The Daily Walk of Shame: DirecTV vs. Versus

This new Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.

Today's subject: For nearly two months now, DirecTV (Nasdaq: DTV  ) and Comcast (Nasdaq: CMCSA  ) have been exchanging verbal jabs, like a couple of goons squaring off at center ice. The only problem is, 14 million viewers can't watch any of it.

They're squabbling over Versus, a Comcast-owned sports channel that carries everything from cage fighting and IndyCar races to college football and the Tour de France. It's also the National Hockey League's primary U.S. broadcast partner, with exclusive rights to 54 regular-season games this year and several postseason games next spring, including two games of the Stanley Cup Final.

DirecTV abruptly yanked Versus from its feed on Sept. 1, after the sides couldn't agree on a contract renewal. The NHL season is now nearly three weeks old, and DirecTV customers have already missed 10 Versus games.

According to the Sports Business Journal, Comcast initially wanted a 20% fee increase for its growing sports network. DirecTV refused, and it still wouldn't give in even after Comcast reeled in its demands. Versus now says it's not seeking a fee increase and reportedly has an offer on the table whereby even if the number of DirecTV subscribers grows, DirecTV's payment to Versus won't.

Why you should be indignant: Instead of quietly working to get a deal done, DirecTV started publicly slinging mud. Where Versus used to appear on the channel lineup, DirecTV placed a notice decrying Comcast's "unfair and outrageous demands." In a separate statement, DirecTV said Versus was "basically a paid programming and infomercial channel with occasional sporting events of interest" and, in reference to the initial request for a fee increase, remarked that Comcast's terms were "simply piggish."

Versus' beef is that DirecTV wants the option to move Versus from its current tier, which has approximately 14 million subscribers, to a sports-only package that costs an extra $12 a month and, according to Versus President Jamie Davis, would bring in about 6 million fewer viewers. Neither side seems likely to budge anytime soon, especially since DirecTV claims re-tiering is a fair option, given Versus' small viewership numbers and considering that satellite competitor DISH Network (Nasdaq: DISH  ) carries the channel in a package with low subscriber penetration. Particularly astounding is that DirecTV says it's treating Versus as if it's negotiating a new deal with a new channel and will gauge the market as such.

But is something else going on here? On its website, where it takes yet another shot at Comcast, DirecTV takes the time to point out that Versus' parent is "the largest cable company in the U.S. and our largest competitor." So is DirecTV simply being stubborn with its biggest rival?

After all, the cost to carry Versus seems far from "outrageous." In its online missive, DirecTV claims that by holding firm against Comcast, it's only thinking of its customers "in these difficult economic times," since the company would have to pass on any cost increases to the end user. How magnanimous -- except that, according to the Sports Business Journal, DirecTV had been paying Versus a whopping 21 cents per subscriber per month. For perspective, DirecTV pays Disney's (NYSE: DIS  ) ESPN more than $4 per subscriber per month. Sure, ESPN is a much bigger moneymaker, but even a 20% increase would have raised Versus' comparatively paltry 21 cents a month to about a quarter. I'm sure DirecTV's customers wouldn't mind whatever small-change increase would accompany a new deal with Versus, especially compared with the extra $12 they'd have to pay to access the channel on a sports-only tier.

Where's the NHL?
Other than placing an ad on nhl.com asking fans to email DirecTV, the league has mostly stayed out of the fracas, like a circling referee waiting for one of the fighters to fall to the ice. That's an odd stance for a league that's struggling to build a U.S. audience. And the NHL hardly needs another black eye right now: It just finished fighting an offseason court battle to maintain control of its bankrupt Phoenix franchise, after Research In Motion (Nasdaq: RIMM  ) CEO Jim Balsillie tried to strong-arm the league into letting him buy the team and relocate it to Hamilton, Ontario.

What now? Let's review.

  • DirecTV thinks Versus is a worthless infomercial channel and says it's fighting this battle to contain customers' costs, yet it wants the option to charge viewers $12 a month for the luxury of seeing all those ads for Snuggies and Jack LaLanne Power Juicers.
  • Comcast is squabbling about losing 6 million viewers, yet Versus has already lost 14 million potential viewers by not being on DirecTV at all.
  • The NHL wants to grow its U.S. market share, but it stands back and does virtually nothing while its leading U.S. broadcast partner remains blacked out on the nation's largest satellite-TV provider.

