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An Honest Look At DIRECTV’s Exaggerated Rate Increase Argument

Published On: Oct 04 2013 01:39:45 PM CDT
Updated On: Oct 18 2013 02:14:10 PM CDT

DirecTV has decided to drop KEYT from its channel lineup.

Update: An Honest Look At DIRECTV’s Exaggerated Rate Increase Argument

DIRECTV is claiming KEYT NewsChannel 3 is asking for an unreasonable increase in the fees we charge to DIRECTV for retransmitting our channels to its subscribers.  Regrettably, DIRECTV is not disclosing all the facts. 

Consider the following:

Assume, for instance, you are selling a product to Company X and discover (a) Company X, based on publicly available information, is paying other companies a price 500% greater than the price it is paying you for a competitive product that is significantly less popular than yours, and (b) you believe, based on public information and current market conditions, Company X is paying others a price 300% greater than it is paying you for a comparable, competitive product, and (c) you are currently selling your product to competitors of Company X at a price 300% greater than Company X is currently paying you, would you not, in those circumstances, consider it fair, reasonable and equitable to ask Company X to increase the price it pays you in order to bring that price more in line with the competitive market?

The above hypothetical is not unlike our negotiations with DIRECTV. By any standard of fair play and fair competition, our proposal to DIRECTV is reasonable. It is based on competitive market conditions.  We have simply asked DIRECTV to pay us a fee more in line with (a) the amount we believe DIRECTV is paying our competitors for significantly less popular channels, (b) the amount we believe companies such as DIRECTV pays for other comparable broadcast channels, and (c) the amount DIRECTV’s competitors are now paying us for our channels.

DIRECTV’s claim that we are asking for an unreasonable rate increase should be evaluated for what it is – a clever, but incomplete characterization of the nature of our negotiations.

In addition to all that, what DIRECTV is not telling its subscribers is that it is making extraordinary demands on KEYT NewsChannel 3 that no other satellite or cable company has ever made of our Station, relating to retransmission of KEYT's channel on the Internet, for which it then will be in the position to resell to its subscribers for an additional fee. 

This is what the DIRECTV dispute is really about.

Tell DIRECTV not to hold its subscribers hostage for its unreasonable price demands and to reinstate service of our Station to its subscribers.

And please keep in mind, we offer our Station for free, over-the-air to viewers—we only charge a fee to satellite and cable companies who resell our signals for their own profit.  So watch us for free, over-the-air or switch to DISH or your local cable company to receive our Station’s award winning programs.

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DIRECTV terminated carriage of KEYT-TV, Santa Barbara, Santa Maria, San Luis Obispo at 10am Pacific Time Wednesday October 9.  KEYT NewsChannel 3 General Manager, Mark Danielson expressed disappointment that “DIRECTV would deprive its subscribers of KEYT’s highly rated national and local programming,” while noting that DIRECTV’s decision only affects DIRECTV subscribers. Danielson pointed out the Station can still be received over-the-air, free, and by local cable systems and the DISH satellite service.

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Mr. Danielson said the Station and DIRECTV have been in negotiations for several weeks, but the negotiations reached an impasse earlier this week. The Station’s current carriage agreement with DIRECTV expired September 30, but in an effort to accommodate DIRECTV and avoid a disruption of service to DIRECTV satellite subscribers, Danielson said the Station granted DIRECTV an extension to 10:00 am, (Pacific Time) October 9, 2013.

Satellite companies, like cable companies, mark-up the price they pay for local broadcast signals and re-sell those signals to their subscribers. Danielson said KEYT, “must pay top dollar in a highly competitive market for its award-winning, national network, syndicated, local news, sports, weather, and public service programming.” Danielson added, “the core dispute between DIRECTV and the Station involves (1) the price DIRECTV is willing to pay the Station for the right to re-sell the Station’s signal and (2) DIRECTV’s demand for the right to place the Station’s signal on the Internet without paying the Station a fair price.

