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Analysis: Broadcasters Hopping Mad Over Dish's Ad-Skipping DVR

The inevitable court battles that many believed would spring up after the announcement of Dish Network's AutoHop ad-skipping DVR began to come to fruition late Thursday, with the satellite giant and a handful of content providers filing lawsuits in federal court.
Dish was the first to approach the bench, filing a suit against the Big Four Networks (ABC, NBC, CBS and Fox) and requesting a declaratory judgment in U.S. District Court for the Southern District of New York on May 24 that the AutoHop feature does not infringe on any copyrights claimed by the major networks. Dish also claimed that while providing the ad-skipping function, it remains in compliance with its agreements with the networks.

That litigation was followed almost immediately by separate suits filed in federal court in California by Fox, NBC and CBS, claiming the exact opposite - that the AutoHop indeed infringes on copyrights and violates their contractual agreements with the distributor.

Missing from the mix was ABC and Disney, both of which were named in the Dish suit, but so far have not filed any legal actions. Spokesmen for ABC and Disney did not respond to requests for comment.
In an interview on Fox Business Network last week prior to the lawsuits being filed, Disney CEO Bob Iger sidestepped the issue of the Hopper telling the news network that "it is in the hands of our great legal counsel," according to a report.
Dish claims in its suit that AutoHop does not infringe on copyrights because the ad-skipping feature is only activated for programming recorded through its PrimeTime Anytime feature -- which allows customers to record the entire primetime schedule of all four major broadcasters each night - and then only after 1 a.m. on the day after it is recorded. The ad-skipping function is not available for live programming.
"Consumers should be able to fairly choose for themselves what they do and do not want to watch," said Dish senior vice president of programming David Shull 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."
Later, after the broadcaster suits were filed, Shull said their arguments were "absurd and anti-consumer."
"Customers have been skipping commercials since the birth of the remote control, and the networks are arguing against that fact, Shull said in a statement Friday. "Taken to the extreme, will the networks next ask consumers to stop changing channels?"
Programmers, on the other hand, see the service as an undermining of their fundamental business models.
"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," Fox said in a statement. "Their wrongheaded decision requires us to take swift action in order to aggressively defend the future of free, over-the-air television."
Whether the courts allow or disallow the service may center on the question of control. In the past, the judicial system has allowed consumers to manipulate content they have paid for in practically any manner they choose. But the courts have taken a different stance when the distributor does the manipulating.
That appears to be the broadcaster's main beef - by taking control of ad skipping out of the viewers hands, they contend that Dish has violated their copyrights. In CBS's lawsuit, it specifically points to the PrimeTime Anytime and AutoHop feature as being automatic services that do not allow the consumer to select which programs are copied or which ads are skipped.
"This service takes existing network content and modifies it in a manner that is unauthorized and illegal," CBS said in a statement. "We believe this is a clear violation of copyright law and we intend to stop it."
Dish has countered that the feature does not alter or modify the broadcast signal and that ads are not deleted and are available for viewing whenever the consumer wants.
At last week's Cable Show, Discovery Communications CEO David Zaslav said that the AutoHop had the potential to "create real carnage" in the programming industry, but saw the product mainly as a way for Dish chairman Charlie Ergen to "raise a flag."
He added that Dish should also realize that a distribution pipe isn't worth much without content.
"It is incumbent on us in the content business to preserve the model so that we can reach people and we can invest," Zaslav said at The Cable Show opening general session panel last Monday, prior to the suits being filed. "It's the fad of the moment. In the end, I don't think it's sustainable because in order to get our content, we're going to have to work together. We've shown a great ability to work together."
At the same general session panel, Time Warner Cable chairman and CEO Glenn Britt chimed in that technology should be used to enhance the relationship between content providers, distributors and consumers, not destroy it.
"New technology helps us to make it better, but it doesn't change the fundamental idea of choice in a subscription," Britt said last Monday. "We can allow people to watch programming when they want as opposed to when it was scheduled. Whether in the cloud or the DVR, that's fundamentally an extension of this idea of letting people, when they sit down, to have the maximum choice. Advertising and subscriptions have been great for the content creators; it's been good for both sides. I don't think you want to destroy one of those revenue streams.
"If you reduce revenue into the entertainment business, either subscription prices are going to go up, or less content is going to be made," Britt continued. "Destroying revenue won't have the impact some people think it may have."
In a research note last week, before the lawsuits were filed, Sanford Bernstein cable and satellite analyst Craig Moffett said the AutoHop could only lead to one conclusion.
"With or without legal action, however, it seems certain the ‘ask' for retrans fees from Dish by the broadcast networks has just gone way up," Moffett wrote. "And perhaps not just for retrans. Recall that all of the Big Four save CBS are housed in major suppliers of cable networks. They can't be thrilled either."