countries can have a material impact on our ability to repatriate funds to the United States. Also, recently in several countries such as Brazil there have been proposed
laws that would require us to carry certain thresholds of domestic or "national" content which, if approved, could have a material impact on our subsidiaries operating in those countries.

INTELLECTUAL PROPERTY

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

We
believe that our growing portfolio of pending and issued patents are important assets. We presently hold over 1,850 issued patents worldwide relating to our past and present
businesses, including over 350 patents developed by, or otherwise relating to, the businesses of DIRECTV U.S. We hold a worldwide portfolio of over 1,100 registered trademarks in over 140 countries
related to the DIRECTV name and the Cyclone Design. In addition, DIRECTV U.S. holds trademark registrations relating to its business, including registrations of the primary "DIRECTV" and Cyclone
Design trademarks. These trademarks are licensed royalty-free to third parties for use in support of the DIRECTV U.S. business. We actively protect our important patents and trademarks
against unauthorized 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 2009. 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 for treatment or disposal. We are aware of contamination at one of our former sites. We believe that we have adequately provided for the expected cost of
environmental investigation and cleanup.

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SEGMENT REPORTING DATA

Operating segment and principal geographic area data for 2008, 2007 and 2006 are summarized in Note 18 of the Notes to the Consolidated Financial
Statements in Item 8, Part II of this Annual Report, which we incorporate herein by reference.

EMPLOYEES

As of December 31, 2008, we had approximately 18,300 full-time and 1,300 part-time employees.

ACCESS TO COMPANY REPORTS

Our website address is www.directv.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to
those reports filed or furnished, if any, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website as soon as reasonably
practicable after they are electronically filed with, or furnished to, the SEC. We are not incorporating by reference in this Annual Report on Form 10-K any information on our
website.

In
addition, our DIRECTV U.S. subsidiary, DIRECTV Holdings LLC, is a separate registrant with the SEC. You can access DIRECTV Holdings LLC's Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished, if any, pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 free of charge through our website at www.directv.com as soon as reasonably practicable after they are electronically filed with,
or furnished to, the SEC.

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 affect our business, financial condition 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, telephone communications 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.

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 a

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THE DIRECTV GROUP, INC.

MVPD
service and approximately 66% of MVPD subscribers receive their programming from a cable operator. Cable television operators have advantages relative to us, including or as a result
of:



In
addition, cable television operators have grown their subscriber bases through mergers and acquisitions. 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 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.

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
companies 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. 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.

We depend on third parties to provide us with programming services, including third parties who are our affiliates and third parties
controlled by competitors. Our ability to compete successfully will

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THE DIRECTV GROUP, INC.

depend
on our ability to continue to obtain desirable programming and deliver it to our subscribers at competitive prices. Our programming agreements generally have remaining terms ranging from less
than one to up to ten years and contain various renewal and cancellation provisions. We may not be able to renew these agreements on favorable terms, or at all, or these agreements may be cancelled
prior to expiration of their original terms. If we are unable to renew any of these agreements or the other parties cancel the agreements, we may not be able to obtain substitute programming, or if we
are able to obtain such substitute programming, it may not be comparable in quality or cost to our existing programming.

In
addition, many of our programming agreements are long term agreements and contain fixed annual price increases. When offering new programming, or upon expiration of existing
contracts, programming suppliers have historically increased the rates they charge us for programming, increasing our costs. We expect this practice to continue. Increases in programming costs could
cause us to increase the rates that we charge our subscribers, which could in turn, especially in a difficult economic environment, cause subscribers to terminate their subscriptions or potential new
subscribers to refrain from subscribing to our service. Furthermore, due to the economy and other factors, we may be unable to pass programming cost increases on to our subscribers, which could have a
material adverse effect on our earnings or cash flow.

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
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.

Our subscriber acquisition costs could materially increase.

We incur costs relating to subscribers acquired by us and subscribers acquired through third parties. These costs are known as
subscriber acquisition costs. For instance, we provide installation incentives to our retailers to enable them to offer standard professional installation as part of the subscriber's purchase or lease
of a DIRECTV System. In addition, we pay commissions to retailers for their efforts in offering a DIRECTV System at a lower cost to consumers. Our subscriber acquisition costs may materially increase
to the extent we continue or expand current sales promotion activities or introduce other more aggressive promotions, or due to increased competition. Any material increase in subscriber acquisition
costs from current levels would negatively impact our earnings and could materially adversely affect our financial performance.

Increased subscriber churn or subscriber upgrade and retention costs could materially adversely affect our financial performance.

Turnover of subscribers in the form of subscriber service cancellations, or churn, has a significant financial impact on the results of
operations of any subscription television provider, including us, as does the cost of upgrading and retaining subscribers. Any increase in our upgrade and retention costs for our existing subscribers
may adversely affect our financial performance or cause us to increase our subscription rates, which could increase churn. Churn may also increase due to factors beyond our control, including churn by
subscribers who are unable to pay their monthly subscription fees, a slowing economy, significant signal theft, consumer fraud, a maturing subscriber base and competitive offers. Any of the risks
described in this Annual Report that could potentially have a material adverse impact on our cost or service quality or that could result in higher prices for our subscribers could also, in

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THE DIRECTV GROUP, INC.

turn,
cause an increase in churn and consequently have a material adverse effect on our earnings and financial performance.

Results are impacted by the effect of, and changes in, United States and Latin America economic conditions and weakening economic conditions may reduce subscriber spending
and our rate of growth of subscriber additions and may increase subscriber churn.

Our business may be affected by factors in the United States and other countries in which we operate that are beyond our control, such
as downturns in economic activity in a specific country or region, or in the MVPD industry. Factors such as interest rates and the health of the housing market may impact our business. A substantial
portion of our revenues come 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 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.

DTVLA is subject to various additional risks associated with doing business internationally, which include political instability, economic instability, and foreign currency
exchange rate volatility.

All of DTVLA's operating companies are located outside the continental United States. DTVLA operates and has subscribers located
throughout Latin America and the Caribbean Basin, which makes it vulnerable to risks of conducting business in foreign markets, including:



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THE DIRECTV GROUP, INC.

In the past, the countries that constitute some of DTVLA's largest markets, including Brazil, Argentina, Colombia and Venezuela have experienced economic crises,
caused by external and internal factors, and characterized by exchange rate instability, high inflation, high domestic interest rates, economic contraction, a reduction or cessation of international
capital flows, a reduction of liquidity in the banking sector and high unemployment. These economic conditions have often been related to political instability, including political violence. If these
economic conditions recur, they could substantially reduce the purchasing power of the population in our markets and materially adversely affect our business.

Because
DTVLA offers premium pay television programming, its business is particularly vulnerable to economic downturns. DTVLA has experienced, and may in the future experience, decreases
or instability in consumer demand for its programming, as well as subscriber credit problems. DTVLA's inability to adjust its business and operations to adequately address these issues could
materially adversely affect its revenues and ability to sustain profitable operations.

Our ability to keep pace with technological developments is uncertain.

In the MVPD 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.

New
technologies could also create new competitors for us. Entities such as telcos are implementing and 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. While these entities are not currently providing MVPD services on a significant basis, many have the capabilities for such services and are growing their
businesses. We may not be able to compete successfully with new entrants in the market for video services.

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THE DIRECTV GROUP, INC.

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.

Our principal stockholder has significant influence over our management and over actions requiring stockholder approval and its interests may differ from ours.

As of December 31, 2008, Liberty Media Corporation, or Liberty Media, held approximately 54% of the issued and outstanding
shares of our common stock. John Malone, Chairman and Chief Executive of Liberty Media, is the Chairman of our Board of Directors. Additionally, two other current Liberty Media executives are members
of our Board of Directors. As a result, Liberty Media has significant influence relating to our management and actions that require stockholder approval. The interests of Liberty Media may differ from
the interests of other holders of our common stock. The extent of Liberty Media's stock ownership in us also may have the effect of discouraging offers to acquire control of us and may preclude
holders of our common stock from receiving any premium

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THE DIRECTV GROUP, INC.

above
market price for their shares that may be offered in connection with any attempt to acquire control of us.

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
five 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 our DIRECTV 12 satellite, scheduled for launch in the second half of 2009, we expect
to purchase launch insurance covering a portion of the satellite and launch vehicle costs in the event of a total loss of the satellite prior to separation from the launch vehicle. We do not currently
expect to purchase in-orbit insurance for the DIRECTV 12 satellite.

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

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THE DIRECTV GROUP, INC.

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:



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 2009, in-orbit satellite capacity to expeditiously recover
transmission of most DIRECTV U.S. programming in the event one of our in-orbit satellites fails. However, programming continuity cannot be assured in the event of multiple satellite
losses. DTVLA leases its satellites and may not have a readily available replacement in the event of a failure or loss of any of its satellites. Because we currently have no back-up
capacity in place for DTVLA, programming continuity in the countries in which DTVLA operates cannot be assured in the event of a single satellite loss.

The cost of commercial insurance coverage on our satellites or the loss of a satellite that is not insured could materially adversely affect our earnings.

We use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet in-orbit and
launch failures unless the premium costs are considered uneconomic relative to the risk of satellite failure. 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 for business interruption

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THE DIRECTV GROUP, INC.

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 that a satellite failure may
have on our ability to provide service.

The
price, terms and availability of insurance fluctuate significantly. Launch and in-orbit policies on satellites may not continue to be available on commercially reasonable
terms or at all. In addition to higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods and satellite health-related policy exclusions.

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.

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. 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 recently extended for another five years, through October 2012, though it is currently considering proposals that
could shorten the term of this extension to two years if a cable operator could show that competition from new entrant MVPDs at that time 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. The cable
providers have asserted that they are not required to provide such programming 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. Challenges to this interpretation of the Communications Act have not been successful, and 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 recently 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, it is not clear that such provisions will be sufficient to assure our
continued access to this programming on fair and nondiscriminatory terms.

Carriage requirements may negatively affect our ability to deliver local broadcast stations, as well as other aspects of our business.

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

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process
of complying with the rules, or subject us to fines, monetary damages or injunctions. In implementing SHVIA, the FCC has required satellite carriers to delete certain programming, including
sports programming, from the signals of certain distant stations. Compliance with those FCC requirements may require costly upgrades to our broadcast system. Further, a recent FCC order interpreting
the requirement that satellite carriers retransmit local digital signals with "equivalent bandwidth" of significantly viewed digital signals may constrain our ability to deliver such significantly
viewed digital signals.

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. 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 begun to consider an obligation for carriage of local digital broadcast transmissions after the digital television transition currently scheduled for June 12,
2009. If the FCC were to require us to carry all local signals in HD format wherever we carry any local signals in HD format as of that date, we would be unable to comply in many 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 for later this year.

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 new 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

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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 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 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 permitted, significantly increases 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.

Other
regulatory risks include, among others:



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 conditional 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.

In
addition, many of our authorizations and pending applications will be subject to petitions and oppositions filed by several companies, and there can be no assurance that our
authorizations will not be cancelled, revoked or modified or that our applications will not be denied. Moreover, the FCC
recently 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

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regulations
are ongoing. The outcomes of these legislative or regulatory proceedings or their effect on our business cannot be predicted.

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 and those described under the
caption "Legal Proceedings" in Item 3. 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 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 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 recently insourced a substantial portion of our 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 face risks arising from possible union legislation in the United States.

There is a possibility that the proposed Employee Free Choice Act, or EFCA, may be enacted. The EFCA, also referred to as the "card
check" bill, if passed in its current form could significantly change the nature of labor relations in the United States, specifically, how union elections and contract negotiations are conducted.
With respect to our owned and operated HSP business, it would be easier for unions to win elections and we could face arbitrator-imposed labor scheduling, costs and standards. Therefore, the EFCA
could impose more labor relations requirements and union activity on our business, thereby potentially increasing our costs, and could have a material adverse effect on our overall competitive
position. Currently, neither we nor most of our outsourced HSP vendors have any unions.

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 authorizations necessary to operate satellites or provide satellite service internationally could have a material adverse effect
on our ability to generate revenue and our overall competitive position.

We have significant debt.

We have significant amounts of debt. If we do not have sufficient income or other sources of cash, it could affect our ability to
service debt and pay other obligations.

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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, 2008, we had approximately 150 owned and leased locations operating in the United States and Latin America. The major locations of the
DIRECTV U.S. segment include eight administrative offices, two broadcast centers and six call centers. The major locations of the DIRECTV Latin America segment include 10 administrative offices, four
broadcast centers and eight call centers. We consider our properties adequate for our present needs.

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, 2008 or subsequent thereto, but before the filing of this 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 in our effort to have 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. The Court found a principal independent claim to be anticipated and therefore invalid, and
remanded for further proceedings regarding validity of other asserted claims in view of this finding. The Court reversed the verdict of willful infringement, and affirmed the earlier ruling finding
several claims to be invalid prior to trial. Following these decisions, our appeal bond was terminated and the escrowed royalties were returned to us. In the remand now pending, initial summary
judgment motions on invalidity of additional claims

34

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THE DIRECTV GROUP, INC.

have
been submitted. If necessary, there will be further proceedings and a trial of remaining issues, which is presently scheduled for October 2009.

Early Cancellation Fees.In 2008, a number of plaintiffs filed putative class action lawsuits in state and federal courts
challenging the early
cancellation fees DIRECTV assesses its customers when they do not fulfill their programming commitments. There are several lawsuits currently
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.

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.

(b)   The
following previously reported legal proceeding was terminated during the fourth quarter ended December 31, 2008.

SuperGuide Corporation.On June 27, 2000, SuperGuide Corporation filed suit in the U.S. District Court for the Western District of
North
Carolina against DIRECTV Enterprises, LLC, DIRECTV, Inc., DIRECTV Operations, LLC, and The DIRECTV Group, Inc., Thomson Inc., and EchoStar Communications
Corporation, EchoStar Satellite Corporation and EchoStar Technologies Corporation. The action alleged infringement of three U.S. patents and sought unspecified damages and injunctive relief. Gemstar
Development Corp. was added as a third party defendant because it asserted to have exclusive control of the patents by reason of a license agreement with SuperGuide Corporation. In August 2005, the
Court granted summary judgment on two of the patents, dismissing the claims of infringement relating to them with prejudice, leaving only one patent at issue which expired in 2005. After a bench
trial, on July 19, 2007 the Court entered judgment denying Gemstar's assertion and holding that SuperGuide has the relevant rights relating to the remaining patent. Proceedings regarding the
remaining patent were then initiated. On October 14, 2008, DIRECTV and Thomson agreed with SuperGuide to settle the case, and DIRECTV was dismissed from the case on October 20, 2008.

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

None.

***

35

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THE DIRECTV GROUP, INC.

PART II

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

Common Stock Price

Our common stock is publicly traded on The NASDAQ Global Select Market under the symbol "DTV." Prior to December 3, 2007 our
common stock was publicly traded on the New York Stock Exchange, or NYSE, under the symbol "DTV." The following table sets forth for the quarters indicated the high and low sales prices for our common
stock, as reported on the NYSE Composite Tape for the period January 1, 2007 to December 2, 2007 and the NASDAQ Global Select Market for the period December 3, 2007 to
December 31, 2008.

2008

High

LowFourth Quarter

$
26.52

$
17.70Third Quarter


28.83


23.65Second Quarter


29.10


24.26First Quarter


26.82


18.20




2007

High

LowFourth Quarter

$
27.73

$
22.68Third Quarter


25.46


20.73Second Quarter


24.77


22.10First Quarter


26.09


21.65


As
of the close of business on February 23, 2009, there were 69,856 holders of record of our common stock.

Dividend Rights and Other Stockholder Matters

Holders of our common stock are entitled to such dividends and other distributions in cash, stock or property as may be declared by our
Board of Directors in its sole discretion, subject to the preferential and other dividend rights of any outstanding series of our preferred stock. There were no shares of our preferred stock
outstanding at December 31, 2008.

No
dividends on our common stock have been declared by our Board of Directors for more than five years. We have no current plans to pay any dividends on our common stock. We currently
expect to use our future earnings, if any, for the development of our businesses or other corporate purposes.

DIRECTV
U.S. is subject to restrictive covenants under its credit facility. These covenants limit the ability of DIRECTV U.S. to, among other things, make restricted payments, including
dividends, loans or advances to us.

Information
regarding compensation plans under which our equity securities may be issued is included in Item 12 through incorporation by reference to our Proxy Statement for the
Annual Meeting of Stockholders scheduled to be held on June 2, 2009.

Share Repurchase Program

During 2006, 2007 and 2008 our Board of Directors approved multiple authorizations for the repurchase of a total of $8.2 billion
of our common stock, including a $3 billion authorization in May

36

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THE DIRECTV GROUP, INC.

2008
that was completed in December 2008. The authorizations allow us to repurchase our common stock from time to time through open market purchases and negotiated transactions or otherwise. The
timing, nature and amount of such transactions will depend on a variety of factors, including market conditions and the program may be suspended, discontinued or accelerated at any time. The sources
of funds for the purchases is our existing cash on hand and cash from operations. Purchases are made on the open market, through block trades and other negotiated transactions. Repurchased shares are
retired but remain authorized for registration and issuance in the future.

All
purchases were made in accordance with Rule 10b-18 of Securities Exchange Act of 1934. A summary of the repurchase activity for the three months ended
December 31, 2008 is as follows:

Period

Total Number
of Shares
Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Dollar
Value that May
Yet Be Purchased
Under the Plans
or Programs(Amounts in Millions, Except Per Share Amounts)October 1 - 31, 2008


34

$
21.57


34

$
586November 1 - 30, 2008


17


20.85


17


237December 1 - 31, 2008


11


21.82


11


Total


62


21.44


62





Subsequent
to December 31, 2008, our Board of Directors authorized the repurchase of an additional $2 billion of our common stock.

For
additional information regarding our share repurchases see Note 12 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report.

***

37

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THE DIRECTV GROUP, INC.

