TV Ad Model Faces New Threat

TV media companies have been battling to keep marketers spending money on their format despite mounting challenges. These challenges range from consumers who watch more TV online to those who use DVRs to skip ads. Now a new ad skipping service has debuted – the Auto Hopper from DISH Networks.

Using this technology, which is being actively promoted by DISH, consumers can effortlessly skip ads. As far as DISH is concerned, this tool is just a more efficient way of doing what viewers already do with DVRs. The major networks – ranging from Fox to CBS to NBC universal – don’t agree. Their programming appears on DISH and these networks fear they’ll be under scrutiny from marketers who count on a certain percentage of the national audience viewing their message.

Lawsuit have been filed on both sides. The basis of the legal argument from the networks is all about whether “skipping commercials is copyright infringement.” Their attorneys are expected to claim that making copies of recorded programming is piracy. DISH executives see it differently. They believe the entire business model for pay TV is under threat. DISH Chairman Charlie Ergen tells the Wall Street Journal that “broadcasters and advertisers have to change the way they do business or run the risk of linear TV becoming obsolete.”

As with most things in business, this comes down to money. Some media groups are already asking DISH for rate changes. At the same time, DISH’s Ergen says that because broadcasters are making so much TV content available online, for free, consumers have little incentive to pay for cable or satellite services.

The business model for TV media space providers will likely change as the result of a number of factors. While the legal wrangling about Auto Hopper will drag on for a while, it seems this service is yet another weapon in the war of digital disintermediation.

[Sources: TV Networks File Legal Claims. Techdirt​.com. 25 May. 2012. Web. 21 Jun. 2012; Ramachandran, Shalini. Dish Chief: TV Needs to Change. Professional​.wsj​.com. 7 Jun. 2012. Web. 21 Jun. 2012] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.