So, Fools, who blinks first? More pointedly, who needs to blink first? DirecTV's broadsides against Comcast have been tremendously unprofessional, but the fact remains that Versus needs DirecTV more than DirecTV needs Versus. And the NHL needs them both. 

Right now, all three are worthy of a game-misconduct penalty.

Fool online editor Adrian Rush has already missed four Versus games from the two teams he follows, but he owns no shares of any of the companies mentioned here. Disney is a recommendation of the Inside Value and Stock Advisor newsletter services. The Fool's disclosure policy is always on the power play.


Read/Post Comments (27) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2009, at 11:23 AM, ceptom wrote:

    DirecTV thinks Versus is a worthless infomercial channel? What makes Versus any different than any other DirecTV channel. I'm a DirecTV subscriber and in my opinion, all DirecTV channels are turning into infomercial channels. I can't have the dish tuned to any other channel other than Disney or Nickelodeon when my daughter is around because of the constant bombardment of male enhancement commercials. And if you do find a show to watch, here is the latest trick in DirecTV's programming. Seven minutes of programming, followed by 5 minutes of commercials, followed by 1 minute of programming, followed by another 3 minutes of commercials, then the cycle repeats. When my contract is up, I will be dumping DirecTV, connecting a antenna to get local and national news, and adding a subscription to Netflix.

  • Report this Comment On October 21, 2009, at 2:07 PM, BMFPitt wrote:

    I hate Comcast, but right now I agree with them in this fight. I am moving in a few weeks and have long wanted to dump Comcast and get DirecTV (actually, I really want FIOS but that's a whole other rant on availability) and right now I don't know what to do. Even if I did have to pay the $12/mo for 6 months out of the year it would still be cheaper, but right now I wouldn't even have that option if I went DTV.

    I don't know if I'd want to deal with gettign Comcast for 2 months just for the playoffs. Plus that would totally jinx it and I'd be to blame for a first round sweep.

  • Report this Comment On October 21, 2009, at 2:33 PM, swiing wrote:

    Why should DirecTV pay anything for Versus? They are just another low penetration channel with commercials. Shouldn't they be profitable by commercial revenue? They should be paying DirectTV to carry their commercial.

  • Report this Comment On October 21, 2009, at 2:58 PM, HDTVMAN wrote:

    This entire cable & satellite senario has gotten out of hand. Why should any carrier PAY a commercial programmer to carry their signal, especially a local channel, which is free over-the-air to begin with? The larger the audience, the more the commercial network can charge for advertising. I understanding paying for non-commercial networks, but if the cable and satellite companies stop paying, our rates will decline, their profits will remain the same, and the commercial stations/networks will be forced to improve their products to increase their advertising rates and income.

  • Report this Comment On October 21, 2009, at 3:48 PM, EdMcGon wrote:

    They still play hockey? I hadn't noticed...

  • Report this Comment On October 21, 2009, at 3:51 PM, titan124 wrote:

    I'm a big hockey fan, and I know for a fact that there are NHL fans who are incensed about this. On a message board I go to, people revealed that if they called directtv to complain they were given half off the NHL Center Ice package. If they still complained, it was given to them for free. This just doesn't make sense, Comcast has clearly brought it's already reasonable demands down, while directtv is prepared to lose money to keep Versus out of their lineup.

  • Report this Comment On October 21, 2009, at 4:05 PM, thug123 wrote:

    Lets face it, once directv loses the NFL package there will be a sucking sound from directv's wallet. Their service sucks, their HD picture sucks compared to mose everything else because of the amount of compression they use. Sound is screwed up on certain channels. Customer service is awful. Their DVR software is outdated, you cannot split a sgnal by normal splitter, you have to buy expensive equipment that is prone to fail. They are the only game in town though for the NFL package. Once that is gone they will be receiving my dish back in pieces with a farewell!!!