ITEM 6.    SELECTED FINANCIAL DATA

Years Ended and As of December 31,2008

2007

2006

2005

2004(Dollars in Millions, Except Per Share Amounts)Consolidated Statements of Operations Data:Revenues

$
19,693

$
17,246

$
14,755

$
13,164

$
11,360Total operating costs and expenses


16,998


14,760


12,398


12,531


13,479Operating profit (loss)

$
2,695

$
2,486

$
2,357

$
633

$
(2,119
)Income (loss) from continuing operations before cumulative effect of accounting changes

$
1,515

$
1,434

$
1,420

$
305

$
(1,056
)Income (loss) from discontinued operations, net of taxes


6


17





31


(582
)Cumulative effect of accounting changes, net of taxes














(311
)Net income (loss)

$
1,521

$
1,451

$
1,420

$
336

$
(1,949
)Basic earnings (loss) per common share:Income (loss) from continuing operations before cumulative effect of accounting changes

$
1.36

$
1.20

$
1.13

$
0.22

$
(0.77
)Diluted earnings (loss) per common share:Income (loss) from continuing operations before cumulative effect of accounting changes

$
1.36

$
1.20

$
1.12

$
0.22

$
(0.77
)Weighted average number of common shares outstanding (in millions):Basic


1,110


1,195


1,262


1,388


1,385Diluted


1,114


1,202


1,270


1,395


1,385Consolidated Balance Sheet Data:Total assets

$
16,539

$
15,063

$
15,141

$
15,630

$
14,324Obligations under capital leases


584


57


91


80


108Long-term debt


5,725


3,347


3,395


3,405


2,410Total stockholders' equity


4,853


6,302


6,681


7,940


7,507


---

In
2004, total operating costs and expenses include a $1.466 billion charge recorded for the impairment of SPACEWAY assets. Also in 2004, we recorded income from discontinued operations related
to the results of operations and the sale of our PanAmSat Corporation and Hughes Software Systems Limited businesses, which we sold in 2004. The $311 million cumulative effect of accounting
change, net of taxes, in 2004 was due to DIRECTV U.S. changing its method of accounting for subscriber acquisition, upgrade and retention costs.

See
the Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding other significant
transactions during each of the three years in the period ended December 31, 2008.

***

38

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THE DIRECTV GROUP, INC.

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

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:



39

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THE DIRECTV GROUP, INC.

SUMMARY RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Years Ended December 31,2008

2007

2006(Dollars in Millions, Except Per Share Amounts)Consolidated Statements of Operations Data:Revenues

$
19,693

$
17,246

$
14,755Total operating costs and expenses


16,998


14,760


12,398Operating profit


2,695


2,486


2,357Interest income


81


111


146Interest expense


(360
)

(235
)

(246
)Other, net


55


26


42Income from continuing operations before income taxes and minority interests


2,471


2,388


2,299Income tax expense


(864
)

(943
)

(866
)Minority interests in net earnings of subsidiaries


(92
)

(11
)

(13
)Income from continuing operations


1,515


1,434


1,420Income from discontinued operations, net of taxes


6


17


Net income

$
1,521

$
1,451

$
1,420Basic earnings per common share:Income from continuing operations

$
1.36

$
1.20

$
1.13Income from discontinued operations, net of taxes


0.01


0.01


Net income

$
1.37

$
1.21

$
1.13Diluted earnings per common share:Income from continuing operations

$
1.36

$
1.20

$
1.12Income from discontinued operations, net of taxes


0.01


0.01


Net income

$
1.37

$
1.21

$
1.12Weighted average number of common shares outstanding (in millions)Basic


1,110


1,195


1,262Diluted


1,114


1,202


1,270




December 31,2008

2007(Dollars in Millions)Consolidated Balance Sheet Data:Cash and cash equivalents

$
2,005

$
1,083Total current assets


4,044


3,146Total assets


16,539


15,063Total current liabilities


3,585


3,434Long-term debt


5,725


3,347Minority interests


103


11Total stockholders' equity


4,853


6,302


---

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

40

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THE DIRECTV GROUP, INC.
SUMMARY RESULTS OF OPERATIONS AND FINANCIAL CONDITION(continued)

Years Ended December 31,2008

2007

2006(Dollars in Millions)Other Data:Operating profit before depreciation and amortization (1)Operating profit

$
2,695

$
2,486

$
2,357Add: Depreciation and amortization expense


2,320


1,684


1,034Operating profit before depreciation and amortization

$
5,015

$
4,170

$
3,391Operating profit before depreciation and amortization margin


25.5
%

24.2
%

23.0
%Cash flow informationNet cash provided by operating activities

$
3,910

$
3,645

$
3,162Net cash used in investing activities


(2,388
)

(2,822
)

(1,536
)Net cash used in financing activities


(600
)

(2,239
)

(2,828
)Free cash flow (2)Net cash provided by operating activities

$
3,910

$
3,645

$
3,162Less: Cash paid for property and equipment


(2,101
)

(2,523
)

(1,754
)Less: Cash paid for satellites


(128
)

(169
)

(222
)Free cash flow

$
1,681

$
953

$
1,186


---

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.

41

---



THE DIRECTV GROUP, INC.
SUMMARY RESULTS OF OPERATIONS AND FINANCIAL CONDITION(concluded)

Selected Segment Data

Years Ended December 31,2008

2007

2006(Dollars in Millions)DIRECTV U.S.Revenues

$
17,310

$
15,527

$
13,744% of total revenues


87.9
%

90.0
%

93.1
%Operating profit

$
2,330

$
2,402

$
2,348Add: Depreciation and amortization expense


2,061


1,448


873Operating profit before depreciation and amortization

$
4,391

$
3,850

$
3,221Operating profit margin


13.5
%

15.5
%

17.1
%Operating profit before depreciation and amortization margin


25.4
%

24.8
%

23.4
%Segment assets

$
12,546

$
12,297

$
11,687Capital expenditures


1,765


2,326


1,798DIRECTV Latin AmericaRevenues

$
2,383

$
1,719

$
1,013% of total revenues


12.1
%

10.0
%

6.9
%Operating profit

$
426

$
159

$
79Add: Depreciation and amortization expense


264


235


165Operating profit before depreciation and amortization

$
690

$
394

$
244Operating profit margin


17.9
%

9.2
%

7.8
%Operating profit before depreciation and amortization margin


29.0
%

22.9
%

24.1
%Segment assets

$
3,301

$
2,456

$
2,001Capital expenditures


447


336


178Corporate and OtherRevenues







$
(2
)Operating loss

$
(61
)
$
(75
)
$
(70
)Add: Depreciation and amortization expense


(5
)

1


(4
)Operating loss before depreciation and amortization

$
(66
)
$
(74
)
$
(74
)Segment assets

$
692

$
310

$
1,453Capital expenditures


17


30


TotalRevenues

$
19,693

$
17,246

$
14,755Operating profit

$
2,695

$
2,486

$
2,357Add: Depreciation and amortization expense


2,320


1,684


1,034Operating profit before depreciation and amortization

$
5,015

$
4,170

$
3,391Operating profit margin


13.7
%

14.4
%

16.0
%Operating profit before depreciation and amortization margin


25.5
%

24.2
%

23.0
%Total assets

$
16,539

$
15,063

$
15,141Capital expenditures


2,229


2,692


1,976


42

---



THE DIRECTV GROUP, INC.

SIGNIFICANT TRANSACTIONS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Acquisitions

180 Connect.On July 8, 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 control over a significant portion of DIRECTV U.S.' 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.

Darlene Transaction.On January 30, 2007, we acquired Darlene's 14% equity interest in DLA LLC for $325 million in cash
and
resolved all outstanding disputes with Darlene. We accounted for this acquisition using the purchase method of accounting.

Sky Transactions.During 2006, we completed the last in a series of transactions that were agreed in October 2004 with News Corporation,
 Televisa,
Globo and Liberty Media International, which we refer to as the Sky Transactions. These transactions were completed as follows:





As
a result of the Darlene and Sky transactions, we own 100% of PanAmericana, 74% of Sky Brazil, and 41% of Sky Mexico. Globo owns the other 26% of Sky Brazil and Televisa owns the other
59% of
Sky Mexico. The results of PanAmericana and Sky Brazil are consolidated in our results. We account for our 41% interest in Sky Mexico under the equity method of accounting.

Divestiture

Hughes Network Systems.In January 2006, we completed the sale of our 50% interest in Hughes Network Systems LLC, or HNS LLC,
to
SkyTerra, and resolved a working capital adjustment from the prior transaction, in exchange for $110 million in cash, which resulted in our recording in the first quarter of 2006 a gain of
$14 million related to the sale in "Other, net" in the Consolidated Statements of Operations.

43

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THE DIRECTV GROUP, INC.

Other Developments

In addition to the items described above, the following items had a significant effect on the comparability of our operating results
and financial position as of and for the years ended December 31, 2008, 2007 and 2006:

Lease Program.On March 1, 2006, DIRECTV U.S. introduced a new set-top receiver lease program. Prior to March 1, 2006, we
expensed most set-top receivers provided to new and existing DIRECTV U.S. subscribers upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated
Statements of Operations. Subsequent to the introduction of our 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.

The
following table sets forth the amount of DIRECTV U.S. set-top receivers we capitalized, and depreciation expense we recorded, under the lease program for the years ended
December 31:

Capitalized subscriber leased equipment:

2008

2007

2006(Dollars in Millions)Subscriber leased equipmentsubscriber acquisitions

$
599

$
762

$
599Subscriber leased equipmentupgrade and retention


537


774


473Total subscriber leased equipment capitalized

$
1,136

$
1,536

$
1,072Depreciation expensesubscriber leased equipment

$
1,100

$
645

$
147


Financing Transactions.In May 2008, DIRECTV U.S. issued $1.5 billion in senior notes and amended its senior secured credit
facility to
include a new $1.0 billion Term Loan C. The senior notes bear interest at a rate of 7.625% and the principal balance is due in May 2016. The Term Loan C currently bears interest at a rate of
5.25% and was issued at a 1% discount. Principal payments on the Term Loan C began on September 30, 2008. The principal is payable in installments with the final installment due in April 2013.

Share Repurchase Program.During 2006, 2007 and 2008 our Board of Directors approved multiple authorizations for the repurchase of a
total of
$8.2 billion of our common stock, including a $3 billion authorization in May 2008 that was completed in December 2008. Subsequent to December 31, 2008, our Board of Directors
authorized the repurchase of an additional $2 billion of our common stock.

The
following table sets forth information regarding shares repurchased and retired for the years ended December 31:

2008

2007

2006(Amounts in Millions, Except Per Share Amounts)Total cost of repurchased and retired shares

$
3,174

$
2,025

$
2,977Average price per share


24.12


23.48


16.16Number of shares repurchased and retired


131


86


184


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

44

---



THE DIRECTV GROUP, INC.

digital
video recorder, or DVR, service, hardware revenues from subscribers who lease or purchase set-top receivers from us, our published programming guide, warranty service fees and
advertising services.

Broadcast Programming and Other.These costs primarily include license fees for subscription service programming,
pay-per-view programming, live sports and other events. Other costs include expenses associated with the publication and distribution of our programming guide, continuing
service fees paid to third parties for active subscribers, warranty service costs and production costs for on-air advertisements we sell to third 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.

Broadcast Operations Expenses.These expenses include broadcast center operating costs, signal transmission expenses (including costs of
collecting
signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with deterring theft of our signal.

Subscriber Acquisition Costs.These costs include the cost of set-top receivers and other equipment, commissions we pay to national
retailers, independent satellite television retailers, dealers, 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 property and equipment" in the Consolidated Statements of Cash Flows.

Upgrade and Retention Costs.The majority of 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 property
and equipment" 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

45

---



THE DIRECTV GROUP, INC.

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 DIRECTV U.S.' commercial pricing and packaging to
increase our competitiveness. As a result, during the first quarter of 2008, DIRECTV U.S. 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 and the other countries in which we operate are currently undergoing a period of substantial economic uncertainty. A more severe downturn in
economic activity could have a detrimental impact on our forecasted revenue, operating margins, net subscriber additions, free cash flow and net income. Please refer to "Risk Factors" in
Item 1A for a further discussion of risks which may affect forecasted results or our business generally.

DIRECTV U.S. Segment

The following discussion of revenues and operating results relates to DIRECTV U.S., which generates 88% of our revenues.

Revenues.In 2008, DIRECTV U.S. revenues increased by 11.5% due to a larger subscriber base and a 6.1% increase in ARPU. In 2009, we
anticipate
revenues will increase in the high single-digit percentage range due to an increase in total subscribers and ARPU growth of about 4%. ARPU increases are expected to be driven primarily by price
increases and the higher penetration of advanced products but will be lower than in 2008 due to the ongoing impact of more competitive promotions offered to both new and existing customers, as well as
lower revenues in 2009 from the completion of the lease of one of our backup satellites in early 2009. After accounting for churn, our net new subscriber additions in 2008 were 861,000 which increased
our total subscriber base by 5.1% to 17.6 million customers. In 2009, we expect net new subscriber additions to approximate the net new subscriber additions in 2008 due to increased gross
additions offset by higher subscriber disconnections.

Operating Results.In 2008, DIRECTV U.S. operating profit before depreciation and amortization increased 14.1% to $4,391 million
and operating
profit before depreciation and amortization margin improved from 24.8% in 2007 to 25.4% in 2008. These increases were primarily due to the gross profit generated from the higher revenues, partially
offset by higher subscriber acquisition and upgrade and retention costs for the increased number of new and existing customers adding HD and DVR services, as well as increased general and
administrative costs.

In
2009 for DIRECTV U.S. we expect a modest increase in both operating profit before depreciation and amortization and operating profit before depreciation and amortization margin over
the 2008 results. These improvements are anticipated to be due to the expected increase in revenues, partially offset by modest increases in certain of our significant cost categories.

46

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THE DIRECTV GROUP, INC.

DIRECTV
U.S. operating profit decreased 3.0% to $2,330 million in 2008 primarily due to the increase in depreciation and amortization expense from the set-top receiver
lease program, partially offset by increased operating profits before depreciation and amortization. Operating profit in 2009 is expected to increase as the anticipated higher operating profit before
depreciation and amortization is expected to be only partially offset by higher depreciation and amortization expense resulting from the set-top receiver lease program.

The DIRECTV Group

Free Cash Flow.In 2008, The DIRECTV Group generated $1,681 million of free cash flow, defined as net cash provided by operating
activities
less cash paid for property and satellites. During 2009, we expect continued free cash flow growth primarily as a result of the anticipated increase in operating profit before depreciation and
amortization.

Earnings per Share.In 2008, The DIRECTV Group generated basic and diluted earnings per common share of $1.37. During 2009, we expect
basic and
diluted earnings per common share to increase by at least 15% as the anticipated improvement in operating profit and repurchase of $2.0 billion of our common stock pursuant to the additional
share repurchase program announced in January 2009, is expected to be partially offset by higher net interest and income tax expense.

RESULTS OF OPERATIONS

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

Consolidated Results of Operations

Revenues.The following table presents our revenues by segment:

Revenues by segment:





Change2008

2007

$

%(Dollars in Millions)DIRECTV U.S.

$
17,310

$
15,527

$
1,783


11.5
%DIRECTV Latin America


2,383


1,719


664


38.6
%Total Revenues

$
19,693

$
17,246

$
2,447


14.2
%


The
increase in our total revenues was due to higher ARPU and subscriber growth at DIRECTV U.S. and DIRECTV Latin America. We discuss these changes for each of our segments in more
detail below.

Operating profit before depreciation and amortization.The following table presents our operating profit (loss) before depreciation and
amortization
by segment:

Operating profit (loss) before depreciation and amortization by segment:Change2008

2007

$

%(Dollars in Millions)DIRECTV U.S.

$
4,391

$
3,850

$
541


14.1
%DIRECTV Latin America


690


394


296


75.1
%Corporate and Other


(66
)

(74
)

8


(10.8
)%Total operating profit before depreciation and amortization

$
5,015

$
4,170

$
845


20.3
%


47

---



THE DIRECTV GROUP, INC.

The
increase in total operating profit before depreciation and amortization was due to higher gross profit from the increase in revenues, partially offset by higher subscriber
acquisition, upgrade and retention and general and administrative costs at both DIRECTV U.S. and DIRECTV Latin America. We discuss the changes for each of our segments in more detail below.

Operating profit.The following table presents our operating profit (loss) by segment:

Operating profit (loss) by segment:





Change2008

2007

$

%(Dollars in Millions)DIRECTV U.S.

$
2,330

$
2,402

$
(72
)

(3.0
)%DIRECTV Latin America


426


159


267


167.9
%Corporate and Other


(61
)

(75
)

14


(18.7
)%Total operating profit

$
2,695

$
2,486

$
209


8.4
%


The
increase in our operating profit was primarily due to increased operating profit before depreciation and amortization, partially offset by the increase in depreciation and
amortization expense due to the DIRECTV U.S. lease program. We discuss these changes for each of our segments in more detail below.

Interest income.The decrease in interest income to $81 million in 2008 from $111 million in 2007 was due to lower interest
rates and
lower average cash balances due mostly to the use of cash to fund our share repurchase program.

Interest expense.The increase in interest expense from $235 million in 2007 to $360 million in 2008 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.

Other, net.The significant components of "Other, net" were as follows:

2008

2007

Change(Dollars in Millions)Equity in earnings of unconsolidated subsidiaries

$
55

$
35

$
20Net gain (loss) from sale of investments


1


(6
)

7Other


(1
)

(3
)

2Total

$
55

$
26

$
29


Income Tax Expense.We recognized income tax expense of $864 million in 2008 compared to $943 million in 2007. The lower
income tax
expense in 2008 is primarily attributable to foreign earnings taxed at less than our domestic statutory rates, a partial reversal of a valuation allowance on deferred tax assets of foreign
subsidiaries as a result of recent profitability and recognition of tax credits due to state tax legislation.

Minority interests in net earnings of subsidiaries.We recognized minority interest in net earnings of subsidiaries of $92 million
in 2008 and
$11 million in 2007 primarily from Sky Brazil. Minority interest in 2008 increased due to higher net income and $23 million from the partial reversal of a valuation allowance on deferred
tax assets at Sky Brazil attributable to the minority interest holder.

48

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THE DIRECTV GROUP, INC.

Income from discontinued operations, net of taxes.During 2008, we recorded a net $6 million adjustment as a result of the
expiration of the
statute of limitations in the federal jurisdiction offset by the write-off of foreign incentive income tax benefits related to previously divested businesses. During 2007, we recorded a
$17 million reduction to our unrecognized tax benefits as a result of a settlement of a foreign withholding dispute from a previously divested business.

