kwrides

The Daily Walk of Shame: DirecTV vs. Versus

https://www.fool.com/investing/genera...vs-versus.aspx

Adrian Rush
October 21, 2009

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.

DiabloScott

This is either completely false or misleading. DishNetwork has Versus on the package that costs about the same as the DirecTV package that had it until September; it's absolutely not a premium sports package, it's the regular package that has the deluxe channels like Biography and NatGeo, not the expensive package like NFL Ticket or HBO.

I switched, got a good deal. If DirecTV had put Versus on a premium sports package for an extra $12/month I'd have done the same thing. Dish has the Versus contract through at least 2012. I made sure all three parties involved (DirecTV, Dish, and Versus) know why I switched if they're keeping track.

m4ximusprim3

I've got versus on my u-verse, and freaking love it. It's strange that DirecTV and U-verse are both AT&T, but it's available on one and not for the other.

Mhendricks

Universal Sports would be a better pic than Versus so why can't Direct TV offer that channel considering they teased us with it for a month. My mom gets it for free and she doesn't even subscribe to any cable channel.

sykerocker 

With the road season now in hibernation, I'm currently just watching the situation. I have a feeling that by the beginning of spring, I'll be taking on Dish in (temporary) addition to DirecTV, with the intention of dumping one or the other by summer. My conservative approach is due to my yard being ten acres of woods. We already don't get the local broadcast channels during Apr-Oct while the leaves are out.

Something definitely smells in this whole mess. And yes, from the couple of weeks we had Universal Sports, I'd be happier with it. Not only cycling, but fencing, too!

DiabloScott

Watching the Vuelta was fun - Versus hasn't had daily coverage of that since about 2004.

But Versus and only Versus has Tour of California, San Remo, Flanders, and Roubaix... those are must haves for me.

After I quit DirecTV they called me a few times with offers for football packages and movie channels - ya right. Dish gave me some referal coupons if anybody wants them.

kwrides

I'm stuck with direcTV. I switched early in 2009 because the cable at my house is messed up and no matter how much I pay comcast (they came out 3 times), they can't get the digital tv signal to stop skipping every time it rains.

DMF 

"Pic" or "pick"? Vs. does HD. Afaik, US doesn't.

And it's not like the programming overlaps. One-or-the-other is simply not a option.

DMF 

Comcast hasn't "lost" them yet. They are betting that consumer demand will force DirecTV to relent.

OTOH, letting DirecTV move them to an expensive tier guarantees the loss of 8 million viewers. Chances are that they want a piece of that $12 action to compensate!

DiabloScott

DirecTV is talking out of both sides of its mouth on this one:
1 - Versus is an infomercial channel with occasional interesting events.
2 - Versus is going on our super premium pay extra sports package with all the other super premium sports channels.

thenomad

I've got VS on Uverse, love it. Better than Direct TV. I was happy to can them.

Fred Smedley

We are about to switch, with the Dish Gold package FSN is also included, which mean English Premiere League Soccer . DTV makes you pay a sports package premuim for this also. It is not hard to see the business plan DTV has implemented.

m4ximusprim3

Isn't it awesome? My only complaint so far is that they moved palladia to a higher tier- I really liked all the concerts. Other than that, versus and golf channel are both in the basic package and look spectacular in HD. That plus 6mbps internet = very happy with uverse.

Griffin2020

My only complaint with Versus is that the two announcers for cycling are compete and utter ****e.
I am thinking about switching to UVerse. The recording 6 things, and watching in any room of the house are great draws...I know the wife would love to be able to record and watch on her TV in the office, since she ain't gonna touch my DVR...lol

jaxgtr

Can't get Uverse in my area yet. Looks like a sweet deal and no outages because or heavy storms, which are pretty common in Florida in the summer.

DMF 

Uhh.. you mean Phil and Paul?

m4ximusprim3

why, is it sticky? The adult channel tier is expensive, FYI.

jhud51

I just stream both Versus and Universal and watch on computer. Direct, Dish and Comcast will be obsolete soon anyway.

JTownCitycycle

can you give me a link to stream versus ?