DIRECTV Comes Under Fire in Colorado

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Colorado is currently experiencing the most devastating fire in its history. Five hundred and two homes have been lost, approximately 14,198 acres have burned, two people have died, and the fire is still not out. But in the midst of this tragedy, many businesses have stepped up to help; Wild Fire Tees, a company started specifically because of last year's Waldo Canyon fire -- again located in Colorado -- is donating 100% of its profits to wildfire victims.  

With the outpouring of support, and given the scope of the devastation, it might surprise you to learn that one company initially told a fire victim that he had to pay for the satellite-TV equipment that was burned during the fire. More importantly, this isn't the first time this company has taken such a stance. I'm talking about DIRECTV (UNKNOWN: DTV.DL  ) . Here's what you need to know. 

You've got to be kidding me
Jeremy Beach's home is gone, burned to the ground by the Black Forest Fire. Luckily, he escaped with his wife -- who is 37 weeks pregnant with twins, his 5-year-old son, and two dogs. When he got the news his home had burned, Jeremy told the The Gazette that he started making calls to cancel his services, including cable, utilities, and trash. However, when he contacted DIRECTV, they told him he owes the company $400 for the burned satellite dish and receivers. 

This news is shocking, but it's not unpredictable when it comes to DIRECTV. During the Waldo Canyon fire, which destroyed 347 homes, The Gazette reported that DIRECTV also charged fire victims for burned equipment. A spokeswoman for DIRECTV told the Gazette that they decided to charge customers because most people's insurance would cover the cost. While that may sound like a valid argument, to victims of the fire, and the surrounding community, the explanation left consumers angry.

Social-media backlash
It's pretty obvious that businesses shouldn't alienate the customers they rely on for profits. As such, DIRECTV's reported position could cause investors concern, as comments on The Gazette's article, and across social media, show that consumers in Colorado are irate, stating that they intend to cancel their subscriptions ASAP. 

The negative backlash created such a stir that DIRECTV issued an apology to the fire victim and said it'd do everything it could to help. It also stated: "DIRECTV has a clear policy that fully supports its customers during natural disasters that includes replacement of damaged equipment at no charge, long-term suspensions of accounts for customers who must leave their home, and waiving cancellation fees for those who need to disconnect service." 

Colorado may hate it, but is DIRECTV still a good investment?
DIRECTV's apology is a step in the right direction, but comments from consumers show that there's still widespread anger against DIRECTV dating back to the Waldo Canyon fire. More pointedly, Colorado residents aren't the only ones to show dissatisfaction with DIRECTV.

In 2012, DIRECTV was rated No. 14 in Business Insider's "15 Most Disliked Companies in America" list. True, that's not as bad as Cox Communications at No.7, Time Warner Cable at No. 6, or Comcast at No. 4, but it's not great, either. 

However, DIRECTV has a few things going for it. One, it's definitely ahead of its competition when it comes to consumer satisfaction. According to the latest report from the American Consumer Satisfaction Index, DIRECTV improved its customer satisfaction rating by 5.9% from the previous year. Also, when it comes to cable providers, DIRECTV has an overall score of 72, which is second only to FiOS operator Verizon Communications' score of 73. 

Two, DIRECTV has continued to have strong financials: Among other positive trends, according to its first-quarter 2013 results, DIRECTV grew net subscribers by 604,000 and revenue by 8%, and its average monthly subscriber churn stayed pretty much the same, going from 1.44% for the three months ended March 2012 to 1.45% for that same period in 2013.  

What to watch for
DIRECTV's initial response to Colorado's wildfire victim is concerning and points to a need for improvement. It's especially concerning given that this is the second time DIRECTV has responded in such a fashion. Yes, DIRECTV is ahead of most cable providers right now, and it has strong financials, but if it continues to alienate customers, that could change. Consequently, investors would do well to continue monitoring customer satisfaction and subscription rates. If either takes a turn for the worse, that could be a bad sign for future investment profits.

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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 June 18, 2013, at 9:47 PM, thegodfather4u wrote:

    Here is reality............Southern Bell who was losing customers faster than they could sign them up bought "broke AT&T" (who was broken up in the early '60s under the defunct "Monoply Law"), and then ATT bought Bellsouth, then purchased Yahoo and then purchased Direct TV, and many other companies. Now americans have a much larger Monoply under a new "shell" game, so please it's not "Direct TV" its all the old master of shell games, AT&T..............

    Reality !!!!!!!!!!!!

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DirecTV CAPS Rating: ***