DIRECTV U.S. Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:

Change2008

2007

$

%(Dollars in Millions, Except Per Subscriber Amounts)Revenues

$
17,310

$
15,527

$
1,783


11.5
%Operating costs and expensesCosts of revenues, exclusive of depreciation and amortization expenseBroadcast 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 expenseSubscriber 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

49

---



THE DIRECTV GROUP, INC.

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.DIRECTV U.S.' 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 subscriber, partially offset by more competitive
customer promotions and slightly lower upfront equipment 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, upgrade and retention costs for the increased number of new and existing customers adding HD and
DVR services, as well as increased general and administrative costs.

Broadcast
programming and other costs increased due to annual program supplier rate increases and the larger number of subscribers in 2008. Subscriber service expenses remained
essentially flat with a larger subscriber base in 2008 due to the cost savings from a decline in customer call volume and a lower call handle time. Broadcast operations expense increased in 2008 due
primarily to costs to support advanced services, HD enhancements and video-on-demand.

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.

50

---



THE DIRECTV GROUP, INC.

DIRECTV Latin America Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV Latin America segment:

Change2008

2007

$

%(Dollars in Millions, Except Per Subscriber Amounts)Revenues

$
2,383

$
1,719

$
664


38.6
%Operating profit before depreciation and amortization


690


394


296


75.1
%Operating profit


426


159


267


167.9
%Other data:ARPU

$
55.07

$
48.33

$
6.74


13.9
%Average monthly subscriber churn %


1.78
%

1.38
%




29.0
%Total number of subscribers (000's)(1)


3,883


3,279


604


18.4
%Gross subscriber additions (000's)


1,393


1,080


313


29.0
%Net subscriber additions (000's)


623


588


35


6.0
%


---

The
increase in net subscriber additions was due to higher gross subscriber additions mainly in Brazil, Argentina and Venezuela, partially offset by higher churn of 1.78% in the region.
The increase in churn was due to two downward subscriber adjustments totaling 78,000 subscribers in Sky Brazil as a result of the inconsistent application of churn policies in previous periods and the
completion of the Sky Brazil and DIRECTV Brazil business integration. Excluding these subscriber adjustments in the current year, churn would have been 1.58%, which is higher than the prior year
period primarily due to increased competition, higher churn in our prepaid business and a more challenging macroeconomic environment.

Revenues
increased in 2008 primarily due to strong subscriber and ARPU growth. ARPU increased mainly due to favorable exchange rates in Brazil in the first three quarters of 2008, as
well as strong ARPU growth in PanAmericana, particularly in Venezuela and Argentina.

The
higher operating profit before depreciation and amortization is primarily due to the gross profit generated from the higher revenues, partially offset by an increase in subscriber
acquisition costs mostly due to the 29% increase in gross additions, higher general and administrative expense due primarily to $29 million in currency related transaction fees in Venezuela and
increased costs related to foreign currency exchange rate appreciation.

The
higher operating profit was primarily due to the increase in operating profit before depreciation and amortization partially offset by higher depreciation and amortization expense.

Corporate and Other

Operating loss from Corporate and Other decreased to $61 million in 2008 from $75 million in 2007.

51

---



THE DIRECTV GROUP, INC.

Year Ended December 31, 2007 Compared with the Year Ended December 31, 2006

Consolidated Results of Operations

Revenues.The following table presents our revenues by segment:

Revenues by segment:





Change2007

2006

$

%(Dollars in Millions)DIRECTV U.S.

$
15,527

$
13,744

$
1,783


13.0
%DIRECTV Latin America


1,719


1,013


706


69.7
%Corporate and Other





(2
)

2


(100.0
)%Total Revenues

$
17,246

$
14,755

$
2,491


16.9
%


The
increase in our total revenues was due to higher ARPU and subscriber growth at DIRECTV U.S. and DIRECTV Latin America, as well as the acquisition of Sky Brazil in August 2006. We
discuss these changes for each of our segments in more detail below.

Operating profit before depreciation and amortization.The following table presents our operating profit (loss) before depreciation and
amortization
by segment:

Operating profit (loss) before depreciation and amortization by segment:Change2007

2006

$

%(Dollars in Millions)DIRECTV U.S.

$
3,850

$
3,221

$
629


19.5
%DIRECTV Latin America


394


244


150


61.5
%Corporate and Other


(74
)

(74
)




Total operating profit before depreciation and amortization

$
4,170

$
3,391

$
779


23.0
%


The
increase in total operating profit before depreciation and amortization was due to higher gross profit from the increase in revenues, the implementation of the DIRECTV U.S. lease
program in March 2006 and the acquisition of Sky Brazil in August 2006, partially offset by higher subscriber acquisition and upgrade and retention costs at DIRECTV U.S. due to an increased number of
new and existing subscribers adding HD and DVR services and gains totaling $118 million for the completion of the Sky Mexico and Sky Brazil transactions in 2006. We discuss these changes for
each of our segments in more detail below.

52

---



THE DIRECTV GROUP, INC.

Operating profit.The following table presents our operating profit (loss) by segment:

Operating profit (loss) by segment:





Change2007

2006

$

%(Dollars in Millions)DIRECTV U.S.

$
2,402

$
2,348

$
54


2.3
%DIRECTV Latin America


159


79


80


101.3
%Corporate and Other


(75
)

(70
)

(5
)

7.1
%Total operating profit

$
2,486

$
2,357

$
129


5.5
%


The
increase in our operating profit was primarily due to the increase in operating profits before depreciation and amortization, partially offset by higher depreciation and amortization
expense due to the DIRECTV U.S. lease program and the acquisition of Sky Brazil. We discuss these changes for each of our segments in more detail below.

Interest income.The decrease in interest income from $146 million in 2006 to $111 million in 2007 was due to lower average
cash and
short-term investment balances due mostly from the use of cash to fund the share repurchase programs.

Other, net.The significant components of "Other, net" were as follows:

2007

2006

Change(Dollars in Millions)Equity in earnings of unconsolidated subsidiaries

$
35

$
27

$
8Net gain (loss) from sale of investments


(6
)

14


(20
)Other


(3
)

1


(4
)Total

$
26

$
42

$
(16
)


Income Tax Expense.We recognized income tax expense of $943 million in 2007 compared to $866 million in 2006. The change in
income tax
expense was primarily attributable to the change in income from continuing operations before income taxes and minority interests and accrued interest associated with unrecognized tax benefits. The
2006 income tax expense also reflects a tax benefit from the write-off of an investment in a foreign entity.

Income from discontinued operations.As a result of a favorable tax settlement, which we discuss in Note 19 of the Notes to the
Consolidated
Financial Statements in Part II, Item 8 of this Annual Report, we recorded a $17 million gain in "Income from discontinued operations, net of taxes" in our Consolidated Statements
of Operations.

53

---



THE DIRECTV GROUP, INC.

DIRECTV U.S. Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:

Change2007

2006

$

%(Dollars in Millions, Except Per Subscriber Amounts)Revenues

$
15,527

$
13,744

$
1,783


13.0
%Operating costs and expensesCosts of revenues, exclusive of depreciation and amortization expenseBroadcast programming and other


6,681


5,830


851


14.6
%Subscriber service expenses


1,137


1,057


80


7.6
%Broadcast operations expenses


216


179


37


20.7
%Selling, general and administrative expenses, exclusive of depreciation and amortization expenseSubscriber acquisition costs


1,901


1,844


57


3.1
%Upgrade and retention costs


958


852


106


12.4
%General and administrative expenses


784


761


23


3.0
%Depreciation and amortization expense


1,448


873


575


65.9
%Total operating costs and expenses


13,125


11,396


1,729


15.2
%Operating profit

$
2,402

$
2,348

$
54


2.3
%Other data:Operating profit before depreciation and amortization

$
3,850

$
3,221

$
629


19.5
%Total number of subscribers (000's)


16,831


15,953


878


5.5
%ARPU

$
79.05

$
73.74

$
5.31


7.2
%Average monthly subscriber churn %


1.51
%

1.60
%




(5.6
)%Gross subscriber additions (000's)


3,847


3,809


38


1.0
%Subscriber disconnections (000's)


2,969


2,989


(20
)

(0.7
%)Net subscriber additions (000's)


878


820


58


7.1
%Average subscriber acquisition costsper subscriber (SAC)

$
692

$
641

$
51


8.0
%


Subscribers.In 2007, gross subscriber additions increased due to higher demand for HD and DVR services, partially offset by the effect
of more
stringent credit policies. Average monthly subscriber churn decreased primarily due to increased sales of HD and DVR services as well as the effect of more stringent credit policies. Net subscriber
additions increased due to the higher gross subscriber additions and lower average monthly subscriber churn.

Revenues.DIRECTV U.S.' 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 equipment and service fees, and an increase in lease fees due to higher average number of receivers per subscriber.

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 and the increase in the amount of set-top receivers capitalized in 2007 under the lease program implemented on March 1, 2006,
partially offset by higher subscriber acquisition, upgrade and retention costs for the increased number of new and existing customers adding HD and DVR services.

54

---



THE DIRECTV GROUP, INC.

Broadcast
programming and other costs increased due to annual program supplier rate increases and the larger number of subscribers in 2007. Subscriber service expenses increased due to
the larger subscriber base in 2007. Broadcast operations expense increased in 2007 due primarily to costs to support new HD local channel markets.

Subscriber
acquisition costs increased due to higher advertising and direct sales marketing costs as well as higher costs associated with the increase in subscribers taking advanced
products in 2007. This increase was partially offset by $159 million of higher costs in 2006 related to set-top receivers being expensed prior to the implementation of the lease
program on March 1, 2006, after which most set-top receivers were capitalized as well as lower set-top receiver costs. SAC per subscriber, which includes the cost of
capitalized set-top receivers, increased due to higher direct sales marketing and advertising costs and higher costs associated with the increase in subscribers taking HD and DVR services,
partially offset by lower set-top receiver costs.

Upgrade
and retention costs increased in 2007 due to higher volume of subscribers upgrading to HD and DVR services, partially offset by $115 million of higher costs in 2006
related to set-top receivers being expensed prior to the implementation of the lease program and lower set-top receiver costs.

General
and administrative expenses increased in 2007 due to higher labor, employee benefit, and legal costs, partially offset by a $10 million reduction in bad debt expense
compared to 2006.

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 2007 resulting from the capitalization of set-top receivers under the lease program.

DIRECTV Latin America Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV Latin America segment:

Change2007

2006

$

%(Dollars in Millions, Except Per Subscriber Amounts)Revenues

$
1,719

$
1,013

$
706


69.7
%Operating profit before depreciation and amortization


394


244


150


61.5
%Operating profit (loss)


159


79


80


101.3
%Other data:ARPU

$
48.33

$
41.71

$
6.62


15.9
%Average monthly subscriber churn %


1.38
%

1.46
%




(5.5
)%Total number of subscribers (000's) (1)


3,279


2,711


568


21.0
%Gross subscriber additions (000's)


1,080


1,471


(391
)

NM*Net subscriber additions (000's)


588


1,118


(530
)

NMNet subscriber additions (excluding the Sky Brazil acquisition) (000's)


588


249


339


136.1
%


---

55

---



THE DIRECTV GROUP, INC.

The
increase in net subscriber additions, excluding the Sky Brazil acquisition in 2006, was primarily due to subscriber growth in Brazil, Argentina, Venezuela and Colombia, as well as a
decrease in churn in Brazil and Venezuela.

The
increase in revenues primarily resulted from a $527 million increase in revenue in Brazil primarily due to the acquisition of Sky Brazil in August 2006, higher ARPU and
favorable exchange rates, as well as subscriber and ARPU growth in PanAmericana.

The
higher operating profit before depreciation and amortization is primarily due to the gross profit generated by the increase in revenues, partially offset by gains totaling
$118 million for the completion of the Sky Mexico and Sky Brazil transactions in 2006 and the increase in costs from the addition of Sky Brazil.

The
higher operating profit was primarily due to the increase in operating profit before depreciation and amortization partially offset by higher depreciation and amortization expense
resulting from the Darlene and Sky Brazil transactions.

Corporate and Other

Operating loss from Corporate and Other increased to $75 million in 2007 from $70 million in 2006.

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 2006 to 2008 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 operations will be sufficient to fund our existing business plan. Additionally, as of December 31, 2008, DIRECTV U.S. had the ability to borrow up to
$500 million under its 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, 2008, our cash and cash equivalents totaled $2.0 billion compared with $1.1 billion at December 31, 2007.

As
a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 1.13 at December 31, 2008 and 0.92 at December 31, 2007. Working capital
increased by $747 million to $459 million at December 31, 2008 from working capital deficit of $288 million at December 31, 2007. The increase during the period was
mostly due to the increase in our cash and cash equivalent balances resulting from the changes discussed below.

56

---



THE DIRECTV GROUP, INC.

Summary Cash Flow Information

Years Ended December 31,2008

2007

2006(Dollars in Millions)Net cash provided by operating activities

$
3,910

$
3,645

$
3,162Net cash used in investing activities


(2,388
)

(2,822
)

(1,536
)Net cash used in financing activities


(600
)

(2,239
)

(2,828
)Free cash flow:Net cash provided by operating activities

$
3,910

$
3,645

$
3,162Less: Cash paid for property, equipment and satellites


(2,229
)

(2,692
)

(1,976
)Free cash flow

$
1,681

$
953

$
1,186


Cash Flows Provided By Operating Activities

The increases in net cash provided by operating activities in 2008 and 2007 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. These increases were partially offset by an increase in cash paid for income taxes,
which was $706 million in 2008, $408 million in 2007 and $30 million in 2006. The increase in cash paid for income taxes resulted mainly from the use of our NOL and tax credit
carryforwards during 2007 and 2006.

Cash Flows Used In Investing Activities

Beginning March 2006, DIRECTV U.S. introduced a set-top receiver lease program under which most set-top
receivers provided to new and existing subscribers are capitalized. Prior to this lease program we expensed the cost of these set-top receivers. As a result of this lease program, our
capital expenditures for property and equipment increased from 2006 to 2007. During 2008, we experienced a reduction in set-top receiver costs and benefited from the use of refurbished
set-top receivers from the DIRECTV U.S. lease program, which resulted in a reduction in capital expenditures for property and equipment from 2007 to 2008.

Also
at DIRECTV U.S. during 2006, 2007 and 2008, we were in the process of constructing three satellites. We have completed and placed two of these satellites into service, which
resulted in decreasing satellite capital expenditures over the three year period. We expect to launch the last of these satellites in 2009. Additionally, our capital expenditures for broadcast
facilities and equipment to support our HD programming has decreased from 2006 to 2008 as we have largely completed the build out of the infrastructure necessary to launch HD programming both locally
and nationally.

These
decreases in capital expenditures for property and equipment have been offset by an increase in capital expenditures in Latin America for set-top receivers provided to
subscribers under lease programs. Part of our business strategy in Latin America is to increase advanced product and multi-box penetrations; therefore, our capital expenditures in Latin America are
expected to increase.

Additionally,
we paid $204 million in 2008, $348 million in 2007 and $389 million in 2006 for investments in various companies. These transactions are described in
Note 6 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Also, in 2007 and 2006, we had cash flows from investing activities
resulting from net cash proceeds received from the sale of short-term investments. Our cash spending on investment in companies is discretionary and we may fund strategic investment
opportunities should they arise in the future.

57

---



THE DIRECTV GROUP, INC.

Cash Flows Used in Financing Activities

During 2006, 2007 and 2008 our Board of Directors approved, and we completed, the repurchase of a total of $8.2 billion of our
common stock as follows: $3,174 million during 2008, $2,025 million during 2007 and $2,977 million during 2006. In January 2009, our Board of Directors authorized an additional
$2 billion of share repurchases.

Additionally,
during 2008 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 8 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, and a $160 million capital contribution
received in connection with the Liberty Transaction described in Note 19 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report.

Free Cash Flow

Free cash flow increased in 2008 as compared to 2007 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 set-top receiver costs for set-top receivers capitalized under the DIRECTV
U.S. lease program and lower capital expenditures for satellite and broadcast facilities and equipment to support HD programming partially offset by increased capital expenditures in Latin America.

Free
cash flow decreased in 2007 compared to 2006 as the increase in net cash provided by operating activities discussed above was more than offset by an increase in capital expenditures
for leased set-top receivers. Capital expenditures for leased set-top receivers increased as a result of an increase in the amount of set-top receivers capitalized
in 2007 under the DIRECTV U.S. lease program implemented in March 2006.

During
2009, 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, 2008, we had $5,833 million in total outstanding borrowings, bearing a weighted average interest rate of
5.7%. Our outstanding borrowings primarily consist of notes payable and amounts borrowed under a senior secured credit facility of DIRECTV U.S. as more fully described in Note 8 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 and other borrowings mature as follows: $108 million in 2009; $308 million in 2010; $108 million in 2011;
$20 million in 2012; $2,796 million in 2013; and $2,500 million thereafter. However, these amounts do not reflect potential prepayments that may be required under DIRECTV U.S.'
senior secured credit facility, which could result from a computation that we are required to make each year end under the credit agreement. We were not required to make a prepayment for the years
ended December 31, 2008 and 2007.

Covenants and Restrictions.The senior secured credit facility requires DIRECTV U.S. to comply with certain financial covenants. The
senior notes and
the senior secured credit facility also include covenants that restrict DIRECTV U.S.' 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

58

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THE DIRECTV GROUP, INC.

voluntary
prepayments of certain debt, in each case subject to exceptions as provided in the credit agreement and senior notes indentures. Should DIRECTV U.S. fail to comply with these covenants, all
or a portion of its borrowings under the senior notes and senior secured credit facility could become immediately payable and its revolving credit facility could be terminated. At December 31,
2008, DIRECTV U.S. was in compliance with all such covenants and we expect to continue to be in compliance with all covenants in 2009.

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 our outstanding common stock. There was no ratings decline for the senior notes associated with that event, and DIRECTV U.S. was not required
either to
offer to redeem the senior notes pursuant to their respective indentures or to prepay any of the borrowings under the senior secured credit facility.

Contingencies

Also, as discussed in Note 19 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this
Annual Report, Globo has the right to exchange Sky Brazil shares for cash or our common shares. If Globo exercises this right, we have the option to elect to pay the consideration in cash, shares of
our common stock, or a combination of both.

