DirecTV Sued for "Extortion"

Has DirecTV's campaign against signal theft crossed the line of legality? So claims a class-action lawsuit launched this month against the El Segundo, CA–based direct broadcast satellite service and parent company, Hughes Electronics.

Filed Wednesday, March 10, in federal court in Denver, the suit accuses DirecTV and Hughes of racketeering in a crackdown on unauthorized reception of the satellite service. Over the past two years, DirecTV has launched antipiracy suits against as many as 20,000 people and sent tens of thousands of threatening letters to people suspected of using counterfeit "smart cards" and other techniques to receive satellite broadcasts or premium programming for free.

Many of the recipients of the letters paid as much as $3500 each to avoid legal action against them, the lawsuit claims, generating what plaintiffs' attorneys described as "millions of dollars" in revenue for DirecTV. The recipients' names were gathered from credit card records and store receipts, according to an Associated Press report from Denver. The suit against DirecTV was initiated by California attorney Jeffrey Wilens of the Lakeshore Law Center in the town of Yorba Linda. The firm specializes in consumer fraud and debt collection violations, and has twice attempted similar suits against DirecTV in California state and federal courts, without success.

Will the third attempt work? Extortion—making threats and extracting payments—is a violation of federal law. So is hacking satellite or cable signals. A DirecTV spokesman told reporters that Wilens's suit is "without merit." The company intends to keep sending out threatening letters to suspected pirates.

Satellite TV is riding a wave of popularity. DirecTV added 405,000 new US subscribers during the fourth quarter ended December 31, 2003, bringing its total subscribership to 11.18 million. Monthly revenue rose 11% to an average of $71.70 per subscriber, pushing fourth quarter revenue up 24% to a total of $2.3 billion, compared with $1.8 billion during the same period in 2002. The company added 1.2 million net new subscribers during the year, helping raise revenue 19%, for a total of $7.7 billion, compared to $6.4 billion the previous year. Operating profits almost doubled during the same period, reaching $459 million versus $249 million in 2002.

Competitor EchoStar Communications added approximately 340,000 net new subscribers during the fourth quarter of 2003, bringing total subscribership to it DISH Network up to 9.425 million subscribers on December 31, 2003. DISH gained 1.245 million subscribers during the year, the Littleton, CO–based DBS service reported in early March.