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Dish Vs. Network TV: Who Will Win the Ad-Skipping War?

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CBS head honcho Leslie Moonves and other TV network executives fear Dish's ad-skipping Hopper will kill their advertising revenue.

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MINYANVILLE ORIGINAL On the issue of ad-skipping technology, it's Dish Network (DISH) versus the TV networks.

In August, CBS (CBS), NBC (CMCSA), and Fox (NWS) asked a California judge to block Dish's DVR ad-skipping technology, known as "AutoHop" and "PrimeTime Anytime," claiming copyright infringement and breaching of content retransmission agreements.

In a statement, Fox said:
Dish Network has created and marketed a product with the clear goal of breaching its license with Fox, violating copyrights and destroying the fundamental underpinnings of the broadcast television business -- which damages not only Fox and the other major networks but also the hundreds of local stations around the country.

CBS CEO Leslie Moonves also lashed out at Dish on Tuesday. Speaking at the Bank of America-Merrill Lynch 2012 Media, Entertainment, Communications Conference in Beverly Hills, California, Moonves threatened to pull CBS off Dish's programming slate if the cable company wins the lawsuit.

"Hopper can't exist," Moonves said. "If Hopper exists and [Dish] want[s] to eliminate our commercials, we will not be in business with them. It's pure and simple."

Of course, Dish fired back at the content providers' "unsubstantiated fear-mongering," saying that ad-skipping technology has been in existence for some time, going back to the introduction of the VCR in the 1980s.

"Consumers have been forwarding through commercials since the beginning of the DVR. This just simplifies the process. The feedback from consumers is that they love it," Dish Vice President Vivek Khemka told USA Today.

Indeed, even without the AutoHop, customers of pay TV operators like Comcast and Time Warner Cable (TWC) are able to skip commercials on DVR recordings by pressing the fast-forward button or the 30-second skip button.

Just as it happens with every industry, the television and cable industry is in the midst of a technological revolution that Moonves simply cannot hope to litigate away by saying that the Hopper "can't exist."

While Moonves' frustrations are understandable -- after all, the TV industry has long been based on an advertising-supported model -- the onus is on the networks to innovate and discover new sources of revenues, not on technology to wait for everyone to catch up.

One way networks have coped with viewers skipping ads is to introduce product placements, or "brand integration," into TV shows. Characters in ABC's (DIS) hit sitcom, Modern Family, for example, were shown shopping at Target (TGT) and driving a Toyota (TM) Prius.

It's clear that Dish will not back down on its Hopper DVR. On Tuesday, Credit Suisse analyst Stefan Anninger said in a research note that Dish sale agents are reporting a increase in new customers in the third quarter compared to one year ago, and that more of them are going for the higher-price Hopper DVR compared to the second quarter.

However, Dish customers are likely to be hurt regardless of the outcome of the lawsuit. If Dish wins and CBS leaves the pay TV operator, Dish subscribers lose channels. Dish customers are already without AMC (AMCX), with whom Dish is also embroiled in a legal battle.

If Dish loses, it will probably have to pay more to the TV networks in fees to make up for lost advertising revenue – in other words, be prepared for subscription fee hikes.

Twitter: @sterlingwong
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