In
addition, we have approximately $97 million of cash on deposit at our Venezuelan subsidiary that is subject to exchange controls that limit our ability to transfer the cash
outside of Venezuela. Venezuelan deposits are denominated in bolivars and translated at the official exchange rate. We are currently required to obtain Venezuelan government approval to exchange
Venezuelan bolivars into U.S. dollars at the official rate (Bf 2,150). The approval process has been delayed in recent periods and may be delayed further in the future. If so, our Venezuelan
subsidiary may be required to rely on a legal parallel exchange process to settle U.S. dollar obligations or to repatriate cash. If the entire Venezuelan cash balance at December 31, 2008 had
been exchanged to U.S. dollars based on the parallel market rates, we would have recorded a charge to operating profit, and a reduction in our cash and cash equivalents of approximately
$60 million. In 2008, we recognized a charge to operating profit of approximately $29 million in connection with the exchange of Venezuelan currency to U.S. dollars.

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, satellite anomalies or signal theft or if we are required to make a prepayment on our term
loans under DIRECTV U.S.' senior secured credit facility. Additionally, DIRECTV U.S.' ability to borrow under the senior secured credit facility is contingent upon DIRECTV U.S. meeting 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, 2008, including the future periods in which payments are expected. Additional
details regarding these obligations are

59

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THE DIRECTV GROUP, INC.

provided
in the Notes to the Consolidated Financial Statements in Part II, Item 8 referenced in the table.

Payments Due By PeriodContractual Obligations

Total

Less than
1 year

1-3 years

3-5 years

More than
5 years(Dollars in Millions)Long-term debt obligations (Note 8) (a)

$
7,900

$
440

$
1,069

$
3,373

$
3,018Purchase obligations (Note 19) (b)


3,601


1,308


1,934


336


23Operating lease obligations (Note 19) (c)


291


51


97


71


72Capital lease obligations (Note 10)


977


83


157


151


586Other long-term liabilities reflected on the Consolidated Balance Sheets under GAAP (Note 19) (d) (e)


229


91


138





Total

$
12,998

$
1,973

$
3,395

$
3,931

$
3,699


---

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2008, we were contingently liable under standby letters of credit and bonds in the aggregate amount of $33 million primarily
related to insurance deductibles and foreign tax refunds.

60

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THE DIRECTV GROUP, INC.

CONTINGENCIES

For a discussion of "Contingencies", see Note 19 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 16 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 Programming Contracts for Live Sporting Events.We charge the cost of multi-year programming contracts for live
sporting events with minimum guarantee payments, such as DIRECTV U.S.' agreement with the NFL, to expense based on the ratio of each period's contract revenues to the estimated total contract revenues
to be earned over the contract period. Management evaluates estimated total contract revenues at least annually. Estimates of forecasted 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 factors, actual results could
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.

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 in order to adjust the carrying value of deferred tax assets to their realizable amount. Such charges could be material
to our consolidated financial statements.

61

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THE DIRECTV GROUP, INC.

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 in
accordance with Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB No. 109," or FIN 48.
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 at DIRECTV U.S. 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 on the book value of the DIRECTV U.S. set-top receivers capitalized as of December 31, 2008, if we
extended the depreciable life of the set-top receivers by one half of a year, it would result in an approximately $250 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 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 2008, and determined that
there was no impairment of goodwill or intangible assets with indefinite lives.

The
goodwill evaluation requires the estimation of the fair value of reporting units where we record goodwill. 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

62

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THE DIRECTV GROUP, INC.

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, 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, 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,
The DIRECTV Group has the following security rating:

Long-term
Corporate Rating

OutlookStandard & Poor's

BB

Stable


Currently,
DIRECTV U.S. has the following security ratings:

Senior Secured

Senior Unsecured

Corporate

OutlookStandard & Poor's

BBB-

BB

BB

StableMoody's

Baa3

Ba3

Ba2

Stable


***

63

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THE DIRECTV GROUP, INC.

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 because 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.

General

Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and
changes in the market value of our equity
investments. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. We
enter into derivative instruments only to the extent considered necessary to meet our risk management objectives, and do not enter into derivative contracts for speculative purposes.

Foreign Currency Risk

We generally conduct our business in U.S. dollars with some business conducted in a variety of foreign currencies and therefore we are
exposed to fluctuations in foreign currency exchange rates. Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign
exchange rate fluctuations. Accordingly, we may enter into foreign exchange contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated
foreign currency transactions. The gains and losses on derivative foreign exchange contracts offset changes in value of the related exposures. As of December 31, 2008, we had no significant
foreign currency exchange contracts outstanding. The impact of a hypothetical 10% adverse change in exchange rates on the fair values of foreign currency denominated assets and liabilities would be a
loss of $42 million, net of taxes, at December 31, 2008.

Interest Rate Risk

We are subject to fluctuating interest rates, which may adversely impact our consolidated results of operations and cash flows. We had
outstanding debt of $5,831 million at December 31, 2008, excluding the unamortized bond premium, which consisted of DIRECTV U.S.' fixed rate borrowings of $3,410 million and
variable rate borrowings of $2,421 million. As of December 31, 2008, a hypothetical one percentage point increase in interest rates related to our outstanding variable rate debt would
have increased our annual interest expense by approximately $24 million.

***

64

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THE DIRECTV GROUP, INC.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of The DIRECTV Group, Inc.
El Segundo, California

We
have audited the accompanying consolidated balance sheets of The DIRECTV Group, Inc. (the "Company") as of December 31, 2008 and 2007, and the related consolidated
statements of operations, changes in stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included
the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and financial statement schedules 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 The DIRECTV Group, Inc. at December 31, 2008 and
2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement schedules, 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.

As
discussed in Note 2 of the Notes to the Consolidated Financial Statements, effective January 1, 2007, the Company adopted Financial Accounting Standards Board, or FASB,
Interpretation No. 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109; effective
December 31, 2007, the Company adopted the measurement date provision of Statement of Financial Accounting Standards No. 158,Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R).

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, 2008, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 26, 2009 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP


Los
Angeles, California
February 26, 2009

65

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THE DIRECTV GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,2008

2007

2006(Dollars in Millions, Except Per Share Amounts)Revenues

$
19,693

$
17,246

$
14,755Operating costs and expensesCosts of revenues, exclusive of depreciation and amortization expenseBroadcast programming and other


8,298


7,346


6,201Subscriber service expenses


1,290


1,240


1,111Broadcast operations expenses


360


323


286Selling, general and administrative expenses, exclusive of depreciation and amortization expenseSubscriber acquisition costs


2,429


2,096


1,945Upgrade and retention costs


1,058


976


870General and administrative expenses


1,243


1,095


1,069Gain from disposition of businesses








(118
)Depreciation and amortization expense


2,320


1,684


1,034Total operating costs and expenses


16,998


14,760


12,398Operating profit


2,695


2,486


2,357Interest income


81


111


146Interest expense


(360
)

(235
)

(246
)Other, net


55


26


42Income from continuing operations before income taxes and minority interests


2,471


2,388


2,299Income tax expense


(864
)

(943
)

(866
)Minority interests in net earnings of subsidiaries


(92
)

(11
)

(13
)Income from continuing operations


1,515


1,434


1,420Income from discontinued operations, net of taxes


6


17


Net income

$
1,521

$
1,451

$
1,420Basic earnings per common share:Income from continuing operations

$
1.36

$
1.20

$
1.13Income from discontinued operations, net of taxes


0.01


0.01


Net income

$
1.37

$
1.21

$
1.13Diluted earnings per common share:Income from continuing operations

$
1.36

$
1.20

$
1.12Income from discontinued operations, net of taxes


0.01


0.01


Net income

$
1.37

$
1.21

$
1.12Weighted average number of common shares outstanding (in millions):Basic


1,110


1,195


1,262Diluted


1,114


1,202


1,270


---

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

66

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THE DIRECTV GROUP, INC.

CONSOLIDATED BALANCE SHEETS

December 31,2008

2007(Dollars in Millions, Except Share Data)ASSETSCurrent assetsCash and cash equivalents

$
2,005

$
1,083Accounts receivable, net


1,423


1,535Inventories


192


193Deferred income taxes


68


90Prepaid expenses and other


356


245Total current assets


4,044


3,146Satellites, net


2,476


2,026Property and equipment, net


4,171


3,807Goodwill


3,753


3,669Intangible assets, net


1,172


1,577Investments and other assets


923


838Total assets

$
16,539

$
15,063LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable and accrued liabilities

$
3,115

$
3,032Unearned subscriber revenues and deferred credits


362


354Current portion of long-term debt


108


48Total current liabilities


3,585


3,434Long-term debt


5,725


3,347Deferred income taxes


524


567Other liabilities and deferred credits


1,749


1,402Commitments and contingenciesMinority interests redeemable at fair value of $325 million as of December 31, 2008


103


11Stockholders' equityCommon stock and additional paid-in capital$0.01 par value, 3,000,000,000 shares authorized, 1,024,182,043 shares and 1,148,268,203 shares issued and
outstanding at December 31, 2008 and December 31, 2007, respectively


8,540


9,318Accumulated deficit


(3,559
)

(2,995
)Accumulated other comprehensive loss


(128
)

(21
)Total stockholders' equity


4,853


6,302Total liabilities and stockholders' equity

$
16,539

$
15,063


---

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

67

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THE DIRECTV GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

Common
Shares

Common
Stock and
Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss,
net of taxes

Total
Stockholders'
Equity

Comprehensive
Income,
net of taxes(Dollars in Millions, Except Share Data)Balance at January 1, 2006


1,391,031,989

$
10,956

$
(3,002
)
$
(14
)
$
7,940Net income








1,420





1,420

$
1,420Stock repurchased and retired


(184,115,524
)

(1,452
)

(1,525
)




(2,977
)Stock options exercised and restricted stock units vested and distributed


19,573,728


257








257Share-based compensation expense





39








39Tax benefit from stock option exercises





42








42Other





(6
)







(6
)Minimum pension liability adjustment, net of tax











24


24


24Adjustment to initially record funded status of defined benefit plans upon adoption of SFAS No. 158, net of tax











(46
)

(46
)Foreign currency translation adjustments











2


2


2Unrealized losses on securities, net of tax











(14
)

(14
)

(14
)Comprehensive income
















$
1,432Balance at December 31, 2006


1,226,490,193


9,836


(3,107
)

(48
)

6,681Net Income








1,451





1,451

$
1,451Stock repurchased and retired


(86,173,710
)

(692
)

(1,333
)




(2,025
)Stock options exercised and restricted stock units vested and distributed


7,951,720


118








118Share-based compensation expense





49








49Tax benefit from stock option exercises





18








18Other





(11
)







(11
)Adjustment to initially record cumulative effect of adopting FIN 48, net of tax








(5
)




(5
)Adjustment to record adoption of measurement date provisions of SFAS No. 158, net of tax








(1
)




(1
)Amortization of amounts resulting from changes in defined benefit plan experience and actuarial assumptions, net of tax











16


16


16Foreign currency translation adjustments











(1
)

(1
)

(1
)Unrealized gains on securities, net of tax











12


12


12Comprehensive income
















$
1,478Balance at December 31, 2007


1,148,268,203


9,318


(2,995
)

(21
)

6,302Net Income








1,521





1,521

$
1,521Stock repurchased and retired


(131,476,804
)

(1,089
)

(2,085
)




(3,174
)Stock options exercised and restricted stock units vested and distributed


7,390,644


105








105Share-based compensation expense





51








51Tax benefit from stock option exercises





15








15Capital contribution





160








160Other





(20
)







(20
)Amortization of amounts resulting from changes in defined benefit plan experience and actuarial assumptions, net of tax











(87
)

(87
)

(87
)Unrealized losses on securities, net of tax











(20
)

(20
)

(20
)Comprehensive income
















$
1,414Balance at December 31, 2008


1,024,182,043

$
8,540

$
(3,559
)
$
(128
)
$
4,853


---

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

68

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THE DIRECTV GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,2008

2007

2006(Dollars in Millions)Cash Flows From Operating ActivitiesNet income

$
1,521

$
1,451

$
1,420Income from discontinued operations, net of taxes


(6
)

(17
)

Income from continuing operations


1,515


1,434


1,420Adjustments to reconcile income from continuing operations to net cash provided by operating activities:Depreciation and amortization


2,320


1,684


1,034Amortization of deferred revenues and deferred credits


(104
)

(98
)

(41
)Gain from disposition of businesses








(118
)Dividends received


35





Deferred income taxes


107


439


765Other


119


45


23Change in operating assets and liabilities:Accounts and notes receivable


95


(166
)

(283
)Inventories


18


(45
)

139Prepaid expenses and other


(96
)

46


(12
)Accounts payable and accrued liabilities


(23
)

255


158Unearned subscriber revenues and deferred credits


8


72


2Other, net


(84
)

(21
)

75Net cash provided by operating activities


3,910


3,645


3,162Cash Flows From Investing ActivitiesCash paid for property and equipment


(2,101
)

(2,523
)

(1,754
)Cash paid for satellites


(128
)

(169
)

(222
)Investment in companies, net of cash acquired


(204
)

(348
)

(389
)Purchase of short-term investments





(588
)

(2,517
)Sale of short-term investments





748


3,029Proceeds from sale of investments








182Proceeds from collection of notes receivable








142Other, net


45


58


(7
)Net cash used in investing activities


(2,388
)

(2,822
)

(1,536
)Cash Flows From Financing ActivitiesCash proceeds from debt issuance


2,490





Debt issuance costs


(19
)




Repayment of long-term debt


(53
)

(220
)

(8
)Net increase (decrease) in short-term borrowings





2


(2
)Repayment of other long-term obligations


(117
)

(121
)

(100
)Common shares repurchased and retired


(3,174
)

(2,025
)

(2,977
)Capital contribution


160





Stock options exercised


105


118


257Excess tax benefit from share-based compensation


8


7


2Net cash used in financing activities


(600
)

(2,239
)

(2,828
)Net increase (decrease) in cash and cash equivalents


922


(1,416
)

(1,202
)Cash and cash equivalents at beginning of the year


1,083


2,499


3,701Cash and cash equivalents at end of the year

$
2,005

$
1,083

$
2,499Supplemental Cash Flow InformationCash paid for interest

$
334

$
230

$
243Cash paid for income taxes


706


408


30


---

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

69

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THE DIRECTV GROUP, INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Business

The DIRECTV Group, Inc., which we sometimes refer to as the company, we, or us, is a leading provider of digital television entertainment in the United
States and Latin America. Our two business segments, DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location, are engaged in acquiring, promoting, selling and/or
distributing digital entertainment programming via satellite to residential and commercial subscribers.



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

Principles of Consolidation

We present our accompanying financial statements on a consolidated basis and include our accounts and those of our domestic and foreign
subsidiaries that we control through equity ownership or for which we are deemed to be the primary beneficiary, after elimination of intercompany accounts and transactions. We allocate earnings and
losses to minority interests only to the extent of a minority investor's investment in a subsidiary.

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.

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

70

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

for
a season or tournament to expense using the straight-line method over the course of the season or tournament. However, we recognize the costs for live sporting events with
multi-year contracts and minimum guarantee payments based on the ratio of each period's revenues to the estimated total contract 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. Through the end of 2006, we also recorded the amortization of a provision for above-market programming contracts that we recorded in connection with
the 1999 acquisition of certain premium subscription programming contracts from United States Satellite Broadcasting Company, Inc. as a reduction of programming costs.

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. DIRECTV U.S. implemented a lease program on March 1, 2006, after which most set-top receivers provided to new subscribers are capitalized. 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 property and
equipment." 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. DIRECTV U.S. implemented a lease program on March 1, 2006, after which most set-top receivers provided to existing
subscribers under upgrade and retention programs are capitalized. 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 property and equipment." See Note 4 below for additional information.

71

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of 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 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 20 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.

Foreign Currency

The U.S. dollar is the functional currency for most of our foreign operations. We recognize gains and losses resulting from
remeasurement of these operations' foreign currency denominated assets, liabilities and transactions into the U.S. dollar in the Consolidated Statements of Operations.

We
also have foreign operations where the local currency is their functional currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to
U.S. dollars using year end exchange rates while income and expense accounts are translated at the average rates in effect

72

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

during
the year. We record the resulting translation adjustment as part of accumulated other comprehensive income (loss), which we refer to as OCI, a separate component of stockholders' equity.

Investments and Financial Instruments

We maintain investments in equity securities of unaffiliated companies. We carry non-marketable equity securities at cost.
We consider marketable equity securities available-for-sale and they are carried at current fair value based on quoted market prices with unrealized gains or losses (excluding
other-than-temporary losses), net of taxes, reported as part of OCI. We continually review our investments to determine whether a decline in fair value below the cost basis is
"other-than-temporary." We consider, among other factors: the magnitude and duration of the decline; the financial health and business outlook of the investee, including
industry and sector performance, changes in technology, and operational and financing cash flow factors; and our intent and ability to hold the investment. If we judge the decline in fair value to be
other-than-temporary, we write-down the cost basis of the security to fair value and recognize the amount in the Consolidated Statements of Operations as part of
"Other, net" and record it as a reclassification adjustment from OCI.

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.

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, 2008 and 2007.

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

We grant restricted stock units and common stock options to our employees and directors.

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 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.

With
the adoption of the Financial Accounting Standards Board, or FASB, Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109," or FIN 48, on January 1, 2007, we now recognize a benefit in "Income tax expense" in the Consolidated

73

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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 $301 million in 2008, $261 million in 2007, and $233 million in 2006.

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 and most of Latin America. As applicable, we maintain allowances for anticipated losses.

Accounting Changes

On January 1, 2008 we adopted Statement of Financial Accounting Standards, or SFAS, No. 159, "The Fair Value Option for
Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115." SFAS No. 159 permits, but does 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 SFAS No. 159 did not have any effect on our consolidated financial statements, as we have not elected to report subject
instruments at fair value.

On
January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements." SFAS No. 157 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 measurements of assets and liabilities to include disclosure about inputs
used in the determination of fair value using the following three categories:

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.

SFAS
No. 157 applies under other accounting pronouncements previously issued by the FASB that require or permit fair value measurements. Our adoption of SFAS No. 157 did
not have any effect on our consolidated financial statements.

