Dish Auto-Hop courts subs, spurns broadcasters

Dish Networks last week announced that satellite subscribers using its Hopper whole-home HD DVR system could opt to automatically skip commercials for most of the programs recorded using its Prime Time Anytime service when viewed the day after airing.

“Viewers love to skip commercials,” said Vivek Khemka, VP of Dish Product Management in a statement. This “Auto Hop” function further differentiates the Pay TV operator’s offering by making it “easier than ever before” to watch shows commercial free, Khemka added.

The third largest Pay TV operator in the U.S., with more than 14 million subscribers, Dish unveiled Prime Time Anytime at CES 2012 in January. The service automatically records with a push of the button primetime programming from the four major broadcast networks: ABC, CBS, Fox and NBC. It stores this programming for up to eight days on the Hopper DVR.

Dish is positioning this move as consumer-friendly. To some extent, it is. Yet to a larger, potentially damaging extent, it is an unfriendly move against its affiliate partners.

Many observers take for granted Khemka’s point that DVR users love to skip ads. Early adopters of time-shifting technology such as TiVo certainly found that functionality compelling. But over the past several years, as DVR penetration has increased, ad skipping as a percentage of overall DVR usage has held steady, or even dropped. High-end estimates three-and-a-half years ago were in the 70% range (if not wildly overstated at 97%), but 50% now seems the generally accepted number, as embedded in this Wall Street Journal article on Auto Hop.

That means that while a lot of DVR users are skipping, just as many are not. Why not? The idea runs counter to much new media analysis, but many viewers may not mind watching ads. That is clearly the case at headline events such as the Super Bowl, where high-budget ads vie for eyeballs in a kind of parallel competition to the game on the field. But even on a daily level, the marginal benefit of watching ads simply may outweigh the hassle of fast-forwarding recorded content. The tradeoff is viewing occasionally useful or amusing ads versus trying to hit the right button on the remote for the right length of time, so as not to overshoot the target.

Is there a case for making it easier for lean-back and lazy TV viewers to skip ads? Dish thinks so. After all, it pioneered the 30-second skip button. By contrast, TiVo Premiere, used by Dish rival DirecTV, offers a measured fast forward.

What remains to be seen is how popular Auto Hop becomes. In its most recent earnings report, Dish has for the first time in years outperformed DirecTV in subscriber numbers: 104,000 to 81,000 net new additions. But Dish launched Hopper, never mind Auto Hop, too late to impact the first quarter numbers.

Less doubtful is how this move looks to Dish’s content partners. “It’s hard to maintain good affiliate relations when you introduce a service designed to cut out the bulk of your affiliates’ revenues,” wrote Bernstein Research Senior Analyst Craig Moffett in a note. NBC and Fox execs already have leveled criticism against Dish, as reported by Fierce Cable.

In addition to Auto-Hop and the existing 30-second button, Moffett noted that Dish’s use of Slingbox technology (“which bypasses incremental payment to affiliate feeds for out of home viewing”) and its litigation with AMC Networks are other “broadcast-unfriendly” features of Dish’s existing service. Moffett also recalled that erstwhile TiVo rival ReplayTV was unable to defend legally two features that resemble Slingbox and Auto Hop.

Dish thus could win over ad-adverse couch potatoes in the market, and yet fail to prevail in court, should it encounter a legal challenge.