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Cable Technology Feature Article

February 12, 2013

DISH Auto Hopper Continues to Stir Trouble with Ad-Skipping Feature

By Tara Seals, TMCnet Contributor

In the latest salvo of its skirmish with broadcasters over its Auto Hop ad-skipping feature, DISH Network has kicked off an ironic strategy of spreading the word that it is now available nationwide…with an ad campaign.

In the satellite operator’s “Only the Hopper” campaigns, the characters in the commercial, dubbed the Boston Guys, hold a wake for TV commercials. “Commercials are out of our lives,” a character mournfully intones. On-screen text then ghosts up that reads: “In Memoriam, Commercials, 1941-2012.”

Multichannel News points out that in the first nine months of 2012, DISH spent $245.3 million on TV advertising, according to Kantar Media. That was up 53 percent from the year before when it spent $160.6 million on TV spots—so perhaps putting TV ads out of their misery makes internal, as well as consumer-facing, logic.

Other VOD and DVR options in the market, including TiVO, allow users to fast-forward through commercials, so they are still technically exposed to the visuals. This, on the other hand, will simply hop over the ads, as the name suggests.

That said, Auto Hop has significant limitations on its commercial-skipping abilities. The ad-skipping capability is available for the Hopper whole-home HD DVR system and works on primetime HD programs shown on ABC, CBS, FOX and NBC when viewed the day after airing. A viewer can watch a show with the Auto Hop option commercial-free starting at 1 a.m. ET, after a show has been recorded to the Hopper's PrimeTime Anytime network DVR library. Prior to that, the Hopper's 30-second "hop forward" feature continues to work for same-day viewing. Auto Hop does not work on live broadcasts.

Nonetheless, the feature has drawn a bucket of lawsuits since its launch in early 2012, and serious discussion of the potential for mass commercial failure for the television industry should advertising be taken out of the equation.

"The lawsuits filed by the networks essentially argue that 'consumers must watch commercials.' We find that proposition absurd and profoundly anti-consumer," said Dave Shull, senior vice president of Programming for DISH, in a statement. "Customers have been skipping commercials since the birth of the remote control, and the networks are arguing against that fact. Taken to the extreme, will the networks next ask consumers to stop changing channels?"

DISH, the third largest pay-TV operator in the United States, filed a preemptive lawsuit against ABC, CBS, NBC and FOX last year, asking for a declaratory judgment that the feature is legal and does not infringe on copyrights. Broadcasters have responded with lawsuits of their own. But in November, FOX was given a court ruling denying its efforts to block Auto Hop.

Meanwhile, CBS is looking to file new counterclaims, saying that DISH fraudulently concealed Auto Hop, and is asking for damages or the original agreement to be rescinded.

CBS alleges that Dish withheld that it was working on the ad-skipping during its contract negotiation with the network in 2011. CBS said that if it had known, it would not have signed the agreement.

In Moody's view, a victory by DISH in the continuing suits could, in the longer term, undermine the ability of broadcast networks to grow and sustain advertising revenue in the traditional fashion.

"We expect networks will seek to get compensated for lost revenue by asking for higher fees than typical in the next round of commercial retransmission negotiations," said Neil Begley, a Moody's analyst. That in turn will put pressure on networks to raise retransmission fees to make up the shortfall, including DISH, which could pass that on to its 14 million subscribers.

But it also gives the operator leverage. "In turn, DISH would want smaller increases in fees in return for turning off the service, leaving DISH in a better position than some of its competitors," added Begley.

However, the returns fees themselves, argues DISH, justify the Auto Hop capability. "Collectively, the networks reap billions in retransmission fees -- fees that are reflected in subscribers' growing bills. For their money, consumers deserve to use content they pay for as they wish."

But Moody's also has said that retransmissionless unaffiliated independent stations, which rely on local advertising alone, stand to have their very existence threatened by such functionality, should it roll out further. The loss of independent locals narrows the marketplace of ideas for consumers and resulting in further media consolidation.

"We believe that any threat to the existing mass audience advertising model could destabilize the entire television ecosystem," Begley noted.

That’s a statement that could be considered alarmist, according to DISH. "AutoHop needs to be put in perspective: the majority of our viewers watch their primetime shows live or during the same evening -- the time that is most valuable to advertisers," Schull said. "We chose to incorporate AutoHop as a next day feature and only if enabled by the consumer."

Edited by Brooke Neuman

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