On
January 1, 2008 we adopted Emerging Issues Task Force, or EITF, Issue No. 06-1, "Accounting for Consideration Given by a Service Provider to a Manufacturer
or Reseller of Equipment Necessary

74

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

for
an End-Customer to Receive Service from the Service Provider." EITF No. 06-1 provides 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 circumstances, such consideration is reported as either an expense
or a reduction of revenues. Our adoption of EITF No. 06-1 did not have any effect on our consolidated financial statements.

We
adopted FIN 48 on January 1, 2007, the cumulative effect of which resulted in a $5 million increase to "Accumulated deficit" in the Consolidated Balance Sheets.
As of the date of adoption, our unrecognized tax benefits and accrued interest totaled $204 million, including $166 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 $45 million in interest and penalties as part of our liability for unrecognized tax benefits. See Note 9
below for additional information regarding unrecognized tax benefits.

On
December 31, 2007, we adopted the measurement date provision of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)." This provision 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. As a result of the adoption of this provision, we recorded an adjustment of $1 million
to recognize net periodic benefit cost for the one month difference to "Accumulated deficit" in the Consolidated Balance Sheets as of December 31, 2007.

On
December 31, 2006, we adopted the provisions of SFAS No. 158 that require us to recognize the funded status of our defined benefit postretirement plans in our
Consolidated Balance Sheets and require that we recognize changes in the funded status of our defined benefit postretirement plans as a component of other comprehensive income, net of tax, in
stockholders' equity in the Consolidated
Balance Sheets, in the year in which changes occur. The adoption of the provisions to recognize the funded status of our benefit plans resulted in a $46 million decrease in "Accumulated other
comprehensive income" in our Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income as of December 31, 2006.

New Accounting Standards

At the March 12, 2008 EITF meeting, the SEC Observer announced revisions to Topic D-98 "Classification and
Measurement of Redeemable Securities", which provides SEC registrants guidance on the financial statement classification and measurement of equity securities that are subject to mandatory redemption
requirements or whose redemption is outside the control of the issuer. The revised Topic D-98 requires that redeemable minority interests, such as Globo Comunicacoes e
Participacoes S.A.'s, or Globo's, redeemable interest described in Note 19 to the Notes to the Consolidated Financial Statements that are redeemable at the option of the holder should be
recorded outside of permanent equity at fair value, and the redeemable minority interests should be adjusted to their fair value at each balance sheet date. Adjustments to the carrying amount of a
noncontrolling interest from the application of Topic D-98 are recorded to retained earnings (or additional paid-in-capital in the absence of retained earnings). We
will apply this guidance in our Consolidated Financial Statements beginning January 1, 2009, which will result in us recording the fair value of our redeemable minority interest as of
January 1, 2009 with a corresponding adjustment to "Additional paid in capital" in the Consolidated Balance Sheets. Had we adopted this guidance as of December 31, 2008, we would have
recorded a $222 million increase to "Minority interest" with a corresponding decrease to "Common stock and additional paid-in-capital" in the Consolidated Balance
Sheets.

75

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

In
December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statementsan amendment to ARB No. 51.", which establishes
standards of accounting and reporting of noncontrolling interests in subsidiaries, currently known as minority interests, in consolidated financial statements, provides guidance on accounting for
changes in the parent's ownership interest in a subsidiary and establishes standards of accounting of the deconsolidation of a subsidiary due to the loss of control. SFAS No. 160 requires an
entity to present minority interests as a component of equity. Additionally, SFAS No. 160 requires an entity to present net income and consolidated comprehensive income attributable to the
parent and the minority interest separately on the face of the Consolidated Statements of Operations. SFAS No. 160 is required to be applied prospectively, except for the presentation and
disclosure requirements, which must be applied retrospectively for all periods presented. The adoption of SFAS No. 160 on January 1, 2009, as required, will only affect the presentation
of the minority interest in our Consolidated Statements of Operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations." SFAS No. 141R will require the acquiring entity 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
SFAS No. 141R certain contingent assets and liabilities, as well as contingent consideration, will also be required to be recognized at fair value on the date of acquisition and acquisition
related transaction and restructuring costs will be expensed. Additionally, SFAS No. 141R requires disclosures about the nature and financial effect of the business combination and also changes
the accounting for certain income tax assets recorded in purchase accounting. The adoption of SFAS No. 141R as required, on January 1, 2009, will change the way we account for
adjustments to deferred tax asset valuation allowances recorded in purchase accounting for prior business combinations and will change the accounting for all business combinations consummated after
January 1, 2009.

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:

2008

2007(Dollars in Millions)Subscriber

$
918

$
925Trade and other


555


666Subtotal


1,473


1,591Less: Allowance for doubtful accounts


(50
)

(56
)Accounts receivable, net

$
1,423

$
1,535


76

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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:

Estimated Useful Lives (years)

2008

2007(Dollars in Millions)Satellites


10-16

$
2,956

$
2,163Satellites under construction





292


474Total





3,248


2,637Less: Accumulated depreciation





(772
)

(611
)Satellites, net




$
2,476

$
2,026Land and improvements


9-30

$
37

$
34Buildings and leasehold improvements


2-40


342


301Machinery and equipment


3-23


3,211


2,821Subscriber leased set-top receivers


3-7


4,853


3,731Construction in-progress





271


365Total





8,714


7,252Less: Accumulated depreciation





(4,543
)

(3,445
)Property and equipment, net




$
4,171

$
3,807


We
capitalized interest costs of $18 million in 2008, $51 million in 2007, and $55 million in 2006 as part of the cost of our property and satellites under
construction. Depreciation expense was $1,907 million in 2008, $1,264 million in 2007, and $664 million in 2006.

On
March 1, 2006, DIRECTV U.S. introduced a new set-top receiver lease program. Prior to March 1, 2006, most set-top receivers provided to new and
existing DIRECTV U.S. 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 "Cash paid for property and equipment" in the Consolidated Statements of Cash Flows.

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

Capitalized subscriber leased equipment:

Years ended December 31,2008

2007

2006(Dollars in Millions)Subscriber leased equipmentsubscriber acquisitions

$
599

$
762

$
599Subscriber leased equipmentupgrade and retention


537


774


473Total subscriber leased equipment capitalized

$
1,136

$
1,536

$
1,072Depreciation expensesubscriber leased equipment

$
1,100

$
645

$
147


77

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Note 5: Goodwill and Intangible Assets

The following table sets forth the changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets by segment for the years ended
December 31, 2008 and 2007:

DIRECTV U.S.

DIRECTV
Latin America

Total(Dollars in Millions)Balance as of January 1, 2007

$
3,032

$
483

$
3,515Acquisition of Darlene interest in DLA LLC





187


187Sky Brazil purchase price allocation





(31
)

(31
)Other





(2
)

(2
)Balance as of December 31, 2007


3,032


637


3,669Acquisition related to home service provider business


157





157Sky Brazil deferred income tax valuation allowance





(73
)

(73
)Balance as of December 31, 2008

$
3,189

$
564

$
3,753


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

December 31, 2008

December 31, 2007Estimated
Useful Lives
(years)

Gross
Amount

Accumulated
Amortization

Net
Amount

Gross
Amount

Accumulated
Amortization

Net
Amount(Dollars in Millions)Orbital slots


Indefinite

$
432




$
432

$
432




$
43272.5° WL Orbital license


5


208

$
171


37


208

$
132


76Subscriber related


5-10


1,697


1,255


442


1,697


942


755Dealer network


15


130


79


51


130


71


59Trade name and other


10-20


102


9


93


95


5


90Distribution rights


7


334


217


117


334


169


165Total intangible assets




$
2,903

$
1,731

$
1,172

$
2,896

$
1,319

$
1,577


Amortization
expense of intangible assets was $412 million in 2008 and $419 million in 2007 and $369 million in 2006.

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $350 million in 2009; $152 million in 2010;
$97 million in 2011; $55 million in 2012; $17 million in 2013 and $69 million thereafter.

We
performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2008, 2007, and 2006. The estimated fair values for each reporting unit and the orbital
slots exceeded our carrying values, and accordingly, no impairment losses were recorded during 2008, 2007, or 2006.

Note 6: Investments

Equity Method Investments

We have investments in companies that we account for under the equity method of accounting totaling $667 million as of
December 31, 2008 and $551 million as of December 31, 2007.

78

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

We
paid cash of $96 million in 2008, $13 million in 2007 and $381 million in 2006 to acquire interests in companies we account for under the equity method of
accounting. As discussed in Note 17, we acquired a 41% interest in Sky Mexico in 2006. The book value of our investment in Sky Mexico was $537 million at December 31, 2008 and
$505 million at December 31, 2007.

The
following table sets forth equity in earnings of our 41% interest in Sky Mexico for the periods presented:

Years Ended December 31,2008

2007

2006(Dollars in Millions)Equity in earnings of Sky Mexico

$
63

$
41

$
18


We
received cash dividends of $35 million in 2008 from companies that we account for under the equity method.

In
January 2006, we completed the sale of our 50% interest in HNS LLC to SkyTerra Communications, Inc. and resolved a working capital adjustment from a prior transaction
with SkyTerra in exchange for $110 million in cash, which resulted in our recording a gain of $14 million related to the sale, in addition to equity earnings of HNS LLC of
$11 million in "Other, net" in the Consolidated Statements of Operations.

Other Investments

We had investments in marketable equity securities of $23 million as of December 31, 2008 and $56 million as of
December 31, 2007, which were stated at current fair value and classified as available-for-sale.

Accumulated
unrealized gains, net of taxes, included as part of accumulated other comprehensive income were $1 million in 2008, $21 million in 2007 and $9 million in
2006.

Note 7: 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:

2008

2007(Dollars in Millions)Programming costs

$
1,640

$
1,506Accounts payable


433


447Property and income taxes


161


154Payroll and employee benefits


165


139Interest payable


45


26Other


671


760Total accounts payable and accrued liabilities

$
3,115

$
3,032


79

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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

2008

2007(Dollars in Millions)Obligations under capital leases

$
542

$
43Other accrued taxes


428


343Programming costs


251


368Pension and other postretirement benefits


179


75Deferred credits


122


213Other


227


360Total other liabilities and deferred credits

$
1,749

$
1,402


Note 8: Debt

The following table sets forth our outstanding debt:

Interest Rates at
December 31, 2008

December 31,2008

2007(Dollars in Millions)8.375% senior notes due in 2013


8.375
%
$
910

$
9106.375% senior notes due in 2015


6.375
%

1,000


1,0007.625% senior notes due in 2016


7.625
%

1,500


Senior secured credit facility, net of unamortized discount of $9 million as of December 31, 2008


3.165
%

2,421


1,483Unamortized bond premium





2


2Total debt





5,833


3,395Less: Current portion of long-term debt





(108
)

(48
)Long-term debt




$
5,725

$
3,347


2008 Financing Transactions

In May 2008, DIRECTV U.S. completed financing transactions that included the issuance of senior notes and an amendment to its existing
senior secured credit facility as discussed below. We incurred $20 million of debt issuance costs in connection with these transactions.

DIRECTV
U.S. 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 DIRECTV U.S.' 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.

80

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

DIRECTV
U.S. also amended its senior secured credit facility to include a new $1,000 million Term Loan C, which was issued at a 1% discount, resulting in $990 million of
proceeds. Initially, borrowings under Term Loan C bear interest at 5.25%, however the rate is variable based on changes in the London InterBank Offered Rate, or LIBOR. 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 DIRECTV U.S.' assets and the assets of its current and certain of its future domestic subsidiaries and
is fully and unconditionally guaranteed, jointly and severally, by substantially all of DIRECTV U.S.' current and certain of its future domestic subsidiaries.

Notes Payable.All of our senior notes were issued by DIRECTV U.S. and have been registered under the Securities Act of 1933, as
amended. The 8.375%
senior notes, 6.375% senior notes and 7.625% senior notes are unsecured and have been fully and unconditionally guaranteed, jointly and severally, by substantially all of DIRECTV U.S.' assets.
Principal on the senior notes is payable upon maturity, while interest is payable semi-annually.

The
fair value of our 8.375% senior notes was approximately $904 million at December 31, 2008 and approximately $948 million at December 31, 2007. The fair
value of our 6.375% senior notes was approximately $911 million at December 31, 2008 and approximately $962 million at December 31, 2007. The fair value of our 7.625%
senior notes was approximately $1,451 million at December 31, 2008. We calculated the fair values based on quoted market prices of our senior notes, which is a Level 1 input under
SFAS No. 157, on those dates.

Credit Facility.At December 31, 2008, DIRECTV U.S.' senior secured credit facility consisted of a $463 million six-year
Term Loan A, a $972 million eight-year Term Loan B, a $986 million five-year Term Loan C and a $500 million undrawn six-year revolving credit
facility. The Term 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 London InterBank Offered Rate, or LIBOR, plus
0.75%, 1.50% and 2.25%, respectively. 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 is secured by substantially all of DIRECTV U.S.' assets and is fully and unconditionally guaranteed, jointly and
severally by substantially all of DIRECTV U.S.' material domestic subsidiaries.

Our
notes payable and credit facility mature as follows: $108 million in 2009, $308 million in 2010, $108 million in 2011, $20 million in 2012,
$2,796 million in 2013 and $2,500 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 of excess cash flows that we may be 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,
2008, 2007, or 2006. The amount of interest accrued related to our outstanding debt was $45 million at December 31, 2008 and $26 million at December 31, 2007.

Sky Brazil Bank Loan.As a result of our acquisition of Sky Brazil, we assumed Sky Brazil's $210 million U.S. dollar denominated
variable rate
bank loan due in August 2007. In January 2007, we paid $210 million to the lending banks, who in turn assigned the loan to a wholly-owned subsidiary of The DIRECTV Group. As a result, this loan
is no longer outstanding on a consolidated basis.

Covenants and Restrictions.The senior secured credit facility requires DIRECTV U.S. to comply with certain financial covenants. The
senior notes and
the senior secured credit facility also include covenants that restrict DIRECTV U.S.' ability to, among other things, (i) incur additional indebtedness,

81

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

(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 indentures. Should DIRECTV U.S. fail to comply with these covenants, all or a portion of its
borrowings under the senior notes and senior secured credit facility could become immediately payable and its revolving credit facility could be terminated. At December 31, 2008, DIRECTV U.S.
was 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 our outstanding common stock. There was no ratings decline for the
senior notes associated with that event, and DIRECTV U.S. was 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 the senior secured credit facility.

Restricted Cash.Restricted cash of $15 million as of December 31, 2008 and $5 million as of December 31, 2007 was
included as part of "Prepaid expenses and other" in our Consolidated Balance Sheets. These amounts secure our letter of credit obligations. Restrictions on the cash will be removed as the letters of
credit expire.

Note 9: Income Taxes

We base our income tax expense or benefit on reported "Income from continuing operations before income taxes and minority interests." 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, as
measured by applying currently enacted tax laws.

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

2008

2007

2006(Dollars in Millions)Current tax expense:U.S. federal

$
(543
)
$
(450
)
$
(20
)Foreign


(128
)

(73
)

(16
)State and local


(72
)

(103
)

(32
)Total


(743
)

(626
)

(68
)Deferred tax (expense) benefit:U.S. federal


(210
)

(285
)

(704
)Foreign


97


5


State and local


(8
)

(37
)

(94
)Total


(121
)

(317
)

(798
)Total income tax expense

$
(864
)
$
(943
)
$
(866
)


82

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

"Income
from continuing operations before income taxes and minority interests" included the following components for the years ended December 31:

2008

2007

2006(Dollars in Millions)U.S. income

$
1,981

$
2,154

$
2,162Foreign income


490


234


137Total

$
2,471

$
2,388

$
2,299


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:

2008

2007

2006(Dollars in Millions)Expected expense at U.S. federal statutory income tax rate

$
(865
)
$
(836
)
$
(804
)U.S. state and local income tax expense, net of federal benefit


(73
)

(91
)

(82
)Change in unrecognized tax benefits


(18
)

(18
)

Tax basis differences attributable to divestitures








25Minority interests in partnership earnings


26


4


5Foreign tax (expense) benefit, net of tax deduction


27


(14
)

(9
)Change in valuation allowance


12


5


1Tax credits


32


4


Other


(5
)

3


(2
)Total income tax expense

$
(864
)
$
(943
)
$
(866
)


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

2008

2007Deferred
Tax
Assets

Deferred
Tax
Liabilities

Deferred
Tax
Assets

Deferred
Tax
Liabilities(Dollars in Millions)Accruals and advances

$
278

$
67

$
300

$
132Prepaid expenses





29





40State taxes


31





23


Depreciation, amortization and asset impairment charges





273





193Foreign net operating loss and tax credit carryforwards


643





715


Programming contract liabilities


162





188


Unrealized foreign exchange gains or losses





59





106Tax basis differences in investments and affiliates


84


705


58


682Other


6


6


3


6Subtotal


1,204


1,139


1,287


1,159Valuation allowance


(511
)




(605
)

Total deferred taxes

$
693

$
1,139

$
682

$
1,159


As
of December 31, 2008, we had $10 million of long-term deferred tax assets, recorded in "Investments and other assets" in the Consolidated Balance Sheets.

83

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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 $511 million at December 31, 2008 and $605 million at December 31, 2007, are primarily attributable to the unused foreign operating losses and unused
capital losses, both of which are available for carry forward. For the year ended December 31, 2008, the decrease in the valuation allowance was primarily attributable to the realization of an $87
million deferred tax asset for Brazilian net operating loss carryforwards. The reversal of the valuation allowance was based on management's evaluation that it is more likely than not that Brazilian
net operating loss carryforwards which have not been previously realized will be utilized as a result of the recent profitability of the Brazilian operations and its financial projections. $22 million
of the valuation allowance reversal was attributable to the minority interest in the Brazilian operations and was reported as a reduction in the foreign income tax expense. Additionally, $65 million
of the valuation allowance reversal was reported as a reduction to both future U.S. tax credits and goodwill that was recognized upon our acquisition of Sky Brazil.

Although
realization is not assured, we have concluded that it is more likely than not that our unreserved deferred tax assets will be realized in the ordinary course of operations based
on available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The underlying assumptions we use in forecasting future
taxable income require significant judgment and take into account our recent performance.

As
of December 31, 2008, we have approximately $1.7 billion of foreign net operating losses that are primarily attributable to operations in Brazil with varying expiration
dates, foreign tax credits of $45 million that expire between 2009 and 2017, and state research tax credits of approximately $40 million that can be carried forward indefinitely.

