Lawsuit claims AT&T created fake accounts to juice DirecTV Now subscription numbers

A new shareholder complaint against AT&T claims the company encouraged employees to create fake accounts for its DirecTV Now streaming service to juice its...

Posted: Sep 18, 2019 10:33 AM

A new shareholder complaint against AT&T claims the company encouraged employees to create fake accounts for its DirecTV Now streaming service to juice its subscriber numbers and mislead investors ahead of its acquisition of Time Warner, shareholders allege in an amended complaint filed last week as part of a lawsuit against the company.

According to the lawsuit, employees — who faced aggressive sales quotas — were "taught and actively encouraged" to convert $35 activation fees that customers paid to upgrade their phones into the price for multiple DirecTV Now subscriptions. This was allegedly executed by "waiving the fee, but charging the customer anyway, and applying the payment to up to three DirecTV Now accounts using fake email addresses."

The complaint claims customers were not told they had been signed up for a subscription, and that the company is said to have fielded regular complaints from customers who said that they were billed for accounts they did not sign up for. The complaint also details other alleged methods for increasing subscriptions without clients' consent.

The purpose of these efforts, the lawsuit alleges, was to create the false impression that the service was compensating for declines in the legacy DirecTV satellite business, and to help justify the company's acquisition of Time Warner, now called WarnerMedia. WarnerMedia is CNN's parent company.

CNN Business asked AT&T to respond to the merits of the lawsuit as well as for comment on specific allegations within it, such as claims the company pressured employees by setting aggressive sales targets and that employees were encouraged to use unrelated fees to create DirecTV Now accounts.

"We plan to fight these baseless claims in court," AT&T said in a statement in response.

Plaintiffs include Local 449, a union pension fund based in Pittsburgh, and Melvin Gross, an investor who exchanged Time Warner stock for AT&T stock as part of the acquisition.

DirecTV Now, which AT&T launched in late 2016, was billed as a key part of the company's pivot to entertainment. The lawsuit alleges that executives, including CEO Randall Stephenson, were deceitful in claiming that DirecTV Now's growth was stable, and that it was driven by "organic" demand and only limited promotions.

But beyond the alleged inflation of subscriber numbers at unwitting consumers' expense, the service also suffered from significant turnover as customers jumped from one discounted streaming service to another, according to the complaint.

The complaint says the plaintiffs and their attorneys spoke with a number of current or former AT&T employees who gave information about the alleged scheme. It refers to one former employee in Michigan who allegedly estimated that around 40% to 50% of the customers he dealt with starting in early 2017 complained of being billed for DirecTV Now subscriptions that they said they had not signed up for.

The allegations come at what is for several reasons a delicate time for the company.

Stephenson just recently elevated WarnerMedia CEO John Stankey to a position that puts Stankey in line to succeed Stephenson should he retire. (Stankey is not alleged in the complaint to have personally misled investors, but the complaint does allege that he should have known investors were being misled.)

WarnerMedia plans to next year release its own streaming service, HBO Max, into a crowded market at a price higher than many of its competitors, including Disney+ and Netflix, will charge. And Elliott Management, an activist hedge fund that has taken a $3.2 billion stake in AT&T, is demanding changes, including possibly spinning off DirecTV entirely.

The firm specifically called out DirecTV Now in a recent letter to AT&T's board, calling the service "poorly executed" and pointing to its declining subscriber base.

At the end of the fourth quarter of last year, AT&T reported that DirecTV Now had 1.6 million customers. It had 1.3 million as of July, according to its earnings report for the second quarter.

Speaking on Tuesday at the Goldman Sachs Communacopia conference, Stephenson responded to criticism that the company is too big and paid too much for its media businesses. It still "makes sense" for the company to own both a big wireless network and content, he said.

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 74992

Reported Deaths: 3044
CountyConfirmedDeaths
Marion15963725
Lake7632275
Elkhart488385
Allen3937163
St. Joseph354682
Hamilton2803104
Vanderburgh199713
Hendricks1901108
Cass17969
Johnson1767118
Porter133839
Clark124447
Tippecanoe122111
Madison98765
LaPorte92130
Howard90565
Kosciusko86212
Bartholomew80147
Floyd79146
Marshall79022
Monroe75930
Delaware73852
Dubois70012
Noble68429
Boone68346
Hancock67038
Vigo66810
Jackson5885
Warrick58630
LaGrange55910
Shelby55827
Grant52830
Dearborn50828
Morgan48334
Clinton4403
Henry38520
Wayne37710
White37210
Montgomery35421
Lawrence35027
Harrison34123
Decatur33832
Putnam2908
Miami2742
Daviess27320
Scott26810
Greene25134
Jasper2452
Franklin24314
DeKalb2354
Gibson2284
Jennings22612
Steuben2113
Ripley2087
Carroll1932
Fayette1907
Perry18612
Starke1787
Posey1770
Orange17324
Wells1712
Wabash1703
Fulton1692
Jefferson1652
Knox1590
Whitley1546
Tipton14311
Washington1421
Spencer1363
Sullivan1341
Clay1245
Huntington1243
Randolph1234
Newton11810
Adams1022
Jay920
Owen911
Pulaski831
Rush804
Brown741
Fountain742
Blackford652
Ohio655
Benton620
Pike560
Vermillion550
Parke521
Switzerland520
Crawford450
Martin450
Union410
Warren231
Unassigned0206

Ohio Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 101731

Reported Deaths: 3673
CountyConfirmedDeaths
Franklin18483525
Cuyahoga13640500
Hamilton9689255
Lucas5377323
Montgomery439894
Summit3573223
Butler294463
Marion292945
Mahoning2566254
Pickaway238742
Stark1844139
Warren180339
Lorain180278
Columbiana166560
Trumbull1534107
Fairfield140032
Delaware131619
Licking129949
Clark115814
Lake112438
Wood105858
Clermont94111
Medina93035
Miami85338
Tuscarawas78814
Portage76561
Allen76044
Greene70312
Mercer62513
Belmont62126
Richland60812
Erie59227
Ashtabula57446
Geauga55844
Wayne54458
Ross4904
Darke40229
Huron4015
Ottawa39026
Madison38810
Sandusky38417
Hancock3793
Athens3591
Holmes3286
Lawrence2880
Auglaize2566
Union2541
Muskingum2391
Jefferson2342
Scioto2341
Seneca2223
Putnam20817
Knox2067
Washington20522
Preble2042
Shelby2004
Coshocton1946
Champaign1782
Crawford1745
Morrow1722
Hardin16912
Clinton1656
Highland1591
Logan1552
Ashland1493
Defiance1484
Wyandot1488
Fulton1471
Brown1382
Perry1363
Williams1353
Guernsey1187
Hocking1189
Henry1172
Fayette1150
Carroll1105
Monroe9318
Pike770
Jackson750
Van Wert721
Paulding700
Gallia651
Adams612
Meigs500
Vinton312
Morgan280
Harrison261
Noble160
Unassigned00
Fort Wayne
Overcast
68° wxIcon
Hi: 84° Lo: 58°
Feels Like: 68°
Angola
68° wxIcon
Hi: 82° Lo: 56°
Feels Like: 68°
Huntington
Broken Clouds
69° wxIcon
Hi: 82° Lo: 57°
Feels Like: 69°
Decatur
70° wxIcon
Hi: 84° Lo: 58°
Feels Like: 70°
Van Wert
70° wxIcon
Hi: 83° Lo: 59°
Feels Like: 70°
Isolated Showers Tuesday
WFFT Radar
WFFT Temperatures
WFFT National

Community Events