Here's what purports to be the letter:
January 13, 2006
EXECUTIVE SUMMARY:
• DIRECTV will be migrating over to a new Lease Program on March 1, 2006, which will require you to sign a new agreement in order to continue working with DIRECTV. As such, this letter shall serve as the written notice required to terminate your existing agreement with DIRECTV. Please be advised that your existing agreement will terminate on February 28, 2006.
• In order for you to continue to act as a DIRECTV dealer, you must agree/accept/approve a new Agreement via the online acceptance method by February 28, 2006; the new agreement will govern our relationship under the Lease Program.
• Your current commission economics will not change other than starting March 1, 2006, commissions will now be paid only for leased equipment instead of purchased sales. Of course, commissions are subject to changes in the future in accordance with the terms of your Agreement.
• In addition, customers will continue to acquire their hardware from you under the Lease Program. Upon activation of the leased equipment, DIRECTV buys the equipment from you and issues payment. Please see details regarding the sale and purchase of leased equipment in the agreement, which will be made available to you shortly.
• Through the new lease model, standard, professional installation remains free for new customers and under the new terms of the lease model, it's free for existing customers as well!
• A Q&A sheet along with a more comprehensive outline of this program is included.
Countdown to the DIRECTV Lease Program!
On March 1, 2006, DIRECTV will be migrating over to a new hardware Lease Program. The Lease Program is designed to provide your customers with competitive offers and to help you continue growing your acquisition of quality customers. The DIRECTV Lease Program will be our primary hardware model to ensure our customers always have access to the most state-of-the-art, up-to-date equipment!
On March 1, 2006, all commission-based DIRECTV hardware transactions will be under the new Lease Program. It is important to note that your current commission economics will in no way change other than the fact that commissions will now be paid only for leased equipment instead of purchased equipment. Of course, your commissions are subject to change in the future in accordance with the terms of your new agreement.
It’s never been easier to have satellite television! With equipment replacement and upgrade offers through our DIRECTV dealers, the new Lease Program takes all the worry away from customers. In addition, leased receivers are backed by a convenient equipment replacement program. If the customer wishes to stop subscribing to DIRECTV service upon fulfilling their programming commitment, they are required to return the equipment to DIRECTV per the terms of the Equipment Lease Addendum.
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The new Lease Program requires customers to pay a nominal lease fee, some examples of which are highlighted below (please note that the following illustrations are for new customers only). Note that the monthly lease fee is in addition to applicable programming charges:
New Customer Hardware
Upfront Hardware Lease Fees
Total Monthly Costs to Customer
Commitment Period/Early Cancellation Fee
1 Standard Receiver
$0
$0 Lease Fee (no fee for first receiver)
+Monthly programming
1 Year/ $150 prorated
1 Standard Receiver + 1 DVR
$0 (after $100 mail-in rebate*)
$0 Lease Fee (no fee for first receiver)
+ $4.99 Lease Fee (for second receiver) + $5.99 DVR Service Fee (Whole House)
+ Monthly Programming
2 Years/ $300 prorated
2 DVRs + 1 HD
$197 (after $100 mail-in rebate*)
$0 Lease Fee (no fee for first receiver)
+ $4.99 Lease Fee (for second receiver)
+ $4.99 Lease Fee (for third receiver)
+ $5.99 DVR Service Fee (Whole House)
+ Monthly Programming
2 Years/ $300 prorated
1 HD DVR
$299 (after $100 mail-in rebate*)
$0 Lease Fee (no fee for first receiver)
+ $5.99 DVR Service Fee (Whole House)
+ Monthly Programming
2 Years/ $300 prorated
* New customers are eligible for one Advanced Receiver mail-in rebate ($100) per household; this rebate is subject to changes or termination.
Credit scoring at point of retail remains in effect with the new Lease Program, so the only change new customers will experience are the lower costs associated with becoming a new DIRECTV customer!
New Agreement Required for all DIRECTV dealers
This letter serves as written notice of DIRECTV’s termination of your agreement as required under your agreement with DIRECTV. Accordingly, your existing agreement will terminate on February 28, 2006. Because the lease program is an entirely new business model, it is necessary for every DIRECTV dealer to review and approve the new agreement no later than February 28, 2006. The new agreement will govern our relationship under the lease program. [Of course, both parties will continue to be responsible for any matters and issues from the terminated agreement after the termination date (e.g., payment of any unpaid commissions, chargebacks accruing in the future, any installation issues under the sales model, etc.)] To make this transition as easy as possible for our dealers, we expect that the new agreement will be available online in the next few days for your review and acceptance. Once the new agreements are available, when you log onto retailer.DIRECTV.com, you will be sent to the online agreement that is applicable to you. For your convenience, you may continue to go on to the dealer website without accepting the new contract, but be advised that you will be directed to the agreement each time you log on until you have agreed, accepted and approved. Please note that you have the right to review the terms of the new agreement before accepting it, but if the new agreement is not approved by the principal/owner of record by February 28, 2006, since your existing agreement will be terminated, you will no longer be able to continue as an authorized DIRECTV dealer after February 28, 2006.
By enabling all of our dealers to accept the agreement online, we ensure that our dealers have access to additional important information DIRECTV will post online in the future.