  • Report this Comment On October 21, 2009, at 4:46 PM, TMFMitten wrote:

    Thanks for all your comments. As a hockey fan myself, I'm pretty fed up, too. If I hadn't already paid for Center Ice, I'd probably leave DTV at this point. And with a move in my future, I don't want to be locked in to a 12-month contract with a new provider. So DTV wins by default -- for now.

    It sounds as if Comcast is making concessions, but I find it funny that they're making such a fuss about being re-tiered, when Comcast was the one pulling this same stunt not so long ago. When the NFL rejected a bid from Versus to carry eight games a year, Comcast stuck the NFL Network (which ended up carrying the games itself) on a premium sports tier. What goes around, comes around. It seems Comcast can dish it out, but they can't take it. Roger Goodell had to step in and negotiate a settlement to get the NFL Network back on a more mainstream tier.

    If only Gary Bettman were that aggressive on behalf of his sport. There really are no innocent parties in this mess.

  • Report this Comment On October 21, 2009, at 5:50 PM, HDTVMAN wrote:

    Bottom line, both DIRECTV and Comcast are number one in their respective categories, both direct competitors, and in this business, there is only room for one. One of them needs to pull out the check book, write a check to the other, and make themselves a solid number #1. As we all know in this democracy, with government controls in place, competition drives up prices. Someone has to pay for all the lobbyists!!!

  • Report this Comment On October 21, 2009, at 5:50 PM, ellipsoid wrote:

    Switch "to over the air" TV if you can. Save TONs of money or talk with your wallet. Go over to your friends house to watch stuff you can't get over the air -- i.e. sports. I was paying Dish more than $80 per month then realized that most of what we watched was on networks that just switched to free digital over the air broadcast. So, I bought a Tivo DVR and paid the lifetime fee. I've already saved more than the lifetime fee by cutting Dish out of the picture. If I keep the Tivo DVR for more than 3 years I'll save on the cost based on the Tivo monthly fee. My wallet walked on Dish. You should consider walking on DirectTV and Comcast.

  • Report this Comment On October 21, 2009, at 6:03 PM, dotphoto wrote:

    Check out ratings for DirecTV here: http://www.rateitall.com/i-26676-directv.aspx They have a lot of angry customers.

  • Report this Comment On October 21, 2009, at 6:13 PM, richie54 wrote:

    The real problem here is that DirecTV has found out what a lot of us Fools found out quite some time ago--hockey stinks and has been getting worse.

  • Report this Comment On October 21, 2009, at 6:22 PM, jesse2159 wrote:

    I've had DirecTV for a little over a year and would pay them to get rid of it. I thought Comcast was the worst line up, but DirecTV HD is so mindless I'm anticipating the day when my contract is up. I'm not even sure why I watch any of this crap at all even if it was for free. But over $80 bucks a month? Way too expensive. That's $960 a year plus taxes that pushes it to well over a thousand dollars for crap.

  • Report this Comment On October 21, 2009, at 6:23 PM, ET69 wrote:

    I hope they keep it up until we all stop watching TV period!

  • Report this Comment On October 21, 2009, at 7:34 PM, xetn wrote:

    Who cares?

  • Report this Comment On October 21, 2009, at 7:55 PM, TMFMitten wrote:

    Hockey fans.

  • Report this Comment On October 22, 2009, at 10:50 AM, nogrthinker wrote:

    DirectTV, Comcast? They both seem like monopoly seeking blood suckers to me. I could add some more to the list of companies that seek to use market or political power to stifle competition, but that would get 'off subject.' Big isn't necessarily good or bad, but when big is bad, it's really bad. Companies often get big enough (oligarchies) that they begin to act like mini-governments.

  • Report this Comment On October 26, 2009, at 2:33 PM, donsueh wrote:

    Well, sorry I only saw this days after the comments - what no one seems to realize is Versus is the station of the PBR - Pro. Bull Riders which is about to embark on it's 2 week finals in Vegas. There is a huge following of the PBR, the most successful new sport ever. I won't miss one minute of it, and I am far from alone. The PBR is what drives Versus, not hockey, not the Tour, not cage fighting. You all are totally missing the gorilla in the room.

