DirecTV's White's Forecast: Weather Channel Should Cost LessCEO Says Network Has Lost Audience, Denies Major Subscriber Defections 1/24/2014 7:19 PM Eastern
DirecTV president and CEO Mike White added to the turbulence in the DBS leader’s carriage disconnect with The Weather Channel, saying the service has lost one-third of its viewers over the past two years and is only worth one-quarter of the programmer’s asking price for a new license fee deal.
White, in an open letter to customers on the company’s website Friday, defends the nation’s No. 2 distributor’s decision to drop The Weather Channel on Jan. 13.
He reiterated what has been the company’s position throughout the contretemps that its customers are finding weather information from digital outlets and local stations and that they do not want to view Weather Channel’s long-form programming.
White also denied Weather Channel claims that customers were dropping DirecTV as a result of the dispute.
The Weather Channel issued this rejoinder on Friday evening: "On a day when the National Hurricane Center directors and the weather community are honoring Jim Cantore and The Weather Channel, we're not shocked that DirecTV is again focused on its margins only. Mr. White's comments have nothing to do with keeping costs down for consumers -- at the same time they were taking away The Weather Channel, they were notifying their customers of a rate increase. If dropping The Weather Channel saves them money then their customers should soon see a rebate or price cut. Most importantly, we are extremely confident in our value and give no credence to DirecTV's "studies." Our confidence is playing out on www.keeptheweatherchannel.com where you can clearly see the support and engagement of our multitude of fans."
The Weather Channel president Brian Kenny wrote in an ad that appeared in the Jan. 22 edition of a number of prominent newspapers that 90,000 DirecTV subscribers have pledged to cancel their DirecTV subscriptions over the dispute, but the DBS leader is impeding that from happening via the imposition of steep cancellation fees. Kenny also asked DirecTV to waive those fees. According to keepweather.com, the number of those pledging to switch providers now exceeds 122,000.
The full text of White’s letter can be read below:
Dear DirecTV Customer,
I wanted to respond to some of the comments you may have heard lately about our attempt to renew our contract with The Weather Channel.
Frankly, I don’t like talking about internal contract discussions, but given TWC’s aggressive, and very public stance, please allow me to set the record straight.
Contract talks with any channel are always extremely complicated and difficult. TV Networks feel it’s their absolute birthright to be paid more and more each year for the same content they offer, regardless of how many customers actually watch their channels. But in each negotiation we represent the interests of all of our customers, and try to strike the best possible deal we can, so it in turn has less impact on your monthly bill.
As with all TV providers such as Comcast, Dish and Time Warner Cable, we are forced to raise our prices annually due to programmers like The Weather Channel, demanding to be paid more and more each year. In 2014, DirecTV will be forced to pay 8% more for the channels you enjoy, yet, the average increase we passed on to our customers was 3.7%, which was lower than the increase in 2013, and also lower than many of our competitors.
We work extremely hard each day to deliver the best possible service and keep your monthly costs down. One of the ways we can do that is to negotiate a lower rate for an existing channel, or replace that channel with a better alternative at a lower cost. That’s what we’re doing for our customers in this situation. Giving them more weather coverage, 24/7 around the clock, and all at a lower cost.
Let me explain why The Weather Channel or an alternative service should cost less:
- The manner in which people access weather-related information has changed dramatically and is increasingly available from a wide variety of online and offline sources, for free.
- Our customers tell us The Weather Channel is their fourth choice when looking to access weather information. They first turn to mobile devices and computers for instant weather information and then to local news sources that have a better grasp on local conditions.
- Because of these first two points, The Weather Channel has lost about a third of its viewers over the last two years. Why should DirecTV customers pay more for a channel they are watching far less?
- A growing number of customers have complained that The Weather Channel devotes 40% of its programming day to reality shows, preempting the hard weather news they really want. Why should you pay for 100% weather information, and only receive it 60% of the time?
- We have a variety of ways to keep customers informed about weather, including WeatherNation, a channel that provides weather detail 24/7, at a much lower cost; and we have you covered with weather information from your local news channels, national news networks and special emergency channels we will launch in times of severe weather.
- We conducted a very thorough evaluation of the usage and value of The Weather Channel, and we determined it was worth one-quarter of the price The Weather Channel is demanding for their programming.
In every other industry, when the demand for any product is reduced, prices go down, they don’t go up. That is the heart of this issue.
We’ve heard from a small number of our customers that WeatherNation is not an exact substitute for Weather Channel. We recognize that, but it does solve the number one complaint you have with their channel — WeatherNation provides weather information 100% of the time.
WeatherNation offers our customers what they want at a fraction of the price, and it will only get better in the coming months. Tune in to WeatherNation on channel 362, and I’m confident that you will find a suitable replacement. The Weather Channel may not appreciate the competition, but it’s our job to offer you the right content, at the best price.
I would like to set the record straight on another issue. The Weather Channel, which is owned by hedge funds and one of our competitors, is claiming that millions of customers are leaving DirecTV as a result of this impasse. I know you are only concerned with your household, but I can assure you 99.9995% of our current customers have voted to stay on the DirecTV platform, because they understand what we are trying to accomplish in these contract talks. I only bring this issue up because you should know that you’re not alone in being willing to take a stand on these out-of-control content price increases.
Finally, I’m sorry that The Weather Channel has taken this public. You should not be pulled into the process. I’m disappointed that a group who used to be such great partners in the past, have resorted to nasty “Chicken Little” scare tactics in an attempt to achieve their financial goals. A public mudslinging campaign and expensive newspaper ads are not going to solve the problem.
I encourage you to look beyond all the drama and hyperbole and ask yourself a simple question: Do you think you should you be paying more for their service? If you feel you should pay more, then I respect your opinion, but I am confident that nearly all of our customers will vote with their pocketbook in mind.
In closing, I apologize again that you’ve been drawn into what is increasingly becoming a nasty public dispute. We deeply appreciate your loyalty and patience, and I thank you for the opportunity to better explain the situation. In the end, after knowing the facts, I am confident you will understand that DirecTV is fighting to deliver the best possible value for our customers.
Chairman, President and CEO