No
income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries deemed permanently reinvested that amounted to approximately $269 million
in 2008. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the investments in foreign subsidiaries.

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

(Dollars in Millions)Gross unrecognized tax benefits at January 1, 2007

$
159Increases in tax positions for prior years


102Increases in tax positions for the current year


34Settlements


(4
)Gross unrecognized tax benefits at December 31, 2007


291Increases in tax positions for prior years


75Increases in tax positions for the current year


26Statute expiration


(38
)Settlements


9Gross unrecognized tax benefits at December 31, 2008

$
363


84

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

As
of December 31, 2008, our unrecognized tax benefits totaled $425 million, including accrued interest of $62 million. If our tax positions are ultimately
sustained, approximately $207 million of the unrecognized tax benefits would be recognized as a reduction in our annual effective income tax rate.

We
recorded $16 million of interest and penalties in "Income tax expense" in the Consolidated Statements of Operations during the year ended December 31, 2008 for
unrecognized tax benefits.

We
file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. For U.S. federal tax purposes, the tax years
2003 through 2008 remain open to examination. The California tax years 1994 through 2008 remain open to examination and the income tax returns in the other state and foreign 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
anticipate that the examination and court proceedings for certain state taxing jurisdictions will conclude in the next twelve months resulting in an estimated reduction in our
unrecognized tax benefits of approximately $35 million, $30 million of which relates to discontinued operations. We do not anticipate that other changes to the total unrecognized tax
benefits in the next twelve months will have a significant effect on our consolidated financial statements.

Note 10: Capital Lease Obligations

Satellite Leases

During the first quarter of 2008, Sky Brazil began broadcasting its service on a new satellite, IS 11, pursuant to a satellite
transponder capacity agreement, which we are accounting for as a capital lease. The present value of the lease payments at the inception of the 15 year lease term was $247 million. The
capitalized value of the satellite has been included in "Satellites, net" in the Consolidated Balance Sheets. The capitalized lease obligations are included in "Accounts payable and accrued
liabilities" and "Other liabilities and deferred credits" in the Consolidated Balance Sheets.

During
the third quarter of 2008, DTVLA amended its satellite transponder capacity agreement for the GIIIC satellite, which provides broadcast services to PanAmericana, and was
previously classified as an operating lease. The extension of the lease term to December 2020 triggered a reassessment of the lease classification and we determined that we should change the
classification of the amended agreement to a capital lease. The present value of the lease payments at the inception of the lease renewal was $333 million. The capitalized value of the
satellite is included in "Satellites, net" and the capitalized lease obligation is included in "Accounts payable and accrued liabilities" and "Other liabilities and deferred credits" in the
Consolidated Balance Sheets.

85

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

The following table sets forth total minimum lease payments under capital leases along with the present value of the net minimum lease payments as of
December 31, 2008:

(Dollars in Millions)2009

$
832010


802011


772012


762013


75Thereafter


586Total minimum lease payments


977Less: Amount representing interest


393Present value of net minimum lease payments

$
584


Assets
held under capitalized leases are included in Satellites, net and Property and Equipment, net in our Consolidated Balance Sheets. We had the following assets held under capital
leases as of December 31:

2008

2007(Dollars in Millions)Satellites under capital leases

$
533

$
44Less: Accumulated amortization


(20
)

(24
)Satellites, net under capital leases

$
513

$
20Property and equipment under capital leases

$
27

$
11Less: Accumulated amortization


(4
)

(1
)Property and equipment, net under capital leases

$
23

$
10


We
paid interest for capital leases of $27 million in 2008, $4 million in 2007 and $2 million in 2006.

Note 11: Pension and Other Postretirement Benefit Plans

Most of our employees are eligible to participate in our 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 the company. Additionally, we maintain a funded contributory defined benefit plan for employees who
elected to participate prior to 1991, and an unfunded, nonqualified pension plan for certain eligible employees. For participants in the contributory pension plan, we also maintain a postretirement
benefit plan for those eligible retirees to participate in health care and life insurance benefits generally until they reach age 65. Participants may become eligible for these health care and life
insurance benefits if they retire from our company between the ages of 55 and 65. The health care plan is contributory with participants' contributions subject to adjustment annually; the life
insurance plan is non-contributory.

On
December 31, 2007, we adopted the measurement date provision of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)." This provision requires the measurement of plan

86

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

assets
and benefit obligations as of the date of our fiscal year end. This required a change in our measurement date, which was previously November 30. See Note 2 for additional
information.

The
components of the pension benefit obligation and the other postretirement benefit obligation, including amounts recognized in the Consolidated Balance Sheets, are shown below for the
years ended December 31:

Pension Benefits

Other Postretirement
Benefits2008

2007

2008

2007(Dollars in Millions)Change in Net Benefit ObligationNet benefit obligation at beginning of year

$
430

$
468

$
24

$
28Service cost


16


18





Interest cost


27


28


1


1Plan participants' contributions


1


1





Actuarial loss (gain)


29


(27
)




(3
)Benefits paid


(51
)

(58
)

(3
)

(2
)Net benefit obligation at end of year


452


430


22


24Change in Plan AssetsFair value of plan assets at beginning of year


368


393





Actual (loss) return on plan assets


(85
)

22





Employer contributions


51


11


3


2Benefits paid


(51
)

(58
)

(3
)

(2
)Fair value of plan assets at end of year


283


368





Funded status at end of year

$
(169
)
$
(62
)
$
(22
)
$
(24
)Amounts recognized in the consolidated balance sheets consist of:Investments and other assets

$


$
2

$


$
Accounts payable and accrued liabilities


(9
)

(10
)

(3
)

(3
)Other liabilities and deferred credits


(160
)

(54
)

(19
)

(21
)Deferred tax assets


79


26


(1
)

(1
)Accumulated other comprehensive loss


129


42


(1
)

(1
)Amounts recognized in the accumulated other comprehensive loss consist of:Unamortized net amount resulting from changes in defined benefit plan experience and actuarial assumptions, net of taxes

$
125

$
37

$


$
Unamortized amount resulting from changes in defined benefit plan provisions, net of taxes


4


5


(1
)

(1
)Total

$
129

$
42

$
(1
)
$
(1
)


87

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

We
estimate that the following amounts will be amortized from accumulated other comprehensive income into net periodic benefit cost during the year ending December 31, 2009:

Pension
Benefits

Other
Postretirement
Benefits(Dollars in Millions)Expense resulting from changes in plan experience and actuarial assumptions

$
7


Expense (benefit) resulting from changes in plan provisions


1

$
(1
)


The
accumulated benefit obligation for all pension plans was $415 million as of December 31, 2008 and $396 million as of December 31, 2007.

Information
for pension plans with an accumulated benefit obligation in excess of plan assets at December 31:

2008

2007(Dollars in Millions)Accumulated benefit obligation

$
415

$
49Fair value of plan assets


283





Information
for pension plans with a projected benefit obligation in excess of plan assets at December 31:

2008

2007(Dollars in Millions)Projected benefit obligation

$
452

$
64Fair value of plan assets


283





Components
of net periodic benefit cost for the years ended December 31:

Pension Benefits

Other Postretirement Benefits2008

2007

2006

2008

2007

2006(Dollars in Millions)Components of net periodic benefit costBenefits earned during the year

$
16

$
18

$
14

$


$


$
Interest accrued on benefits earned in prior years


27


28


27


1


1


2Expected return on plan assets


(30
)

(33
)

(29
)







Amortization componentsAmount resulting from changes in plan provisions


1


1


1





(1
)

(1
)Net amount resulting from changes in plan experience and actuarial assumptions


4


6


5








Net periodic benefit cost

$
18

$
20

$
18

$
1

$


$
1Additional informationIncrease in minimum liability included in other comprehensive income, net of taxes

$


$


$
24

$


$


$



88

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Net
periodic pension benefit costs for 2007 includes one month of expense that was recorded as an adjustment to "Accumulated deficit" in the Consolidated Balance Sheets
($1 million after tax) related to the adoption of the measurement date provisions of SFAS No. 158 discussed in Note 2.

Assumptions

Weighted-average assumptions used to determine benefit obligations at December 31:

Pension Benefits

Other Postretirement
Benefits2008

2007

2008

2007Discount rateQualified Plans


6.06
%

6.22
%

5.88
%

5.76
%Discount rateNon-Qualified Plans


6.04
%

6.24
%




Rate of compensation increase


4.00
%

4.00
%

4.00
%

4.00
%


Weighted-average
assumptions used to determine net periodic benefit cost for the years ended December 31:

Pension Benefits

Other Postretirement
Benefits2008

2007

2006

2008

2007

2006Discount rateQualified Plan


6.22
%

5.67
%

5.78
%

5.76
%

5.43
%

5.46
%Discount rateNon-Qualified Plans


6.24
%

5.69
%

5.74
%







Expected long-term return on plan assets


8.75
%

8.75
%

8.75
%







Rate of compensation increase


4.00
%

4.00
%

4.00
%

4.00
%

4.00
%

4.00
%


We
base our expected long-term return on plan assets assumption on a periodic review and modeling of the plans' asset allocation and liability structure over a
long-term horizon. Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling and are based on comprehensive reviews of
historical data and economic/financial market theory.

A
hypothetical 0.25% decrease in our discount rate would have had the effect of increasing our 2008 pension expense by approximately $1 million and our projected benefit
obligation by approximately $12 million. A hypothetical 0.25% decrease in our expected return on plan assets would have had the effect of increasing our 2008 pension expense by approximately
$1 million.

The
following table provides assumed health care costs trend rates:

2008

2007Health care cost trend rate assumed for next year


8.00
%

8.00
%Rate to which the cost trend rate is assumed to decline (ultimate trend rate)


5.00
%

5.00
%Year that trend rate reaches the ultimate trend rate


2015


2011


A
one-percentage-point change in assumed health care cost trend rates would have the following effects:

1-Percentage
Point Increase

1-Percentage
Point Decrease(Dollars in Millions)Effect on total of service and interest cost components





Effect on postretirement benefit obligation

$
2

$
(1
)


89

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Plan Assets

Our target asset allocation for 2008 and actual pension plan weighted average asset allocations at December 31, 2008 and 2007,
by asset categories, are as follows:

Target
Allocation

Percentage of
Plan Assets
at December 31,2009

2008

2007Equity securities


40-56
%

47
%

53
%Debt securities


24-40
%

40
%

36
%Real estate


0-10
%

3
%

4
%Other


0-10
%

10
%

7
%Total





100
%

100
%


Our
investment policy includes various guidelines and procedures designed to ensure we invest assets in a manner necessary to meet expected future benefits earned by participants. The
investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories.

The
objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed
the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The
investment policy is periodically reviewed by us and a designated third-party fiduciary for investment matters. We establish and administer the policy in a manner so as to comply at
all times with applicable government regulations.

There
were no shares of our common stock included in plan assets at December 31, 2008 and 2007.

Cash Flows



We expect to contribute approximately $22 million to our qualified pension plans and $11 million to our nonqualified
pension plans in 2009.

90

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Estimated Future Benefit Payments

We expect the following benefit payments, which reflect expected future service, as appropriate, to be paid by the plans during the
years ending December 31:

Estimated Future Benefit PaymentsPension Benefits

Other Postretirement
Benefits(Dollars in Millions)2009

$
43

$
32010


36


32011


31


22012


31


22013


31


22014-2017


179


10


We
maintain 401(k) plans for qualified employees. We match a portion of our employee contributions and our match amounted to $12 million in 2008, $10 million in 2007 and
$8 million in 2006.

We
have disclosed certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "other postretirement benefit
obligation." Notwithstanding the recording of such amounts and the use of these terms, we do not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of our
company (other than pensions) represent legally enforceable liabilities of us.

Note 12: Stockholders' Equity

Capital Stock and Additional Paid-In Capital

Our certificate of incorporation provides for the following capital stock: common stock, par value $0.01 per share, 3,000,000,000
shares authorized; Class B common stock, par value $0.01 per share, 275,000,000 shares authorized; excess stock, par value $0.01 per share, 800,000,000 shares authorized; and preferred stock,
par value $0.01 per share, 9,000,000 shares authorized. As of December 31, 2008 and 2007, there were no shares outstanding of the Class B common stock, excess stock or preferred stock.

Share Repurchase Program

During 2006, 2007 and 2008 our Board of Directors approved multiple authorizations for the repurchase of a total of $8.2 billion
of our common stock, including a $3 billion authorization in May 2008 that was completed in December 2008. Subsequent to December 31, 2008, our Board of Directors authorized the
repurchase of an additional $2 billion of our common stock. The authorizations allow us to repurchase our common stock from time to time through open market purchases and negotiated
transactions, or otherwise. The timing, nature and amount of such transactions will depend on a variety of factors, including market conditions, and the program may be suspended, discontinued or
accelerated at any time. The sources of funds for the purchases under the remaining authorizations are our existing cash on hand and cash from operations. Purchases are made in the open market,
through block trades and other negotiated transactions. Repurchased shares are retired but remain authorized for registration and issuance in the future.

91

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

The
following table sets forth information regarding shares repurchased and retired for the years ended December 31:

2008

2007

2006(Amounts in Millions, Except Per Share Amounts)Total cost of repurchased and retired shares

$
3,174

$
2,025

$
2,977Average price per share


24.12


23.48


16.16Number of shares repurchased and retired


131


86


184


For
the year ended December 31, 2008, we recorded the $3,174 million in repurchases as a decrease of $1,089 million to "Common stock and additional paid in capital"
and an increase of $2,085 million to "Accumulated deficit" in the Consolidated Balance Sheets. For the year ended December 31, 2007, we recorded the $2,025 million in repurchases
as a decrease of $692 million to "Common stock and additional paid in capital" and an increase of $1,333 million to "Accumulated deficit" in the Consolidated Balance Sheets. For the year
ended December 31, 2006, we recorded the $2,977 million in repurchases as a decrease of $1,452 million to "Common stock and additional paid in capital" and an increase of
$1,525 million to "Accumulated deficit" in the Consolidated Balance Sheets.

Other Comprehensive Income

The following represents the components of OCI, net of taxes, for the years ended December 31:

2008

2007

2006Pre-tax
Amount

Tax
Benefit

Net
Amount

Pre-tax
Amount

Tax
(Benefit)
Expense

Net
Amount

Pre-tax
Amount

Tax
(Benefit)
Expense

Net
Amount(Dollars in Millions)Amortization of amounts resulting from changes in defined benefit plan experience and actuarial assumptions, net of taxes

$
(140
)
$
(53
)
$
(87
)
$
26

$
10

$
16

$


$


$
Minimum pension liability adjustments




















38


14


24Foreign currency translation adjustments











(2
)

(1
)

(1
)

2





2Unrealized holding gains (losses) on securities


(32
)

(12
)

(20
)

19


7


12


(22
)

(8
)

(14
)


We
recorded a $46 million charge to "Accumulated other comprehensive loss" in our Consolidated Balance Sheets as of December 31, 2006 for the initial adoption of SFAS
No. 158.

92

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Accumulated Other Comprehensive Loss

The following represent the components of "Accumulated other comprehensive loss" in our Consolidated Balance Sheets as of
December 31:

2008

2007(Dollars in Millions)Unamortized net amount resulting from changes in defined benefit plan experience and actuarial assumptions, net of taxes

$
(124
)
$
(37
)Unamortized amount resulting from changes in defined benefit plan provisions, net of taxes


(4
)

(4
)Accumulated unrealized gains on securities, net of taxes


1


21Accumulated foreign currency translation adjustments


(1
)

(1
)Total accumulated other comprehensive loss

$
(128
)
$
(21
)


Note 13: Earnings Per Common Share

We compute basic earnings per common share, or EPS, by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted
EPS considers the effect of common equivalent shares, which consist entirely of common stock options and unvested restricted stock units issued to employees. In the computation
of diluted EPS under the treasury stock method, the amount of assumed proceeds from nonvested stock awards and unexercised stock options includes the amount of compensation cost attributable to future
services not yet recognized, proceeds from the exercise of the options, and the incremental income tax benefit or liability as if the awards were distributed during the period. We exclude common
equivalent shares from the computation in loss periods as their effect would be antidilutive and we exclude common stock options from the computation of diluted EPS when their exercise price is
greater than the average market price of our common stock. The following table sets forth the number of common stock options excluded from the computation of diluted EPS because the options' exercise
prices were greater than the average market price of our common stock during the years presented:

December 31,2008

2007

2006(Shares in Millions)Common stock options excluded


27


34


48


The
following table sets forth comparative information regarding common shares outstanding:

2008

2007

2006(Shares in Millions)Common shares outstanding at January 1


1,148


1,226


1,391Decrease for common shares repurchased and retired


(131
)

(86
)

(184
)Increase for stock options exercised and restricted stock units vested and distributed


7


8


19Common shares outstanding at December 31


1,024


1,148


1,226Weighted average number of common shares outstanding


1,110


1,195


1,262


93

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

The
reconciliation of the amounts used in the basic and diluted EPS computation was as follows:

Income

Shares

Per Share Amounts(Dollars and Shares in Millions, Except Per Share Amounts)Year Ended December 31, 2008:Basic EPSIncome from continuing operations

$
1,515


1,110

$
1.36Effect of Dilutive SecuritiesDilutive effect of stock options and restricted stock units





4


Diluted EPSAdjusted income from continuing operations

$
1,515


1,114

$
1.36Year Ended December 31, 2007:Basic EPSIncome from continuing operations

$
1,434


1,195

$
1.20Effect of Dilutive SecuritiesDilutive effect of stock options and restricted stock units





7


Diluted EPSAdjusted income from continuing operations

$
1,434


1,202

$
1.20Year Ended December 31, 2006:Basic EPSIncome from continuing operations

$
1,420


1,262

$
1.13Effect of Dilutive SecuritiesDilutive effect of stock options and restricted stock units





8


(0.01
)Diluted EPSAdjusted income from continuing operations

$
1,420


1,270

$
1.12


Note 14: Share-Based Payment

Under The DIRECTV Group, Inc. Amended and Restated 2004 Stock Plan as approved by our 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 Board of Directors. We issue new shares of our common stock when restricted stock units are earned and when stock options are exercised.



The Compensation Committee has granted restricted stock units under our stock plans to certain of our employees and executives. Annual
awards are mostly performance-based, with final payments in shares of our common stock. Final payment can be reduced from the target award amounts based on our 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 on the closing stock price of our common shares on the date of
grant.