  • Report this Comment On October 27, 2009, at 1:08 PM, godevils54 wrote:

    I'm here to tell you the ones who write get rid of DTV and go to air TV or Comcast are the ones who shouldn't even be blogging right now!! You have no clue about sports or shows or anything TV related! I have had DTV for 6 years now and I pay a lot of money for it because I dont have to go to a friends house to watch what I want and I mean I!! I'm glad DTV is telling versus where to stick it, I'm a huge hockey fan and yea it sucks but I have tons of other games to watch, so I miss a few until versus gets there Sh-t together. The whiners are always going to whine and the winners are always going to enjoy life!!! I love my sports and I love my DTV for giving it to me and the NFL package will never go away they might have to share it but it will never go away!!

  • Report this Comment On October 27, 2009, at 9:01 PM, WhiteHatBobby wrote:

    DirecTV is corrupt enough that they want more for HD. TWC-SC doesn't charge extra for HD, and that was what put us back with TWC. Glad we went back because we kept the Booze (IRL), Bulls (PBR), Bikes (Le Tour), and Ice (LNH).

    DTV thinks MTV is more important than Versus. Consider MTV is one of the biggest wastelands of the country, and Versus airs the all-important Mountain West Conference, and I wonder if ESPN's probable push to pay-per-view for the BCS Championship Game next season and "control" of the BCS will affect the Versus and CBS-tied MWC.

  • Report this Comment On October 28, 2009, at 4:00 PM, PinkPhloyd wrote:

    I cancelled my DirecTV subscription precisely because of this dispute and made sure that I let them know it.

  • Report this Comment On October 28, 2009, at 4:23 PM, Berryman300 wrote:

    I find it hilarious that Comcast is fighting this battle. It was just 2 years ago when Comcast was in the EXACT same position Direc-TV is now in. They were fighting with the Big 10 Network, claiming that it should be on a sports channel tier, blah blah blah. Now they're using exactly the same argument Big 10 used against them.

    I wish we had actual competition when it comes to television.

  • Report this Comment On October 29, 2009, at 1:33 AM, cbrathw8 wrote:

    This is not new battle. The war for the regional sports network in Philadelphia has been going on for over a decade. Comcast owns the regional sports network in Philly and won't let DirecTV carry it.

    It seems to me like Comcast should be paying DirecTV to carry Comcast-Versus. No one watches Versus currently, and for Versus to grow at all, it needs to be carried by all providers. If DirecTV no longer carries Versus, Versus will inevitably lose its NHL and College Football deals, leaving them only with minor sports that can't afford to be on ESPN.

    In a few years this stupid anticompetitive behavior will be all forgotten as internet streaming of sports wins out.

  • Report this Comment On October 29, 2009, at 8:49 PM, tigertor wrote:

    I have experience with the cut throat tactics of direct t.v. For those of you who are intending to quit the service you should watch your contract date and notify direct t.v. BEFORE the end of your contract. They will automatically renew you for another year if you pass the contract date. There is no recourse or any agency to conpalin to. The sattelite providers are not regulated by any government agency. There simply is no way to get assistance with a complaint about direct t.v. (small letters intended). That's why they are so arrogant and use the tactics that you're seeing. Their customers are captive.

  • Report this Comment On November 07, 2009, at 12:54 AM, crashdamage1957 wrote:

    want hockey? try your local team, AHL. IHL. College. High school, whatever. The games are so much better in person anyway.

  • Report this Comment On January 01, 2010, at 2:17 PM, Fool wrote:

    If DIRECTV is so concerned about cost to it's customers, why do they still charge us for versus when it has not been available for several months.I haven't seen any discounts on my bill.

  • Report this Comment On January 25, 2010, at 2:02 PM, Altidude wrote:

    I switched to Dish from DirecTV a couple of weeks back because DirecTV dropped Versus.

    The DirecTV rep told me that the DirecTV rates would have risen "sky high" if DirecTV gave in to Comcast. I let her know that I would have been more than happy to pay the additional 4 cents to keep Versus on DirecTV and that I, and most other subscribers, wouldn't consider that a sky-high rate increase. No response from the rep at that point.

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