DirecTV's Daniel York brought hardball tactics to Dodgers channel negotiations

By Meg JamesStaff Writer

Nov. 13, 2016 5 AM PT

When the Weather Channel’s carriage contract came up for renewal nearly three years ago, DirecTV’s chief content officer demanded the small network slash its programming fees by 75%. After the Weather Channel refused, DirecTV abruptly replaced it with a lesser-known programming service — confusing viewers who suddenly couldn’t find their favorite meteorologist on TV.

It was a vintage hardball tactic by Daniel York, one of the most powerful executives in television who is at the center of a federal lawsuit alleging collusion among television companies that prevented tens of thousands of baseball fans from watching the Los Angeles Dodgers on TV.

Those who know York describe him as the alpha male of the pay-TV pack — an executive with a long memory and a swashbuckling style.

Now as AT&T Entertainment’s chief content officer, he is the gatekeeper of the Dallas phone company’s vast television systems, which since last year includes DirecTV. He has the power to make or break cable networks by deciding which ones are available in the more than 25 million homes served by AT&T — and how much his company will pay for the rights to distribute them.

According to the U.S. Department of Justice, the 53-year-old executive was the ringleader in a campaign to ensure the cable channel owned by the Dodgers, SportsNet LA, would remain on the bench. York, who works at DirecTV’s headquarters in El Segundo, allegedly traded calls, text messages and inside information with his counterparts at Charter Communications, Cox Communications and AT&T (before the phone company swallowed DirecTV) to thwart rival Time Warner Cable, which had the rights to distribute SportsNet LA. Time Warner Cable struck out in its efforts to win carriage for the pricey channel.

The Justice Department’s lawsuit against AT&T’s DirecTV unit, which came this month after a nearly two-year investigation, has laid bare the inner workings of the insular world of pay-TV distribution. Consumers in recent years have become collateral damage, watching helplessly as favorite channels, including CBS, Nickelodeon, Univision and Turner Classic Movies, get yanked from program lineups as big media companies haggle over billion-dollar carriage contracts.

York, through an AT&T spokesman, declined to comment for this story and he did not respond to emails or a message left at his home. But more than a dozen current and former senior industry executives interviewed by The Times, including several DirecTV insiders, describe him as a driven and brash executive who was bent on leveling the field at a time when he perceived that TV networks, such as CBS and Fox, were gaining an upper hand in contract talks.

“We all negotiate hard to get good deals,” said one veteran TV executive who was not authorized to discuss the situation. “But Dan mashes your face into the cement.”

Bargaining sessions with York include shouting matches, all-nighters and occasional tears shed by those on the opposite side of the negotiating table, according to executives interviewed.

But, they say, he often gets results. Before joining DirecTV in mid-2012, York spent nearly eight years building AT&T’s U-Verse fiber-optic video service from scratch to nearly 6 million customers. When AT&T acquired DirecTV last year, York’s turf grew and he now controls an annual programming budget of $17.2 billion, according to the research firm MoffettNathanson.

Refusing to carry the Dodgers channel, in effect, saved DirecTV more than $200 million in programming costs the satellite TV provider would have had to pay Time Warner Cable over the three years that SportsNet LA has been in operation. That expense, insiders said, would have been passed along to customers.

But York’s tactics may prove costly for AT&T. The antitrust lawsuit could result in a steep fine and pave the way for wide carriage of SportsNet LA. It also comes at a crucial time as AT&T seeks Justice Department approval of its proposed $85.4-billion takeover of Time Warner Inc., which owns HBO, CNN and the Warner Bros. studio. Critics, including President-Elect Donald Trump, have raised concerns that a frenzy of media consolidations is unfairly squeezing the little guy and wiping out competition.

AT&T declined to comment for this story, but earlier defended DirecTV’s action, saying: “No one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to L.A. Dodgers baseball.”

The 2014 negotiations over the Dodgers channel came amid an explosion of sports channels in recent years, taxing a business model that already was under strain. As much as $25 of a consumer’s monthly cable television bill goes to pay for the various sports networks. And no where are there more sports channels than in LA.

DirecTV was determined to hold the line. The company in 2013 and 2014 was clawing to maintain its base of subscribers. “Growth was starting to dry up,” said Ian Olgeirson, research director at consulting firm SNL Kagan. “The market overall was feeling more pressure.”

Programming costs were rising at a time when more consumers were ditching or scaling back their cable TV service and switching to low-cost video streaming services such as Netflix and Hulu.

“These new services threaten their legacy businesses — they are getting squeezed,” said a longtime media executive who has represented popular cable channels. “And desperate people do desperate things.”

York was born and raised in Michigan and still follows his college team, the Michigan State Spartans. He is married with two children and his wife is a food blogger.

He has been in the media business more than 20 years, first working in HBO marketing and sports, and then at the pay-per-view program distributor, In Demand. There, he made a few enemies.