Mr. Danielson also pointed out that DIRECTV “pays other, considerably less popular program providers more than five (5) times the rate the Station is asking in payment for its more highly rated signal.” Danielson said the Station’s proposal, in comparison to what DIRECTV pays for less popular programming, is very modest and is consistent with today’s market rates.

Mr. Danielson expressed hope the current impasse will be resolved and the disruption in service for DIRECTV’s subscribers will end, but he cautioned that DIRECTV subscribers may wish to make plans for receiving the KEYT NewsChannel 3 off the air for free, or switch to a local cable company or the DISH satellite service.

Frequently Asked Questions

1. Why has DIRECTV stopped retransmitting the Station’s signals?

The contract for carriage of the Station by DIRECTV expired at 12 noon (Central Time) October 9, and so far, it has not been renewed by DIRECTV.

2. Why was the contract not renewed?

DIRECTV refused to pay the Station a fair price or agree to other reasonable terms for the right to retransmit and resell the Station’s signals to its subscribers. The Station, in fact, gave DIRECTV an extension of the existing carriage contract in the hope a new agreement could be reached. Regrettably, that extension has expired without agreement by DIRECTV,  and DIRECTV is no longer carrying the Station.

3. But isn’t DIRECTV only trying to hold down the price it pays the Station and, in turn, keep down the price it charges its subscribers?

Certainly it is appropriate for DIRECTV to minimize the price it pays for the privilege of reselling the signal of Stations such as ours to its subscribers. However, DIRECTV, reportedly, pays five times more for significantly less popular program services than the price we are asking for our top rated Station and all the channels we offer. DIRECTV, a multi-billion dollar company, is, in effect, asking our Station to subsidize its operations which will enable it to pay more for other programming services with whom we compete for the best entertainment, sports and news programming. There are other unacceptable demands, aside from rates, that DIRECTV is making which no other cable or satellite company has made or is making. In short, it would be irresponsible for us to subsidize DIRECTV’s cost of operation and grant it all the other financial benefits it is demanding.

4. But aren’t you just asking DIRECTV for more money to enhance your profits?

No—absolutely not. We now have to pay our program suppliers significantly more for highly rated sports and entertainment programming because cable and satellite companies are paying higher rates to our competitors who, in turn, will try to outbid us for the best programs.

5. The upshot though is that DIRECTV will raise rates for its subscribers if it pays you more, will it not?

DIRECTV does not have to raise its subscriber rates in order to pay us competitive market rates for our signal. DIRECTV can elect simply to pay less for the less popular channels you, as a subscriber, are forced to buy in order to get the channels you really want to watch.

6. Will DIRECTV reduce our monthly bill since it is no longer offering your Station?

It should, of course.  But that is DIRECTV’s decision; we have no control over it.

7. Is DIRECTV’s offer to you consistent with offers you have accepted from cable TV and other satellite companies?

No—it is not. DIRECTV’s demands are far greater than those asked of us by any other cable and satellite company—and, in fact, DIRECTV’s multiple demands are considerably greater than any demand DIRECTV has ever made of our Station in the past. It is for that reason the negotiations with DIRECTV reached an impasse.

8. So, as a DIRECTV subscriber, how can I continue to receive the Station and not miss my favorite program?

You can receive our Station free, over-the-air. You can receive the Station from local cable companies (depending on where you live), and from the DISH satellite service. You might, in fact, wish to drop your DIRECTV service, check out the rates with other services, and switch to another service—or simply watch us, for free, over-the-air. A list and telephone numbers of other cable and satellite services that deliver our Station are as follows:

Cox Cable – 866-961-0155
Charter – 855-229-8584
Comcast – 800-934-6489
TW Telecom – 855-427-0191
Dish Network – 855-318-0572

9. What can I do to get the Station back on DIRECTV?

We have told DIRECTV our company’s executives are available “around the clock” to resolve the impasse and work to assure that DIRECTV subscribers continue to have access to their favorite sports, entertainment and local news and weather programming from our Station. You may wish to express your concern to your DIRECTV representative and ask DIRECTV to restore our Station and treat all of us in this community fairly and equitably. We deeply regret the inconvenience DIRECTV’s actions have caused.

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