Q. I’ve read your stories about DIRECTV and Dish losing subscribers. I’m surprised that more people don’t drop them. Dish is always losing channels and DIRECTV’s customer service is horrible. Why do people stay with them? I don’t get it. — Tony, Las Vegas.
Tony, Dish has lost roughly one million subscribers since the end of 2018 while DIRECTV has lost between 3-4 million during that time period. (AT&T, which owns DIRECTV, does not break out sub numbers for the satcaster and U-verse, choosing instead to lump them together.)
The losses are not terribly surprising when you consider that Dish has been involved in numerous carriage disputes over the last two years, triggering long-term blackouts of several popular channels such as HBO, the Fox-named regional sports channels and the NFL Network. (The Dish-NFL fee fight was finally settled yesterday after nearly three months.)
And DIRECTV has been the target of numerous subscriber complaints regarding its customer service since AT&T purchased it in 2015.
However, despite those two developments, both Dish and DIRECTV have raised programming prices every January for the last several years.
Considering that there are other viewing options now, such as Netflix and live streaming services like YouTube TV and Hulu Live, it’s reasonable to ponder why more people don’t drop DIRECTV and Dish.
But there’s a good reason why they don’t. And it’s the reason why Dish and DIRECTV don’t do more to address customer concerns.
And that reason is…the two-year contract.
We don’t know exactly how many Dish and DIRECTV subscribers have signed up for two-year commitments as part of their subscriptions. But it’s a requirement for new customers, and many long-time subscribers have agreed to renew their subs for two years in exchange for certain incentives such as free equipment upgrades.
While I have long argued that the two-year agreement is a bad deal for consumers, many people can’t resist because both Dish and DIRECTV offer tantalizing perks as part of the deal. Dish’s two-year agreement for new customers includes a price guarantee for two years while DIRECTV’s commitment includes free Sunday Ticket and HBO Max for one year as well as lower prices in year one.
The problem with the agreement, however, comes when something bad happens during the two years such as a blackout of a favorite channel, or a bad customer experience. The subscriber under the two-year agreement may want to drop service, but that would trigger a $20-a-month ‘early termination’ penalty for the remaining months left in the contract.
That’s a serious handcuff. For example, if you dropped service after one year, you would have to pay $240 in penalties.
DIRECTV and Dish know that the two-year commitment gives them leverage over their customers, which often leads to them being taken for granted. You can almost hear the executives saying, ‘They’re not going to drop us; they can’t because they would have to pay the penalty.’
If it were not for the two-year agreement, you can only imagine how many subscriber defections there would be for Dish and DIRECTV.
Again, I can’t underemphasize the importance of not signing a long-term agreement for any service, but particularly a pay TV service. Don’t give up your flexibility and leverage as a consumer.
Tony, hope that explains it. Happy viewing, and stay safe!
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— Phillip Swann