Marketing

Ad Hopper Dispute Heads for Court

5/28/2012 12:01 AM Eastern

The battle over the digital video
recorder that automatically skips commercials exploded
in a flurry of lawsuits last week.

Fox, NBC and CBS separately sued satellite-TV
provider Dish Network in California last Thursday
(May 24), seeking to enjoin Dish’s Auto Hop service
on grounds that it violates their copyrights and
retransmission-consent contracts.

More importantly, they argue that by giving viewers
a simple way to erase all commercials when playing
back automatically recorded primetime shows,
Dish was threatening the economic ecosystem that
makes commercial television programming possible.
(A spokeswoman for ABC, whch has not sued Dish,
said the network was monitoring the situation.)

Meanwhile, Dish — headed by its mercurial
and litigious chairman, Charlie Ergen — sued the
Big Four networks, including ABC, claiming that
threats of litigation by the broadcasters were stifling its innovation, which was nothing more than
an improvement on the videocassette recorder. Dish
is seeking a declaratory judgment in New York that
it wasn’t infringing on any copyrights and is in compliance
with its agreements with the networks.

“Consumers should be able to fairly choose for
themselves what they do and do not want to watch,”
Dish Network senior vice president of programming
David Shull said in a statement. “Viewers have been
skipping commercials since the advent of the remote
control; we are giving them a feature they want
and that gives them more control.”

Dish noted that in addition to reports of legal actions,
CBS, Fox and NBC have rejected ads for Dish’s Hopper
DVRs, the devices with the Auto Hop function.

“We respect the business models that drive our industry,
but we also embrace the evolving nature of technology and
new ideas,” Shull said. “Advances in the ability to measure
and target viewership will give the entire industry — including
advertisers — the ability to develop better programming,
more-effective advertising and deliver an overall better experience
to the viewer.”

UPFRONT WAR OF WORDS

Dish announced Auto Hop on May 10, the week before the
broadcasters were to hold their upfront presentations, at which
they show their new programming to media buyers and advertisers.
Over the next few weeks, the broadcasters will sell
about $9 billion worth of ads on those primetime programs.

During the upfront presentations, network executives called
Auto Hop everything from illegal to an insult. Last Thursday,
the lawsuits continued to assail Dish and its service.

“This service takes existing network content and modifies it
in a manner that is unauthorized and illegal. We believe this is
a clear violation of copyright law and we intend to stop it,” CBS
said in a statement accompanying its suit.

“NBC has filed suit against this unlawful service in order to
keep over-the-air broadcast television a strong competitor. Advertising
generates the revenue that makes it possible for local
broadcast stations and national broadcast networks to pay for
the creation of the news, sports and entertainment programming
that are the hallmark of American broadcasting,” NBC
said in a statement. “Dish simply does not have the authority to
tamper with the ads from broadcast replays on a wholesale basis
for its own economic and commercial advantage.”

Fox said in a statement: “We were given no choice but to file
suit against one of our largest distributors, Dish Network, because
of their surprising move to market a product with the
clear goal of violating copyrights and destroying the fundamental
underpinnings of the broadcast television ecosystem.
Their wrongheaded decision requires us to take swift
action in order to aggressively defend the future of free,
over-the-air television.”

Fox’s suit, filed in U.S. District Court for the Central District
of California, charges copyright infringement and
breach of contract. Fox is seeking to enjoin Dish’s Auto Hop
service and wants an award of compensatory and statutory
damages, costs and attorney’s fees.

Fox charged that it and the other broadcasters license
Dish to retransmit primetime network programming as
it is broadcast, and have also agreed to license primetime
broadcast programming to Dish for video-on-demand service
to customers under conditions that include prohibiting
fast-forwarding through commercials.

“Commercial advertising is vital to broadcast television,
as the robust choices and quality of primetime programming
… are possible only because they are supported by
the advertising revenues generated from television commercials,”
Fox said in its suit.

Fox said Dish, in violation of copyright laws and its license
agreement with Fox, “launched its own bootleg
broadcast video-on-demand service called PrimeTime
Anytime that is available to top-tier Dish subscribers who
lease the Hopper set-top box from Dish.”

According to the lawsuit, PrimeTime Anytime “makes an
unauthorized copy of the entire primetime broadcast schedule
for all four major networks every night … To make matters
worse, Dish operates its bootleg PrimeTime Anytime service
so that the copies it makes are viewable commercial-free.”

Fox added: “This lawsuit is not about Dish enhancing
consumer choice. By stealing Fox’s broadcast programming
to create a bootleg video-on-demand service that, if
not enjoined, will ultimately destroy the advertising-supported
ecosystem that provides consumers with the choice
to enjoy free over-the-air, varied, high-quality primetime
broadcast programming.”

In its suit, filed in U.S. District Court in New York, Dish
is seeking a declaratory judgment that “Dish is not directly
or indirectly infringing the copyrights of the major television
networks and is in compliance with its contracts with
the major television networks.”

In its suit, Dish describes and defends its Auto Hop service.

“Even though consumers have had the option, in one
form or another, to skip commercials for decades, the major
television networks are threatening Dish with litigation
to eliminate Auto-Hop, a patented technology that allows
Dish’s paying subscribers to avoid commercials that they
might prefer not to watch.”

Dish said it has contracts with each major network that
authorize the satellite-TV firm to rebroadcast their signals.
“Dish is required to pay the major television networks hundreds
of millions of dollars per year in retransmission fees,
collected from its subscriber base, for the right to rebroadcast
those signals — even though the major television
networks provide their content at no charge to television
viewers with an over-the-air antenna,” Dish said.

DISH: IT’S JUST LIKE A VCR

Dish noted that since the introduction of the video cassette recorder,
TV viewers have been able to time-shift viewing and
fast-forward through commercials. It said the DVR was the
next generation of DVR and that Auto Hop “allows consumers
who are already time-shifting their television viewing to
skip commercials more efficiently by automatically fast-forwarding
through all the commercials at the touch of a button.”

Dish said the commercials are not erased or deleted.
“They remain on the recording and can be readily viewed
at each customer’s individual option. The Dish Auto Hop
feature does not alter or modify the broadcast signal.”

Dish said the broadcast networks responded to Auto Hop
with “hostility, threatening litigation.” It contended that
Auto Hop is “a legitimate, legal DVR feature, and Dish is
in full compliance with copyright law and its rebroadcast
agreements with the major television networks.

In a report when the service was introduced, Sanford C.
Bernstein & Co. analyst Craig Moffett noted, “Auto Hop adds
to an already long list of broadcast-unfriendly features of
Dish’s service, including 30-second skip buttons on their
remote controls.”

Moffett noted that other DVR services, including DirecTV
and TiVo, have locked this feature out of sight, while Dish
boldly promotes it on a button on the remote. Dish also offers
Slingbox, which bypasses incremental payment to affiliate fees for out-of-home viewing.

Moffett wondered in his report if the networks would take
legal action against Dish. Even without legal action, he said,
it was likely that the broadcasters would seek much larger
retransmission payments from Dish in the future, noting
that most of those broadcast networks are owned by media
companies that also control cable programmers.

“They can’t be thrilled, either,” he said. “Indeed, although
for now Auto Hop seems to be confined to
primetime broadcast, it conceivably could spread to all
programs/networks/dayparts.”


Jon Lafayette is business editor of Broadcasting & Cable.
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