94

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Changes
in the status of outstanding restricted stock units were as follows:

Stock Units

Weighted-Average
Grant-Date
Fair ValueNonvested at January 1, 2008


9,416,496

$
17.99Granted


2,692,310


23.19Vested and Distributed


(3,166,095
)

17.00Forfeited


(1,245,271
)

17.78Nonvested at December 31, 2008


7,697,440


20.25


The
weighted average grant-date fair value of restricted stock units granted during the year ended December 31, 2007 was $23.69. The weighted average
grant-date fair value of restricted stock units granted during the year ended December 31, 2006 was $13.57.

The
total fair value of restricted stock units vested and distributed was $54 million during the year ended December 31, 2008, $33 million during the year ended
December 31, 2007 and $21 million during the year ended December 31, 2006.



The Compensation Committee has also granted stock options to acquire our common stock under our 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.

Changes
in the status of outstanding options were as follows:

Shares
Under
Option

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

Aggregate
Intrinsic
Value(in millions)Outstanding at January 1, 2008


48,634,539

$
28.69Granted





Exercised


(5,506,070
)

19.09Forfeited or expired


(6,061,725
)

33.18Outstanding at December 31, 2008


37,066,744


29.38


2.1

$
31Exercisable at December 31, 2008


36,260,477

$
29.54


2.0

$
31


The
total intrinsic value of options exercised was $38 million during the year ended December 31, 2008, $59 million during the year ended December 31, 2007
and $115 million during the year ended December 31, 2006, based on the intrinsic value of individual awards on the date of exercise.

95

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

The following table presents the estimated weighted average fair value for stock options granted under the Plan using the Black-Scholes valuation model along with
the assumptions used in the fair value calculations. Expected stock volatility is based primarily on the historical volatility of our common stock. The risk-free rate for periods within
the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected option life is based on historical exercise behavior and other factors.

2007Estimated fair value per option granted

$
8.27Average exercise price per option granted


22.43Expected stock volatility


22.5
%Risk-free interest rate


4.65
%Expected option life (in years)


7.0


There
were no stock options granted during the years ended December 31, 2008 and 2006.

The
following table presents amounts recorded related to share-based compensation:

For the Years Ended December 31,2008

2007

2006(Dollars in Millions)Share-based compensation expense recognized

$
51

$
49

$
39Tax benefits associated with share-based compensation expense


19


19


15Actual tax benefits realized for the deduction of share-based compensation expense


43


36


50Proceeds received from stock options exercised


105


118


257


As
of December 31, 2008, there was $70 million of total unrecognized compensation expense related to unvested restricted stock units and stock options that we expect to
recognize as follows: $45 million in 2009 and $25 million in 2010.

Note 15: Other Income and Expenses

The following table summarizes the components of "Other, net" in our Consolidated Statements of Operations for the years ended December 31:

2008

2007

2006(Dollars in Millions)Equity in earnings from unconsolidated affiliates

$
55

$
35

$
27Net gain (loss) from sale of investments


1


(6
)

14Other


(1
)

(3
)

1Total other, net

$
55

$
26

$
42


See
Note 6 regarding equity method investments and net gains and losses recorded on the sale of investments.

96

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Note 16: Related-Party Transactions

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

Liberty Media, Liberty Global and Discovery Communications

As a result of the completion of the Liberty Transaction, beginning February 27, 2008, transactions with Liberty Media
Corporation, or Liberty Media, and its affiliates, including its equity method investees, may be considered to be related party transactions as Liberty Media currently owns approximately 54% of our
outstanding common stock. Our transactions with Liberty Media and its affiliates consist primarily of the purchase of programming.

In
addition, John Malone, Chairman of the Board of Directors of The DIRECTV Group, Inc. and of Liberty Media, has an approximate 23% voting interest in Discovery
Communications, Inc., or Discovery Communications, and an approximate 32% 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. 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

News Corporation and its affiliates were considered related parties until February 27, 2008, when News Corporation transferred
its 41% interest in our 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.

As
discussed below in Note 19, during the first quarter of 2008, we received a $160 million cash capital contribution, which we recorded as "Additional
paid-in-capital" in the Consolidated Balance Sheets.

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.

Other

Other related parties include Globo, which provides programming and advertising to Sky Brazil, and companies in which we hold equity
method investments, including Sky Mexico.

97

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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

2008

2007

2006(Dollars in Millions)Sales:Liberty Media and affiliates

$
36

$


$
Discovery Communications, Liberty Global and affiliates


10





News Corporation and affiliates


2


24


32Other


9





Total

$
57

$
24

$
32Purchases:Liberty Media and affiliates

$
269

$


$
Discovery Communications, Liberty Global and affiliates


186





News Corporation and affiliates


167


901


783Other


384


223


49Total

$
1,006

$
1,124

$
832


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

2008

2007(Dollars in Millions)Accounts receivable

$
29

$
22Accounts payable


165


285


The
accounts receivable and accounts payable balances as of December 31, 2008 are primarily related to affiliates of Liberty Media and the accounts receivable and accounts payable
balances as of December 31, 2007 are primarily related to affiliates of News Corporation.

In
addition to the transactions described above, in connection with our purchase of News Corporation's interests as part of the Sky Transactions, we made cash payments to News
Corporation of $315 million in 2006. We received $127 million in cash from News Corporation in August 2006 for the repayment of a note receivable for the assumption of certain
liabilities as part of the Sky Transactions described in Note 17.

Note 17: Acquisitions

Acquisitions



180 Connect.On July 8, 2008, we acquired 100% of 180 Connect Inc.'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 control over a significant portion of DIRECTV U.S.' 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.

98

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

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, 2008
consolidated financial statements reflect the preliminary 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. Amounts allocated to tangible assets, deferred tax assets and
liabilities, and accrued liabilities are estimates pending the completion of analyses currently in process. The excess of the purchase price over the estimated fair values of the net assets acquired
has been recorded as goodwill, resulting in an increase in goodwill of $142 million during 2008. We are currently evaluating whether the recorded goodwill will be deductible for tax purposes.
The purchase price allocation is expected to be completed during the first half of 2009.

The
following table sets forth the preliminary allocation of the purchase price to the 180 Connect net assets acquired on July 8, 2008 (dollars in millions):

Total current assets

$
21Property and equipment


16Goodwill


142Total assets acquired

$
179Total current liabilities

$
80Other liabilities


8Total liabilities assumed

$
88Net assets acquired

$
91


The
following selected unaudited pro forma information is being provided to present a summary of the combined results of The DIRECTV Group and 180 Connect for 2008 and 2007 as if the
acquisition had occurred as of the beginning of the respective periods, 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 each of the periods presented, nor are they necessarily indicative of the results of future operations. The
pro forma information excludes the effect of non-recurring charges.

Years Ended December 31,2008

2007(Dollars in Millions, Except Per Share Amounts)Revenues

$
19,693

$
17,246Net income


1,479


1,416Basic and diluted earnings per common share


1.33


1.18


Other.In August 2008, we paid $11 million in cash to purchase certain assets and we assumed certain liabilities of another home
service
provider for DIRECTV U.S. We accounted for the acquisition using the purchase method of accounting, and began consolidating the results from the date of acquisition. Amounts allocated to tangible
assets, deferred tax assets and liabilities, and accrued liabilities are estimates pending the completion of analyses currently in process. The excess of the purchase price over the estimated fair
values of the net assets acquired has been recorded as goodwill,

99

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

resulting
in an increase in goodwill of $15 million during 2008. We expect the recorded goodwill to be deductible for tax purposes.



On January 30, 2007, we acquired Darlene's 14% equity interest in DLA LLC for $325 million in cash. We accounted
for the acquisition of this interest using the purchase method of accounting.

The
following table set forth the final allocation of the excess purchase price over the book value of the minority interest acquired:

Goodwill

$
187Intangible assets


75Total assets acquired


262Net assets acquired

$
262


Intangible
assets that are included in "Intangible assets, net" in our Consolidated Balance Sheets include a subscriber related intangible asset to be amortized over six years and a
trade name intangible asset to be amortized over 20 years from the Darlene Transaction.



During 2006 we completed the last in a series of transactions with News Corporation, Grupo Televisa, S.A., or Televisa, Globo
and Liberty Media International, which we refer to as the Sky Transactions as further described below. The Sky Transactions resulted in the combination of the DTH satellite platforms of DIRECTV and
SKY in Latin America into a single platform in each of the major territories in the region.

Brazil.On August 23, 2006, we completed the merger of our Brazil business, Galaxy Brasil Ltda., or GLB, with and into Sky
Brazil, and
completed the purchase of News Corporation's and Liberty Media International's interests in Sky Brazil. As a result of these transactions, we hold a 74% interest in the combined business. The purchase
consideration for the transactions amounted to $670 million, including $396 million in cash paid, of which we paid $362 million to News Corporation and Liberty Media International
in 2004 and $30 million to News Corporation in August 2006, the $64 million fair value of the reduction of our interest in GLB resulting from the merger and the assumption of Sky
Brazil's $210 million bank loan.

We
accounted for the Sky Brazil acquisition using the purchase method of accounting, and began consolidating the results of Sky Brazil from the date of acquisition. We also accounted for
the reduction of our interest in GLB resulting from the merger as a partial sale pursuant to EITF No. 90-13 "Accounting for Simultaneous Common Control Mergers," which resulted in
us recording a one-time pre-tax gain during the third quarter of 2006 of $61 million in "Gain from disposition of businesses" in the Consolidated Statements of
Operations.

The
following selected unaudited pro forma information is being provided to present a summary of the combined results of The DIRECTV Group and Sky Brazil for the year ended
December 31, 2006 as if the acquisition had occurred as of the beginning of 2006, giving effect to purchase accounting adjustments. The pro forma data is presented for informational purposes
only and may not necessarily reflect our results of operations had Sky Brazil operated as part of us for the period presented, nor are

100

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

they
necessarily indicative of the results of future operations. The pro forma information excludes the effect of non-recurring charges.

Years Ended
December 31, 2006(Dollars in Millions, Except
Per Share Amounts)Revenues

$
15,077Operating profit


2,375Income from continuing operations before income taxes and minority interests


2,307Net income


1,425Basic earnings per common share


1.13Diluted earnings per common share


1.12


Mexico.In Mexico, also as part of the Sky Transactions, DTVLA's local operating company, DIRECTV Mexico, sold its subscriber list to
Sky Mexico and,
after completing the transfer of its subscribers to Sky Mexico, ceased providing services in 2005. In 2006, upon completion of the transaction, we recorded a gain of $57 million in "Gain from
disposition of businesses" in our Consolidated Statements of Operations when DLA LLC received an equity interest in Sky Mexico resulting from the sale of DIRECTV Mexico's subscriber list and
transfer of subscribers to Sky Mexico. Also in February 2006, we acquired News Corporation's and Liberty Media International's equity interests in Sky Mexico for $373 million in cash. On
April 27, 2006, we sold a portion of our equity interest to Televisa for $59 million in cash, which reduced our equity interest in Sky Mexico to 41%. We account for our investment in Sky
Mexico using the equity method of accounting. See Note 6 for additional information regarding this investment.

Other.In 2004, we acquired Sky Multi-Country Partners and related entities for $30 million in cash. As part of this transaction,
News
Corporation agreed to reimburse us $127 million for the Sky entities' net liabilities we assumed, which we received from News Corporation in August 2006.

Note 18: Segment Reporting

Our two reportable segments, DIRECTV U.S. and DIRECTV Latin America, acquire, promote, sell and distribute digital entertainment programming via satellite to
residential and commercial subscribers. Corporate and Other includes the corporate office, eliminations and other entities.

101

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

Selected
information for our operating segments is reported as follows:

DIRECTV
U. S.

DIRECTV
Latin
America

Corporate and Other

Total(Dollars in millions)2008Revenues

$
17,310

$
2,383

$


$
19,693Operating profit (loss)

$
2,330

$
426

$
(61
)
$
2,695Add: Depreciation and amortization expense


2,061


264


(5
)

2,320Operating profit (loss) before depreciation and amortization (1)

$
4,391

$
690

$
(66
)
$
5,015Segment assets

$
12,546

$
3,301

$
692

$
16,539Capital expenditures


1,765


447


17


2,2292007Revenues

$
15,527

$
1,719

$


$
17,246Operating profit (loss)

$
2,402

$
159

$
(75
)
$
2,486Add: Depreciation and amortization expense


1,448


235


1


1,684Operating profit (loss) before depreciation and amortization (1)

$
3,850

$
394

$
(74
)
$
4,170Segment assets

$
12,297

$
2,456

$
310

$
15,063Capital expenditures


2,326


336


30


2,6922006Revenues

$
13,744

$
1,013

$
(2
)
$
14,755Operating profit (loss)

$
2,348

$
79

$
(70
)
$
2,357Add: Depreciation and amortization expense


873


165


(4
)

1,034Operating profit (loss) before depreciation and amortization (1)

$
3,221

$
244

$
(74
)
$
3,391Segment assets

$
11,687

$
2,001

$
1,453

$
15,141Capital expenditures


1,798


178





1,976


---

102

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)



The
following represents a reconciliation of operating profit before depreciation and amortization to reported net income on the Consolidated Statements of Operations:

Years Ended December 31,2008

2007

2006(Dollars in Millions)Operating profit before depreciation and amortization

$
5,015

$
4,170

$
3,391Depreciation and amortization expense


(2,320
)

(1,684
)

(1,034
)Operating profit


2,695


2,486


2,357Interest income


81


111


146Interest expense


(360
)

(235
)

(246
)Other, net


55


26


42Income from continuing operations before income taxes and minority interests


2,471


2,388


2,299Income tax expense


(864
)

(943
)

(866
)Minority interests in net earnings of subsidiaries


(92
)

(11
)

(13
)Income from continuing operations


1,515


1,434


1,420Income from discontinued operations, net of taxes


6


17


Net income

$
1,521

$
1,451

$
1,420


103

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

The following table presents revenues earned from subscribers located in different geographic areas. Property is grouped by its physical location.

Years Ended and As of December 31,2008

2007

2006Revenues

Net Property
& Satellites

Revenues

Net Property
& Satellites

Revenues

Net Property
& Satellites(Dollars in Millions)North AmericaUnited States

$
17,454

$
5,728

$
15,687

$
5,330

$
13,907

$
4,088South America and the CaribbeanBrazil


1,290


566


944


251


417


159Venezuela


428


136


258


99


171


73Argentina


325


131


211


85


152


78Other


196


86


146


68


108


55Total South America and the Caribbean


2,239


919


1,559


503


848


365Total

$
19,693

$
6,647

$
17,246

$
5,833

$
14,755

$
4,453


Note 19: Commitments and Contingencies

Commitments

At December 31, 2008, 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 $291 million, payable as follows: $51 million in 2009, $50 million in 2010, $47 million in
2011, $35 million in 2012, $36 million in 2013 and $72 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 $95 million in 2008, $114 million in 2007 and $110 million in 2006.

At
December 31, 2008, our minimum payments under agreements to purchase broadcast programming, and the purchase of services that we have outsourced to third parties, such as
billing services, and satellite telemetry, tracking and control, satellite construction and launch contracts and broadcast center services aggregated $3,601 million, payable as follows:
$1,308 million in 2009, $1,178 million in 2010, $756 million in 2011, $228 million in 2012, $108 million in 2013 and $23 million thereafter.

As
of December 31, 2008, other long-term obligations totaling $210 million are payable approximately as follows: $80 million in 2009, $83 million
in 2010 and $47 million in 2011. These amounts are recorded in "Accounts payable and accrued liabilities" and "Other liabilities and deferred credits" in the Consolidated Balance Sheets.

Contingencies



In connection with approval by the Federal Communications Commission, or FCC, of the Liberty Transaction, the FCC imposed certain
conditions related to attributable interests in two pay television

104

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

operations:
DIRECTV Puerto Rico and Liberty Cablevision of Puerto Rico Ltd. We refer to the FCC's requirements as the "Puerto Rico Condition". Because neither News Corporation nor Liberty Media
could satisfy the Puerto Rico Condition, in connection with the close of the transaction a Special Committee of independent directors of our Board of Directors approved an agreement with News
Corporation and Liberty Media in which we assumed responsibility for the satisfaction, modification or waiver of the Puerto Rico Condition within the one year period specified by the FCC. As part of
this agreement, during the first quarter of 2008, we received a $160 million cash capital contribution, which we recorded as "Additional paid-in-capital" in the
Consolidated Balance Sheets.

In
order to comply with terms of the FCC order, effective February 25, 2009, we placed the shares of DIRECTV Puerto Rico into a trust and appointed an independent trustee who will
oversee the management and operation of DIRECTV Puerto Rico, and will have the authority, subject to certain
conditions, to divest ownership of DIRECTV Puerto Rico. We will continue to consolidate the results of DIRECTV Puerto Rico following this transaction.



In connection with our acquisition of Sky Brazil in 2006, our partner who holds the remaining 25.9% interest, Globo was granted the
right, until January 2014, to require us to purchase all or a portion (but not less than half) of its shares in Sky Brazil. Upon exercising this right, the fair value of Sky Brazil shares will be
determined, by mutual agreement or by an outside valuation expert, and we have the option to elect to pay for the Sky Brazil shares in cash, shares of our common stock or a combination of both. As of
December 31, 2008, we estimate that Globo's 25.9% equity interest in Sky Brazil has a fair value of approximately $325 million to $450 million. We determined the range of fair
values using significant unobservable inputs, which are Level 3 inputs under SFAS No. 157.



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, 2008. 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.

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. The Court found a principal independent claim to be anticipated and therefore invalid, and remanded for further proceedings
regarding validity of other asserted claims in view of this finding. The Court reversed the verdict of

105

---



THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)

willful
infringement, and affirmed the earlier ruling finding several claims to be invalid prior to trial. Following these decisions, our appeal bond was terminated and the escrowed royalties were
returned to us. In the remand now pending, initial summary judgment motions on invalidity of additional claims have been submitted. If necessary, there will be further proceedings and a trial of
remaining issues, which is presently scheduled for October 2009.



In 2008, we recorded a $48 million reduction to our unrecognized tax benefits as a result of the expiration of the statute of
limitations in foreign and federal taxing jurisdictions, of which $27 million related to a previously divested business, which we included in "Income from discontinued operations, net of taxes"
in the Consolidated Statements of Operations.

