Ad Hopper Dispute Heads for Court

The battle over the DVR that automatically skips commercials
exploded in a flurry of lawsuits Thursday.

Fox, NBC and CBS separately sued Dish Network in California
seeking to enjoin Dish's Auto Hop service on grounds that it violates their
copyrights and contractual agreements to retransmit programming.

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 said the network
was monitoring the situation.)

Dish, headed by the mercurial and litigious Charlie
Ergen,  meanwhile sued the Big Four networks, claiming that threats of
litigation by the broadcasters was stifling their innovation, which was nothing
more than an improvement on the video cassette 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," David Shull, Dish senior VP of
programming 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 DVR, 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," said Shull.
"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

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 last week's upfront presentations, network executives called
Auto-Hop everything from illegal to an insult. On Thursday the lawsuits continued to assail Dish and its

"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."

"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 said in a

Fox's suit, filed in U.S. District Court in 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 charges that it and the other broadcasters license
Dish to retransmit primetime network programming as it is broadcasts and also
has agreed to license primetime broadcast programming to Dish for
video-on-demand service to customers under conditions including 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 says 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

Fox adds: "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."

Fair use fan Public Knowledge took aim at Fox for challenging Dish.

"It is truly unfortunate for consumers that Fox has filed suit against Dish Network," said Public Knowledge President Gigi Sohn said in a statement. "That suit charges Dish with copyright violations for the satellite company's DVR which allows consumers to skip commercials, but also against the Sling adapter (formerly Slingbox) which allows consumers to stream their TV signal to a laptop at a different location. This is a frontal assault on home recording and fair use. Ordinary consumers are in its crosshairs, while Fox demands technological stagnation from innovators.

Public Knowledge has also backed Aereo TV, which is also being sued by broadcasters as an improper use of their broadcast content.

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

"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 says has contracts with each of the major networks that
authorize the satcaster 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 says.

Dish notes that since the introduction of the video cassette
recorder, TV viewers have been able to time shift viewing and fast-forward
through commercials. It says 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 says 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

Dish says the broadcast networks responded to Auto Hop with
"hostility, threatening litigation." Dish contends that Auto Hop is "a
legitimate, legal DVR feature, and Dish is in full compliance with copyright
law and its re-broadcast agreements with the Major Television Networks."

In a report when the service was introduced, Sanford C.
Bernstein & Co. analyst Craig Moffett noted that "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 notes 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 had wondered if the networks would take legal action against Dish. Even
if they hadn't, he says it's likely that the broadcasters will seek much larger
retransmission payments from Dish in the future, and notes that most of those
broadcast networks are also owned by media companies that control cable
programmers as well. "They can't be thrilled either. Indeed, although for now Auto Hop seems to
be confined to primetime broadcast, it conceivably could spread to all
programs/networks/dayparts," he said.

John Eggerton contributed to this report

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.