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Ad-Skipping DVR Household Penetration to Grow 22%

11 Jul, 2012 By: Erik Gruenwedel

Despite legal challenges by broadcasters, technology has populist appeal and will be hard to stop, according to report

Dish Network’s new Hopper digital video recorder featuring controversial ad-skipping “AutoHop” technology is headed to separate courtrooms across the country. It is also growing in popularity among households in the United States.

Dish’s DVR household penetration is expected to increase 22% by 2016 to 11.7 million units, compared with 9.6 million units this year, according to new research from IHS Screen Digest.

The Hopper DVR is expected to add 600,000 units a year in 2013 and 2014, slowing to 500,000 units in 2015 and 400,000 units in 2016. The Hopper is projected to add 700,000 units this year from 2011. Dish’s DVR shipments are second only to those of DirecTV, and are ahead of rivals such as Comcast and Time Warner Cable.

AutoHop technology allows subscribers to voluntarily skip advertising on recorded — not live — primetime network programming. Because of this, Fox Broadcasting, NBC Universal and CBS Corp. filed separate lawsuits May 24, alleging a breach of terms in the licensing deals that allow Dish to retransmit their network feeds. The lone holdout, ABC Networks, did not immediately file suit, but parent company Disney CEO Bob Iger has said publicly that Dish’s action “feels like a bite to the hand that feeds you.”

The networks’ suits will be heard in a Los Angeles courtroom.

Dish, in turn, filed a suit against the broadcasters, including ABC, alleging they conspired to thwart the satellite operator’s marketing of the Hopper, in addition to preventing rollout of technology allowed under provisions of the “Betamax” court ruling decades ago.

The 1984 Supreme Court ruling, which reversed the appeals court decision, ruled in favor of Sony’s Betamax DVR allowing consumers for the first time to record TV broadcasts.

Dish’s suit will be heard in a New York court in Manhattan.

Unlike previous DVR technology that allowed users to manually fast-forward through recorded programming or featured a 30-second skip button, Hopper (and AutoHop) can automatically skips ads on up to six simultaneously recorded programs. It's now dawning on the networks that AutoHop has the potential to devour the ad model, according to IHS. And with two terabytes of storage space, the Hopper, together with AutoHop, could be enough to spur new sales — both among existing Dish subscribers as well as current non-subscribers, which is what the company hopes.

“The Hopper was clearly a monster the minute it was announced at the Consumer Electronics Show back in January, with twice the capacity of DVRs from other operators,” said Tom Adams, senior principal media analyst for U.S. 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 program. And with an ever-increasing percentage 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.”

The Hopper also is connectable via multimedia over coax (MoCA) to three smaller set-top boxes — dubbed “Joeys” in keeping with the kangaroo metaphor — which allow live, recorded and video-on-demand programming to be viewed on other TVs in the home. The system’s new interface includes capabilities such as predictive content searching on the DVR, as well as a “push” VOD content that Dish will be preloading during off hours for a service the company is calling “Dish Unplugged,” according to IHS.

Adams contends Hopper is also Dish’s Trojan Horse in the growing battle over retransmission fees between media companies and cable, satellite and telecommunication operators. This has led some to speculate that AutoHop was launched simply to fire a shot across the bow of broadcasters in order to get them to moderate their retransmission demands.

“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,” Adams said.

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