DirecTV cracks down on consumer piracy

Until now, DirecTV has concentrated almost exclusively on filing several multimillion-dollar civil claims and cooperating with a handful of government criminal cases against a relatively small number of alleged middlemen, or members of underground rings, suspected of masterminding such signal piracy. A few groups have been accused by DirecTV and the government of peddling unauthorized access cards and other equipment capable of tapping DirecTV's wide array of programs free of charge, but the effort overall has shown only spotty success.

Now, the El Segundo, Calif., broadcaster is taking a more grass-roots approach, aiming at what it estimates may be as many as one million residences throughout the country receiving DirecTV without paying for it. "We've gone after the developers and major distributors, and believe it's also important to identify and target users" of illicit equipment, said Larry Rissler, the DirecTV vice president in charge of the initiative. "It's necessary to do that" to convince average viewers they face potentially stiff penalties, he added in an interview Monday.

The new crackdown, which is already being implemented, is "a sea change for us" in terms of enforcement, said another DirecTV official. The service has about 10 million paying subscribers, but its growth has slowed down sharply, and the turnover rate of subscribers has increased significantly in recent quarters. Analysts believe rival satellite broadcasters also suffer from piracy, though to a smaller extent. Cable-television operators face a comparable theft problem.

DirecTV Spokesman Bob Marsocci confirmed that the company has launched what it calls "an end-user campaign," including mailing strongly worded letters to potentially thousands of individuals and families suspected of pirating DirecTV signals. As many as 100,000 names and addresses were collected by the company from earlier searches of alleged bootleg access-card operations, according to industry and company officials, while some of the illicit devices still can be obtained on the Web. A sample letter from the company warns that "modifying devices to gain access to DirecTV" subjects users to damages well in excess of $100,000, and it urges recipients to avoid litigation by signing documents promising to avoid "satellite signal theft" in the future.

Cutting to the chase
After years of targeting middlemen, working with federal undercover operations, devising sophisticated electronic countermeasures to turn off bogus access cards and spending hundreds of millions of dollars to distribute more piracy-resistant devices, "we want to send out an unequivocal message" that users also can't escape "vigorous pursuit," Mr. Rissler has said. Trafficking in the illicit equipment, which includes credit-card size access devices, was supposed to decrease under a 1998 federal law giving companies greater authority to carry out searches and crack down against signal piracy.

But recently, DirecTV executives authorized the launch of a customer-oriented initiative. The first complaints have been drafted, and Mr. Rissler said as many as 1,000 letters may be sent out each month. Hughes's largest satellite rival, EchoStar Communications, has complained that its own subscriber-retention efforts are being hurt by DirecTV's failure to reduce signal piracy.

The latest moves are important elements of the No. 1 satellite-to-home broadcaster's drive to improve profitability, revamp its management and reassess its marketing programs. Hughes's parent, General Motors, is in the latter stages of talks for Hughes to be acquired by Rupert Murdoch's News Corp. GM could receive about $7 billion for its 30 percent stake in Hughes.

Piracy has long been a nagging problem for satellite broadcasters, here and abroad. In the U.S., the number of illicit viewers could rise to 1.5 million by 2006, according to Carmel Group, a consulting firm in Carmel, Calif.

Jim Stroud, an analyst who worked on the study, said these figures might even be too low, given that satellite companies have "pretty much kept the issue quiet." The industry calculates that signal theft is already costing it between $500 million and $1 billion annually in forgone revenue.

Some people think that DirecTV is fighting a losing battle, and that the letters won't prove to be much of a deterrent. Along with satellite signals, "people steal cable today, and they will steal satellite radio tomorrow," said Robert Peck, an analyst at Bear Stearns in New York. "At the end of the day, it's more important to get to the source of the problem" by doing more thorough credit checks and requiring potential customers at retail stores to sign up and prepay for a full year of DirecTV services before receiving essentially free equipment and installation, he said.