NBC, FOX, and CBS have file a lawsuit against Dish Network for Autohop, a feature that blacks out commercials on pre-recorded network shows. The networks argue that the feature violates copyright laws and jeopardizes the financial foundation of the entire television industry.
It was the world’s first television commercial, and it lasted 10 seconds.
Ever since, TV networks have been jamming the airwaves with longer, louder and more insistent ads, and viewers have found increasingly sophisticated ways of avoiding them.
Now a high-profile legal test could resolve this TV tug-of-war that has been building for decades.
Satellite TV provider Dish Network’s new ad-skipping feature, AutoHop, enables subscribers to black out ads on programs they’ve saved on their digital video recorders. When activated, AutoHop turns the screen dark when a commercial arrives, then returns to the show a few seconds later.
CBS, NBC and Fox have sued, saying the feature violates copyright laws and jeopardizes the financial foundation of the entire television industry. The AutoHop, which launched in May, is only available for use on shows on broadcast networks CBS, ABC, NBC and Fox and not on cable channels.
On Monday, the legal battle over AutoHop between Dish and the broadcast networks is scheduled to start in New York, where U.S. District Judge Laura Swain will hear arguments to determine whether the case will be heard in New York or Los Angeles.
Dish maintains that its new feature is legal.
“I think it was settled 28 years ago in the Betamax case,” Dish Network Chairman Charlie Ergen told Congress last week, referring to the landmark 1984 case that established that consumers did not violate copyright laws by recording shows at home for their own enjoyment.
At stake are billions of dollars in advertising revenue. The estimated $68 billion in ad dollars the television industry collects each year helps to offset the spiraling production costs of prime-time dramas and comedies, network news operations, late night talk shows and sports.
“I can’t produce premium shows like ‘CSI’ without advertising,” CBS Corp. Chief Executive Leslie Moonves said.
The alternative to forcing consumers to watch commercials would be to ask them to pay more for all the TV time they consume. No one knows exactly how much viewers would be asked to fork over to make up for lost revenue if commercials suddenly went away.
Consulting firm Frank N. Magid Associates Inc. figured that each household would need to come up with an additional $49.74 a month — on top of the money already paid for monthly cable service.
“Advertising pays for the programming,” said Howie Cohen, the advertising executive who created Alka-Seltzer’s iconic 1972 “I can’t believe I ate the whole thing” television commercial. “I don’t think America can afford to pay its own way when it comes to programming.”
Commercials won’t disappear any time soon. Media companies and major marketers have too much invested in the system. In fact, even as they squabble with Dish over AutoHop, the major networks last month quickly sold billions of dollars’ worth of ad time to companies eager to buy commercials for the upcoming TV season. Demand was so strong that the networks were able to raise ad rates despite concerns over viewers bypassing commercials through technology.
TV remains marketers’ preferred medium. But advertisers increasingly are searching for alternatives to conventional advertising, including opting for so-called product placement. On the CBS comedy “The Big Bang Theory,” for example, a character used the hand sanitizer Purell. On the ABC comedy “Suburgatory,” a can of Red Bull horned its way into a starring role.
Last year, Nielsen counted 8,113 instances of product placement in TV shows, a 65 percent jump over 2009.