It really shouldn’t surprise anyone that cable TV providers have felt put upon by the advertising campaign launched by DirecTV (DTV, Financial) in September. The entertaining advertisements, which feature actor Rob Lowe as a DirecTV customer and several of Lowe’s bizarre alter egos cast as cable subscribers, have been so successful with viewers that memes parodying them have been popping up on social media sites.
But that may be coming to an end.
The Better Business Bureau’s National Advertising Division (NAD) issued a ruling Tuesday that sides with cable providers, in particular Comcast (CMCSA, Financial), which had complained that DirecTV made many claims in the advertisements it could not prove. The NAD’s review board told DirecTV to modify the unsupported ads or take them off the air entirely.
For example, DirecTV claims in its commercials that its signal is 99% reliable, that it offers more sports programming than its competitors, that all of its programming is delivered with better picture and sound quality than its competitors and that wait times for service calls are shorter than they are for cable service calls.
The NAD didn’t agree with Comcast on all its points, but it did agree on many. For one, it agreed that the advertisement that claimed DirecTV offers more sports programming than cable providers could not be proven nor could the claim that DirecTV delivers better picture and sound.
The NAD also took issue with the claim about wait times for service calls, but it found the claims of 99% signal reliability and high-quality high definition were strongly supported.
DirecTV reportedly is appealing the claims against it, but, according to Variety, the advertisement series has been dropped because DirecTV has moved on to a new commercial campaign.
Nevertheless, this is not the first time that DirecTV has been accused of deceptive advertising. In federal court last month, the Federal Trade Commission (FTC) charged DirecTV with misleading consumers with its 12-month plan. Consumers are told the service can be had for as low as $19.95 a month, the FTC said, but the service is not direct about the fact that a two-year contract is needed.
To make matters worse for consumers, the monthly price goes up substantially in the second year. If a customer tries to cancel early, that customer faces a fee of nearly $500.
The FTC also said that it is up to customers to take the initiative to cancel the premium channels that they receive for free for the first three months; if customers do not cancel them before the end of the free period, they will be charged for them automatically.
DirecTV, which is based in El Segundo, California, has a P/E of 16.0, a Price/Book of 0 and a Price/Sales of 1.3. It has a market cap of $43.64 billion and an enterprise value of $59.56 billion.
At the close of trading Wednesday, DirecTV’s stock was selling for $86.76 a share.
Fourteen gurus – David Abrams (Trades, Portfolio), John Hussman (Trades, Portfolio), George Soros (Trades, Portfolio), David Dreman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), John Paulson (Trades, Portfolio), Warren Buffett (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), James Barrow (Trades, Portfolio), Lou Simpson (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio) and Wallace Weitz (Trades, Portfolio) – have shares of DirecTV in their portfolios.
Comcast is based in Philadelphia and has a P/E of 18.4, a Price/Book of 2.9 and a Price/Sales of 2.2. It has a market cap of $150.05 billion and an enterprise value of $190.36 billion.
At the close of trading Wednesday, Comcast’s stock was selling for $59.18 per share.
Four gurus – Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Dodge & Cox and Jean-Marie Eveillard (Trades, Portfolio) – have shares of Comcast in their portfolios.
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