In
the second quarter of 2007, we recorded a $17 million reduction to our unrecognized tax benefits as a result of the settlement of a foreign withholding tax dispute from a
previously divested business, which we included in "Income from discontinued operations, net of taxes" in the Consolidated Statements of Operations.

We
have received tax assessments from certain foreign jurisdictions and have agreed to indemnify previously divested businesses for certain tax assessments relating to periods prior to
their respective divestitures. These assessments are in various stages of the administrative process or litigation, and we believe we have adequately provided for any related liability.

While
the outcome of these assessments and other tax issues cannot be predicted with certainty, we believe that the ultimate outcome will not have a material effect on our consolidated
financial statements.



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, 2008, the net book value of in-orbit
satellites was $2,184 million, of which $1,978 million was uninsured.



In July 2008, we amended our agreement with Thomson such that the amount of the rebate we can earn from the purchase of
set-top receivers was reduced from $57 million to $42 million and in return, we are no longer required to purchase $4 billion in set-top receivers over the
contract term. We continue to be obligated to grant Thomson a portion of all set-top receiver purchases. As of December 31, 2008, included in "Accounts receivable, net" and
"Investments and other assets" in the Consolidated Balance Sheets is a receivable for $21 million related to this agreement.

We
are contingently liable under standby letters of credit and bonds in the aggregate amount of $33 million at December 31, 2008.

106

---



THE DIRECTV GROUP, INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(concluded)

Note 20: Selected Quarterly Data (Unaudited)

The following table presents unaudited selected quarterly data for 2008 and 2007:

1st

2nd

3rd

4th(Dollars in Millions, Except Per Share Amounts)2008 QuartersRevenues

$
4,591

$
4,807

$
4,981

$
5,314Operating profit


657


801


658


579Income from continuing operations


371


455


363


326Income from discontinued operations, net of taxes











6Net income


371

$
455


363


332Basic and diluted earnings per common share from continuing operations


0.32


0.40


0.33


0.312007 QuartersRevenues

$
3,908

$
4,135

$
4,327

$
4,876Operating profit


563


740


566


617Income from continuing operations


336


431


319


348Income from discontinued operations, net of taxes





17





Net income


336


448


319


348Basic and diluted earnings per common share from continuing operations


0.27


0.36


0.27


0.30


***

107

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THE DIRECTV GROUP, INC.

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, 2008.

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, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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:



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, 2008. In making this assessment, our management used the criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the

108

---



THE DIRECTV GROUP, INC.

Treadway
Commission (COSO). Based on their assessment and those criteria, management believes that, as of December 31, 2008, 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of The DIRECTV Group, Inc.
El Segundo, California

We
have audited the internal control over financial reporting of The DIRECTV Group, Inc. (the "Company") as of December 31, 2008, based on criteria established in Internal ControlIntegrated
Frameworkissued 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, 2008, based on the criteria established in Internal Control

109

---



THE DIRECTV GROUP, INC.

Integrated Frameworkissued 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
schedules as of and for the year ended December 31, 2008 of the Company and our report dated February 26, 2009, expressed an unqualified opinion on those financial statements and
financial statement schedules and included an explanatory paragraph regarding the Company's adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109and Statement of Financial Accounting
Standards No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statement No. 87, 88, 106 and
132(R).

/s/ DELOITTE & TOUCHE LLP


Los
Angeles, California
February 26, 2009

110

---





THE DIRECTV GROUP, INC.

ITEM 9B.    OTHER INFORMATION

None.

***

PART III

ITEMS    10, 11, 12, 13 and 14

We hereby incorporate by reference information required by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report from The DIRECTV
Group, Inc.'s definitive Proxy Statement for its 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year.

***

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

Page
Number(a)

1.

All Consolidated Financial Statements


See Part II2.

Financial Statement Schedule ICondensed Financial Information of the Registrant


118Financial Statement Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2008, 2007 and
2006


1193.

Exhibits




Exhibit Number

Exhibit Name*3.1

Amended and Restated Certificate of Incorporation of Hughes Electronics Corporation, dated as of December 22, 2003
(incorporated by reference to Exhibit 99.2 to the Form 8-K of Hughes Electronics Corporation filed December 22, 2003)*3.2

Certificate of Ownership and Merger of The DIRECTV Group, Inc. with and into Hughes Electronics Corporation dated
March 16, 2004 (incorporated by reference to Exhibit 3.1 to the Form 8-K of The DIRECTV Group, Inc. filed March 16, 2004)*3.3

Amended and Restated By-laws of Hughes Electronics Corporation, dated as of December 22, 2003 (incorporated by reference
to Exhibit 99.3 to the Form 8-K of Hughes Electronics Corporation filed December 22, 2003)*4.1

Specimen form of certificate representing common stock of The DIRECTV Group, Inc. (incorporated by reference to
Exhibit 4.1 to the Form 10-K of The DIRECTV Group, Inc. filed March 17, 2004)


111

---



THE DIRECTV GROUP, INC.

Exhibit Number

Exhibit Name*4.2

Indenture, dated as of February 28, 2003, by and among DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., as Issuers,
DIRECTV, Inc., USSB II, Inc., DIRECTV Customer Services, Inc., DIRECTV Merchandising, Inc., DIRECTV Enterprises, LLC, DIRECTV Operations, LLC, as Guarantors, and The Bank of New York as Trustee (incorporated by reference
to Exhibit 4.1 to the Form 10-Q of Hughes Electronics Corporation filed May 8, 2003)*4.3

Form of 8.375% Senior Notes due 2013 (incorporated by reference to Exhibit 4.2 to the Form 10-Q of Hughes
Electronics Corporation filed May 8, 2003)*4.4

Supplemental Indenture dated as of September 30, 2004 by and among DIRECTV Home Services, LLC, DIRECTV
Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 to the Form 10- K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc.
filed March 1, 2005)*4.5

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 4.5 to the Form 10-K of The DIRECTV Group, Inc. filed March 1, 2007)*4.6

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 Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co, Inc. filed June 20, 2005)*4.7

Form of 63/8% Senior Notes due 2015 (incorporated by reference to Exhibit 10.1 to the
Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co, Inc. filed June 20, 2005)*4.8

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)*4.9

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)**4.10

Form of 75/8% Senior Notes due 2016*10.1

Amended and Restated Agreement for the Allocation of United States Income Taxes, dated as of April 9, 2003, by and
between General Motors Corporation and Hughes Electronics Corporation (incorporated by reference to Exhibit 99.3 to the Form S-4 of Hughes Electronics Corporation filed June 5, 2003)


112

---



THE DIRECTV GROUP, INC.

Exhibit Number

Exhibit Name*10.2

DTH Agreement, dated as of October 8, 2004, by and among Grupo Televisa, S.A., The News Corporation Limited, Innova, S. de R.L. de
C.V., The DIRECTV Group, Inc. and DIRECTV Latin America, LLC (incorporated by reference to Exhibit 10.8 to the Form 8-K of The DIRECTV Group, Inc. filed October 15, 2004)*10.3

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 Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed April 13, 2005)*10.4

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)*10.5

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)*10.6

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)*10.7

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)*10.8

Letter Agreement dated December 21, 2006 between The DIRECTV Group, Inc. and Liberty Media Corporation (incorporated
by reference to Exhibit 10.3 to the Form 8-K of The DIRECTV Group, Inc. filed February 27, 2008)*10.9

Confidentiality, Non-Solicitation and Non-Competition Agreement dated as of December 22, 2006 between The DIRECTV Group,
 Inc. and News Corporation (incorporated by reference to Exhibit 10.2 to the Form 8-K of The DIRECTV Group, Inc. filed February 27, 2008)*10.10

Separation Agreement dated as of February 26, 2008 between The DIRECTV Group, Inc. and News Corporation
(incorporated by reference to Exhibit 10.1 to the Form 8-K of The DIRECTV Group, Inc. filed February 27, 2008)*10.11

Letter Agreement dated May 6, 2008 among The DIRECTV Group, Inc., Liberty Media Corporation, Greenlady Corporation
and Greenlady II, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K of the The DIRECTV Group, Inc. filed May 6, 2008)


113

---



THE DIRECTV GROUP, INC.

Exhibit Number

Exhibit Name*10.12

Agreement dated May 6, 2008 between The DIRECTV Group, Inc. and Liberty Media Corporation (incorporated by reference to
Exhibit 10.1 to Form 8-K of The DIRECTV Group, Inc. filed May 7, 2008) *10.13

Employment Agreement dated as of August 9, 2007 between The DIRECTV Group, Inc. and Chase Carey (incorporated by
reference to Exhibit 10.1 to Form 8-K of The DIRECTV Group, Inc. filed August 14, 2007) *10.14

Employment Agreement effective as of January 1, 2007 between The DIRECTV Group, Inc. and Bruce Churchill
(incorporated by reference to Exhibit 10.2 to the Form 8-K of The DIRECTV Group, Inc. filed February 12, 2007) *10.15

Employment Agreement effective as of January 1, 2007 between The DIRECTV Group, Inc. and Larry Hunter (incorporated
by reference to Exhibit 10.3 of the Form 8-K of The DIRECTV Group, Inc. filed February 12, 2007) *10.16

Employment Agreement effective as of January 1, 2007 between The DIRECTV Group, Inc. and Romulo Pontual
(incorporated by reference to Exhibit 10.4 of the Form 8-K of The DIRECTV Group, Inc. filed February 12, 2007) *10.17

Employment Agreement effective October 5, 2007 between The DIRECTV Group, Inc. and Michael Palkovic (incorporated by
reference to Exhibit 10.1 to Form 8-K of The DIRECTV Group, Inc. filed November 9, 2007) *10.18

Employment Agreement dated as of October 30, 2008, between Patrick T. Doyle and The DIRECTV Group, Inc.
(incorporated by reference to Exhibit 10.1 to the Form 8-K of The DIRECTV Group, Inc. filed on November 5, 2008) **10.19

The DIRECTV Group, Inc. Executive Deferred Compensation Plan, amended and restated effective as of January 1,
2005 *10.20

The DIRECTV Group, Inc. Amended and Restated 2004 Stock Plan (incorporated by reference to Annex B to the The
DIRECTV Group, Inc.'s Definitive Proxy Statement dated April 27, 2007 and filed on April 27, 2007) *10.21

The DIRECTV Group, Inc. Amended and Restated Executive Officer Cash Bonus Plan (incorporated by reference to Annex C
to the The DIRECTV Group, Inc.'s Definitive Proxy Statement dated April 27, 2007 and filed on April 27, 2007) *10.22

Terms and Conditions of 2007 Equity program to applicable executive officers (incorporated by reference to Exhibit 10.1
of the Form 8-K of The DIRECTV Group, Inc. filed February 12, 2007) *10.23

Terms and conditions of restricted stock unit grants to applicable executive officers (incorporated by reference to
Exhibit 10.1 to the Form 8-K of The DIRECTV Group, Inc. filed February 14, 2008) *10.24

Summary Terms2008 Bonus (incorporated by reference to Exhibit 10.2 to the Form 8-K of The DIRECTV Group,
 Inc. filed February 14, 2008) *10.25

Summary Terms 2009 Restricted Stock Unit Grants to applicable executive officers (incorporated by reference to
Exhibit 10.1 to the Form 8-K of The DIRECTV Group, Inc. filed February 25, 2009)


114

---



THE DIRECTV GROUP, INC.

Exhibit Number

Exhibit Name *10.26

Summary Terms2009 Bonus (incorporated by reference to Exhibit 10.2 to the Form 8-K of The DIRECTV Group, Inc. filed
February 25, 2009) *10.27

Non-Qualified Stock Option Agreement, dated as of March 16, 2004, between The DIRECTV Group, Inc. and Chase Carey
(incorporated by reference to Exhibit 10.40 to the Form 10-K of The DIRECTV Group, Inc. filed March 1, 2005) *10.28

The DIRECTV Group, Inc. Performance Stock Unit Award Agreement dated as of August 13, 2007 between The DIRECTV Group,
 Inc. and Chase Carey (incorporated by reference to Exhibit 10.2 to Form 8-K of The DIRECTV Group, Inc. filed August 14, 2007) *10.29

The DIRECTV Group, Inc. Non-Qualified Stock Option Agreement dated as of August 13, 2007 between The DIRECTV Group,
 Inc. and Chase Carey (incorporated by reference to Exhibit 10.3 to the Form 8-K of The DIRECTV Group, Inc. filed August 14, 2007)*14

The DIRECTV Group, Inc. Code of Ethics and Business Conduct, adopted February 6, 2007 (incorporated by reference to
Exhibit 14.1 to the Form 8-K of The DIRECTV Group, Inc. filed on February 12, 2007)**21

Subsidiaries of the Registrant as of December 31, 2008**23

Consent of Deloitte & Touche LLP**31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**31.2

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**32.1

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002**32.2

Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002


---

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.

115

---





THE DIRECTV GROUP, INC.        SCHEDULE ICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS
(Parent Company Only)

Years Ended December 31,2008

2007

2006(Dollars in Millions)Operating costs and expensesGeneral and administrative expenses

$
68

$
87

$
79Operating loss


(68
)

(87
)

(79
)Interest income


35


43


61Interest expense


(3
)

(3
)

(5
)Equity in net earnings of subsidiaries


2,430


2,434


2,309Other, net


(15
)

(10
)

Income from continuing operations before income taxes


2,379


2,377


2,286Income tax expense


(864
)

(943
)

(866
)Income from continuing operations


1,515


1,434


1,420Income from discontinued operations, net of taxes


6


17


Net income

$
1,521

$
1,451

$
1,420


CONDENSED BALANCE SHEETS
(Parent Company Only)

December 31,2008

2007(Dollars in Millions)ASSETSCurrent assetsCash and cash equivalents

$
536

$
74Accounts and interest receivables from subsidiaries


30


29Deferred income taxes


15


53Prepaid expenses and other


110


15Total current assets


691


171Investments in subsidiaries


5,031


6,899Other assets


67


94Total assets

$
5,789

$
7,164LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable, and accrued liabilities

$
112

$
79Total current liabilities


112


79Deferred income taxes


424


474Other liabilities and deferred credits


400


309Commitments and contingenciesStockholders' equity


4,853


6,302Total liabilities and stockholders' equity

$
5,789

$
7,164


---

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

116

---



THE DIRECTV GROUP, INC.

SCHEDULE ICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS
(Parent Company Only)

Years Ended December 31,2008

2007

2006(Dollars in Millions)Cash Flows from Operating ActivitiesNet cash used in operating activities

$
(16
)
$
(388
)
$
(256
)Cash Flows from Investing ActivitiesPurchase of short-term investments





(588
)

(2,517
)Sale of short-term investments





748


3,029Dividends from, net of investments in, subsidiaries


3,390


1,259


992Cash paid for property and equipment


(17
)

(30
)

Other, net


6


(5
)

13Net cash provided by investing activities


3,379


1,384


1,517Cash Flows from Financing ActivitiesCommon shares repurchased and retired


(3,174
)

(2,025
)

(2,977
)Capital contribution


160





Stock options exercised


105


118


257Excess tax benefit from share-based compensation


8


7


2Net cash used in financing activities


(2,901
)

(1,900
)

(2,718
)Net increase in cash and cash equivalents


462


(904
)

(1,457
)Cash and cash equivalents at beginning of the year


74


978


2,435Cash and cash equivalents at end of the year

$
536

$
74

$
978


---

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

117

---



THE DIRECTV GROUP, INC.

SCHEDULE ICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

As discussed in Note 8 of the Notes to the Consolidated Financial Statements, the terms of the DIRECTV Holdings LLC credit facility limit DIRECTV
Holdings LLC and its respective subsidiaries from transferring funds to us in the form of cash dividends, loans or advances. In the parent company only financial statements, we state our
investments in subsidiaries at cost, net of equity in earnings of subsidiaries, since the date of formation/acquisition. As a result, we include our interest in the net assets of DIRECTV
Holdings LLC, which total approximately $2.7 billion at December 31, 2008 and $4.7 billion at December 31, 2007 in "Investments in subsidiaries" in the accompanying
Condensed Balance Sheets of the parent company. The parent company only financial statements and related notes should be read in conjunction with our consolidated financial statements and notes
thereto.

Note 2: Credit Facilities

See Note 8 of the Notes to the Consolidated Financial Statements.

Note 3: Contingencies

See Note 19 of the Notes to the Consolidated Financial Statements.

Note 4: Dividends Received

We received dividends from DIRECTV U.S. in the amounts of $3,400 million in 2008, $1,050 million in 2007 and $300 million in 2006 from
available cash and cash equivalents. See Note 6 of the Notes to the Consolidated Financial Statements for other dividends received.

118

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THE DIRECTV GROUP, INC.  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, 2008Allowances Deducted from AssetsAccounts receivable

$
(56
)
$
(210
)
$
(192)
(a)
$
408
(b)
$
(50
)For the Year Ended December 31, 2007Allowances Deducted from AssetsAccounts receivable

$
(46
)
$
(196
)
$
(160)
(a)
$
346
(b)
$
(56
)For the Year Ended December 31, 2006Allowances Deducted from AssetsAccounts receivable

$
(56
)
$
(206
)
$
(119)
(a)
$
335
(b)
$
(46
)


---

119

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THE DIRECTV GROUP, INC.

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.

THE DIRECTV GROUP, INC.(Registrant)Date: February 26, 2009By:

/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 26th day of February 2009 by the following persons on behalf of the
Registrant and in the capacities indicated.

Signature

Title/s/ JOHN MALONE (John Malone)

Chairman of the Board of Directors/s/ CHASE CAREY (Chase Carey)

Director, 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 and Controller

}

Principal Accounting Officer/s/ NEIL R. AUSTRIAN (Neil R. Austrian)

Director/s/ RALPH F. BOYD, JR. (Ralph F. Boyd, Jr.)

Director/s/ MARK D. CARLETON (Mark D. Carleton)

Director/s/ GREG MAFFEI (Greg Maffei)

Director/s/ NANCY NEWCOMB (Nancy Newcomb)

Director/s/ CHARLES R. LEE (Charles R. Lee)

Director


120

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THE DIRECTV GROUP, INC.

Signature

Title/s/ PETER A. LUND (Peter A. Lund)

Director/s/ HAIM SABAN (Haim Saban)

Director


***

121

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