Even though DISH Network’s introduction of an STB with an automatic ad-skipping feature has prompted a furious legal response, the function could become so popular with consumers that it may prove difficult to take away.
According to a research note by IHS Screen Digest, DISH’s AutoHop feature in its Hopper set-top boxes — which will allow consumers to automatically skip ads during playback on a digital video recorder (DVR) when viewing broadcast network programming — may just be a ploy to cut retrans fees, but it could represent a fundamental threat to the advertising revenue that drives their business.
As a result, there has been a swarm of lawsuits and dire warnings of mass commercial failure for the television industry should advertising be taken out of the equation. After widespread industry rumblings against the feature and ongoing investment in such things, DISH, the third largest pay-TV operator in the US, filed a pre-emptive lawsuit against ABC, CBS, NBC and FOX, asking for a declaratory judgment that the feature is legal and does not infringe on copyrights. Three broadcasters have responded with lawsuits of their own.
Yet out of around a total of more than 14 million residential and commercial customers at the end of 2011, DISH is expected to enjoy household penetration this year of an estimated 9.6 million DVR units, up 8% from 8.9 million DVRs in 2011 and will likely see DVR penetration continue to climb during the next few years, reaching a projected 11.7 million units by the end of 2016.
As a result, says the analyst, AutoHop has the potential to “devour the ad model” given its capability — it is twice as capacious as any other US operators’ DVR, capable of playing and capturing up to six programme streams simultaneously during primetime. The box is also connectable via multimedia over coax (MoCA) to three smaller clients allowing live, recorded and video-on-demand programming to be viewed on other sets.
“The Hopper was clearly a monster the minute it was announced … with twice the capacity of DVRs from other operators,” said Tom Adams, senior principal media analyst for US media at IHS. “With AutoHop, consumers can automate the ad-skipping process whenever they fire up a show on which the feature is enabled, electronically detecting the switch from programming to advertising, and blackening out the screen briefly while it scans forward to the programme. And with an ever-increasing rage of viewing occurring on a time-shifted basis via DVRs, this likely-to-be-very-popular innovation is what spurred networks to turn their lawyers loose on DISH.
"If the AutoHop feature proves to be as popular as we think it might be, it will be awfully hard to take it away from consumers — even if broadcasters prove willing to negotiate away the capability in future retransmission deals.”