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Please note that on and after March 1, 2006, only hardware transactions under the Lease Program will be eligible for commission; any DIRECTV hardware sold by you will not be commissionable or subsidized in any manner or for any amounts whatsoever. All hardware subsidies will be subject to chargeback for sales made under the owned model. Further, under the new terms of the lease agreement, DIRECTV retailers are required to extend the lease offers to customers based on DIRECTV’s standardized lease transactions; see “Consumer Offers: Lease Transactions” in the online contract for full details. Dealers may not deviate from these lease transaction fees in any way since the lease offers are set and established by DIRECTV as the lessor.
We are excited to offer this new program to our customers and know that, with your help, it will be a success! If you have any questions, please contact your DIRECTV Area Sales Manager, Distributor Sales Representative, or DIRECTV Retail Services at 1-800-323-1994, or via email at
[email protected] (
[email protected]).
Best Regards,
DIRECTV, Inc.
LSE_0106
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Q&A About the DIRECTV Lease Program
1. Q: Why is DIRECTV migrating from a hardware purchase model to a Lease Program?
A: Some of the most important reasons DIRECTV is migrating to the Lease Program are:
• To maintain a competitive offer in the market place by providing
DIRECTV customers a convenient receiver replacement program.
• Increase retention of DIRECTV customers, which should help reduce chargebacks.
2. Q: How is my commission affected by the Lease Program?
A: With the new Lease Program going into effect on March 1, 2006, dealers are paid commission only on those DIRECTV customers acquired under the terms of the new Lease Program. Some dealers may still sell receivers to customers, if they wish, but they will not be paid on those sales and the hardware will be in no way subsidized.
3. Q: How are mirroring fees impacted with the new Lease Program?
A: The bottom line is that a customer’s monthly bill will be nominally impacted. Although the term “mirroring fees” will go away in the Lease Program, customers will be subject to “monthly lease fees.” As with mirroring fees, the new “lease fees” are waived for the customer’s first receiver (lease fees are waived for the first receivers for new customers only; existing customers are subject to lease fees for any additional receivers they may acquire).
4. Q: Under the current model, I can currently charge whatever I want for the hardware as long as I absorb the cost if I offer it at lower than what is subsidized by DIRECTV; will this continue?
A: No. DIRECTV will be the party who will lease the equipment to the customers under the lease program. Accordingly, DIRECTV controls, sets and establishes the terms of the new lease program, including the lease fees charged for equipment. If you deviate in any way from the lease program as established by DIRECTV, including the standardized lease fees, you will be subject to immediate termination, without an opportunity to cure.
5. Q: Will the customer be getting used boxes with the Lease Program?
A: Through the Lease Program, there is the possibility that customers may get reconditioned equipment. Please keep in mind that DIRECTV will take precaution to ensure that any reconditioned equipment leased to customers is in “like new condition.” Of course, whether the equipment is new or reconditioned, it is covered by DIRECTV’s receiver replacement program.
6. Q: Why do I need to sign a new contract/agreement with DIRECTV?
A: Because the primary business model that DIRECTV works with its dealers on is changing, we need to have a new contract in place to support the new Lease Program. This will also allow us to provide contractual amendments to you online in the future!
7. Q: What happens if I sell (not lease) my customer a DIRECTV system after 2/28/06?
A: While you are not prohibited from selling DIRECTV hardware at prices established by you, please be advised that after 2/28/06, you will not be eligible to receive any commissions or subsidies for sold receivers. Accordingly, you will be subject to chargebacks for any subsidies or commissions you may have received, including any amounts under the Buy-Down Program. Please also note that only leased receivers will be eligible for ODU/Multi-Switch Reimbursement and commission.
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8. Q: Do Early Cancellation Fees or Differentiated Offer Fees change with lease?
A: No; both of these fees will be generally handled in the same manner as they currently are.
9. Q: With the lease model, will new customers now have to pay for standard, professional installation?
A: A: No! New customers will continue to get standard professional installation for free. In fact the great news is that with the lease model, both new and existing customers are eligible for free standard installation.
10. Q: How are existing customers affected by the lease model?
A: They aren’t. Existing customers who have already purchased hardware will continue to own their hardware. New customers who sign up for DIRECTV will be leasing the equipment. However, if an existing customer wishes to add additional receivers to what they already own on or after March 1, 2006, the newly acquired receivers will be under the terms of the lease model and the customer will be considered a mixed household, in which case they will be charged a lease fee on their leased equipment.
11. Q: How does my advertising need to change in order to promote the new lease model?
A: There will be changes reflected in all advertising once we migrate over to the lease model on March 1, 2006. We will be providing you ad slicks for the upcoming Q1 offer, which reflects the new hardware positioning and advertises our great, new programming offer that starts March 1.
Advertisements will continue to promote the free standard, professional installation but the equipment will now be leased, not owned. You will need to update the legal block to reflect the new terms of the lease, and, as always, all advertising must be sent through DIRECTV for approval.
12. Q: How does the Lease Program affect a customer’s experience at my store?
A: The customer experience will not change in regards to coming to you to acquire the best and latest DIRECTV hardware. The customer still comes to you for their DIRECTV system, they are credit scored, and you provide them with the hardware they need to access DIRECTV programming! The only thing that changes is the terms of the hardware, which will now be leased instead of owned. Upon cancellation/disconnection/termination of their DIRECTV account, they are required to return the equipment per the terms of the Equipment Lease Addendum, which replaces the old programming commitment agreement. If they do so before they have satisfied the programming commitment, they will also be subject to the early cancellation fees. The terms of ownership change, but accessing the premier multi-channel provider remains the same! DIRECTV is making it easier than ever for customers to get the most up-to-date, advanced hardware on the market through its dealers.