DirecTV Irks Sports Fans With ‘HD Tax’

May 29, 2005  •  Post A Comment

DirecTV’s plan to charge NFL Sunday Ticket viewers an extra $99 to watch games in high definition has sparked a revolt among frustrated subscribers, who called the “HD tax” the last straw in a series of expensive HD programming costs.

More than 500 subscribers have signed an online pledge to cancel their Sunday Ticket service if plans for the so-called “SuperFan” surcharge, announced on DirecTV’s Web site three weeks ago, go forward.

“I think they’ve gone too far,” said Mike Mazza, a Florida software engineer and six-year DirecTV subscriber. “They’re not charging for additional content, like with HD channels. They’re charging me for a better picture in a format the country is supposed to be migrating to.”

The surcharge is particularly frustrating for subscribers be-cause DirecTV is considered to have the most expensive HD programming package among the major video providers, despite having only four basic cable HD channels nationwide. Cable companies such as Comcast and Time Warner typically offer services in which subscribers pay $5 to $10 per month for an HD package that includes about 10 HD channels and the use of an HD receiver/digital video re-corder. DirecTV competitor DISH Network also offers a high-definition receiver with its $9.99 HD package but charges $250 to upgrade to an HD DVR.

DirecTV, however, charges a monthly fee of $10.99 plus the entire cost of its proprietary receiver-$299 for standard HD and, until two weeks ago, a whopping $999 for an HD DVR.

“I think they underestimated the impact of this as a public relations issue,” said Mr. Mazza, who paid $999 for his DirecTV HD DVR. “Enough is enough already.”

Sunday Ticket has been available on an annual subscription basis for DirecTV subscribers since 1995. The package allows fans to see every regular-season NFL game (except local games, which are blacked out). In 2002 DirecTV signed an exclusive five-year contract extension with the NFL worth about $2 billion. Last year, when DirecTV was acquired by News Corp., the Sunday Ticket package cost $199 and included HD games. This year, the price has gone up to $219, plus $99 for HD games.

DirecTV spokesperson Robert Marsocci pointed out the HD “SuperFan” add-on includes new features, such as viewer-selected camera angles, the ability to follow eight games on one screen and a condensed highlights-only version of games. Subscribers to the premium package will also be able to index, search and view specific plays by player or team on game day. Viewers can create their own highlight show.

“We are catering to the die-hard football fan,” Mr. Marsocci said. “We really believe, for those fans who really want to have the ultimate football experience, we think they’d be more than willing to pay $99 to get these compelling and unique new features. Certainly we understand those who received HD for free last year, we understand their concern, and we looked long and hard at the best way to package this.”

But North Arkansas Times sports columnist Joe West was so irate about the surcharge that he declared he was dumping DirecTV after six years.

“It’s like losing my best friend,” Mr. West wrote, “after my best friend ate my last bowl of chili and slugged me in the gut.”

After nine years as a DirecTV customer, Matt Cramer of South Carolina started Web site Nohdtax.com to rally support for repealing the charge. “High-definition enthusiasts are as passionate about their television as NFL fans are passionate about football,” Mr. Cramer said. “DirecTV has managed to come up with a program that irritates a group that shares both passions.”

Bruce Leichtman, president of the digital television analyst firm Leichtman Research Group, agreed the charge was ill-conceived.

“People who have Sunday Ticket typically have had DirecTV for long periods of time,” Mr. Leichtman said. “You’re talking about your best customers-early adopters with high incomes. When you push your best customers too far, that’s not a good situation.”

Still, Mr. Leichtman predicted few DirecTV subscribers will cancel their service. “There’s a small but loyal following to Sunday Ticket games and there’s no place else to go for it,” he said.

The controversy comes at an awkward time for DirecTV, which is fighting an HD services war against EchoStar and cable. Though DirecTV is taking significant action to secure future HD services, EchoStar and cable currently offer more bang for the HD dollar.

The battle intensified after the demise last month of Voom, the all-HD satellite service, when both DBS providers scrambled to pick up the service’s 38,000 customers. EchoStar snatched up 10 of Voom’s channels, which increased the number of DISH HD offerings to 15. DISH offered former Voom subscribers the option of switching to DISH at a discount, as well as offering current HD customers the chance to add 10 Voom channels for an additional $5 a month. Though HD subscriber numbers are not available, DISH spokes-man Mark Cicero said, “We had a significant blip of HD customers as soon as we grabbed those Voom channels.”

DirecTV countered by putting out a $200 coupon for former Voom subscribers interested in buying a DirecTV receiver and slashed the base price of its HD DVR from $999 to $699.

DirecTV is aware that it has fewer HD channels to offer than competitors. The satellite service is launching four high-definition satellites to expand its offerings to include local HD channels in most markets by next year. DirecTV also plans to cut the price of receivers to less than $300 and allow a lease option when the company rolls out its new MPEG-4 system, which allows for greater video stream compression.

DISH is taking a more passive approach, estimating that local HD channels will not be widely available until 2006.

“Cable is taking on more of the burden of the cost of HD, whereas DBS is putting the cost on the customer for now. That’s why their box costs $700,” Mr. Leichtman said. “DirecTV is basically stalling [on becoming cost-competitive] until they roll out their new services next year.”

Whether the HD war is affecting DirecTV’s churn rates is unclear. Sources said HD subscribers represent only about 5 percent of DBS subscribers.

In the fourth quarter of last year, DISH gained more customers than DirecTV. In the first quarter of 2005, however, the reverse was true, with DirecTV adding 505,000 to a total of 14.4 million customers and DISH gaining 325,000 to total of 11.23 million subscribers. Still, DISH enjoyed a profitable quarter-$318 million in profit and a 28 percent increase in sales.