“I hate this guy [York] to this day,” said professional wrestling executive Paul Heyman during an April 2014 broadcast of a show hosted by Steve Austin, an actor and former wrestler.

Fifteen years ago, Heyman was desperate to keep afloat his Philadelphia-based venture, Extreme Championship Wrestling. It needed TV distribution for exposure and it needed money. Heyman said York’s company, In Demand, owed ECW $2.8 million for a previous pay-per-view event.

“Dan York said to me: Once you get distribution, we’ll give you your money … but if you don’t get distribution, we know you’re going down and it’s going to be cheaper for us to pay pennies on the dollar to a bankruptcy trustee,” Heyman said on Austin’s show. “That’s why we went out of business.”

York in 2004 joined SBC (which became AT&T). He was charged with getting AT&T’s fiber-optic video service, AT&T U-Verse, off the ground and worked for years to negotiate carriage deals with TV networks. Because his firm was the new kid on the pay-TV block, York had little leverage to negotiate favorable contracts for AT&T. That, according to his associates, appeared to bother York.

By 2010, U-Verse had gained more than 2 million subscribers, giving York a stronger hand in negotiations.

He seized on the vulnerability of the independently owned Hallmark channels, known for wholesome fare and made-for-TV movies.When Hallmark’s contract was up for renewal in 2010, York demanded that Hallmark slash its already low rates by as much as 80% to stay on the service.

Hallmark refused and its two channels were dropped — a blackout that lasted five years.

“I have a lot of respect for Dan,” Bill Abbott, chief executive of Hallmark’s parent, Crown Media Networks, said last week, noting the dispute with U-Verse ended last year on amicable terms. “I understand that he and other distributors are trying to save every penny they can to manage programming costs.”

Several executives interviewed said York seemed to take his underdog status at AT&T personally. When York was running AT&T’s video service, he was the “90-pound weakling who had been getting sand kicked in his face,” said one executive who did not want to be identified.

But that changed when York joined DirecTV in mid-2012. “He grew muscles,” the executive said, noting that York became a titan overnight because he now was representing a company with nearly 20 million subscribers.

Just as he was settling in at DirecTV, its main rival, Time Warner Cable, was making the rounds to line up carriage for a new channel featuring the Los Angeles Lakers. DirecTV was interested, but planned to grind down the price.

But Time Warner Cable’s top negotiator, Melinda Witmer, had a different idea. She offered a special rate and enticed Charter, AT&T and Cox Communications to carry the channel — leaving DirecTV as the big holdout.

With hundreds of customers fleeing, DirecTV was forced to cave in to Time Warner Cable’s demands.

York and other DirecTV executives immediately regretted their decision to carry the Lakers channel. They figured they were paying twice what the channel was worth, according to the government lawsuit. Viewership fell after Lakers star Dwight Howard left the team and, then, Kobe Bryant got injured and played only six games that season.

Meanwhile, in early 2014, York told Weather Channel executives that DirecTV would not pay any rate increase, and instead demanded that the channel roll back its fees.

The Weather Channel refused -- only to be replaced by programming from WeatherNation.

The move backfired. Hilton Hotels threatened to drop DirecTV from its hotel rooms. DirecTV capitulated, and was forced to swallow a rate hike for the Weather Channel — adding insult to injury. In return, DirecTV demanded that Weather Channel make a public apology for the fuss. Weather Channel executives were furious, but they served it up: “Our apologies to DirecTV and their customers for the disruption of our service and for initiating a public campaign,” Weather Co.’s CEO said in the unusual apology.

“What did that accomplish?” one of the executives involved in the dispute said of the forced apology.

While the Weather Channel fight was raging, a different skirmish was unfolding inside DirecTV.

Time Warner Cable’s Witmer was making the rounds again, this time trying to win carriage for the Dodgers channel, SportsNet LA, which is owned by Guggenheim Baseball Management.

Money was reserved in DirecTV’s programming budget to cover the Dodgers channel affiliate fees and marketing executives argued that DirecTV owed it to local fans and subscribers, according to the Justice Department lawsuit.

But “having been burned” by Time Warner Cable on the Lakers channel, York and DirecTV weren’t about to get played again, the Justice Department lawsuit said.

Executives from Charter, Cox and AT&T testified under oath to federal prosecutors that they had been comparing notes with York in 2013 and 2014 about whether to carry the Dodgers channel. York’s assurance that DirecTV would not take the channel without giving the others a heads-up, emboldened them to hold firm against Time Warner Cable. That collusion, according to the Justice Department, did not allow the free market to work — and baseball fans suffered.

“This makes Dan York look vindictive, but some could view him as something of a hero,” said Paul F. Rothstein, a Georgetown University law professor. “He was working in service to his company and its customers — he wasn’t going to be the victim of price gouging again.”

Times researcher Scott Wilson contributed to this report.

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@MegJamesLAT

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