/// Analyst: Auto Hop Flap Much Ado About Nothing

May 24, 2012  |  Media Week

A week after the broadcast networks warned that they would not tolerate Dish Network’s commercial-blasting technology, Fox, NBC and CBS today separately filed suit to block the service. And while the math suggests that TV’s reaction may be a bit overblown, a successful legal campaign could set a precedent preventing any other operator from issuing its own ad-erasing feature. In a note to investors, Janney Capital Markets analyst Tony Wible said that while the networks have gone nuclear in their assault on Dish Net, only “1 percent of advertising revenues is at risk, given the viewing patterns and low penetration of the [Auto Hop] technology.” One reason Wible believes that Auto Hop is all hat and no cattle has to do with viewer consumption patterns. Per Nielsen C3 data, 82 percent of broadcast viewing is done during the same day a show originally airs, whether live or in time-shifted mode. On cable, same-day viewing is even more prevalent (90 percent). Because Auto Hop does not allow viewers to zap the ads until 1 a.m. the following day, the vast majority of time-shifted content will be seen with the commercials intact. Of course, viewers can simply fast-forward through the spots in their recorded shows, but the Dish service is far more disruptive . When Auto Hop is deployed, the screen goes totally black during the commercial break; after an interval of a few seconds, the program resumes. From there, it’s all just a numbers game. “The reality is that Dish's 14.1 million subscribers only account for 12 percent of the broadcast homes,” Wible said. “Only 53 percent of Dish subs have DVRs which implies only 6 percent of homes are at risk.” Of the 115 million TV households in the U.S., only 7.46 million are DVR-owning Dish Network subs. As such, Wible believes the actual exposure to the Big Four “would likely be less than $162 million, or 1.1 percent of broadcast’s total advertising revenues [$14.1 billion].” Wible suggests that Dish may simply be leveraging the disruptive power of Auto Hop in order to negotiate against rising carriage fees.

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Analyst: Auto Hop Flap Much Ado About Nothing


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