Media-Mind: The Consequences of Skipping Commercials

Media-Mind: The Consequences of Skipping Commercials

Dish Network is embroiled in a lawsuit with television networks over a feature that will allow viewers to skip commercials during recorded shows, and the outcome could affect future programming.

Media-Mind is our column charting how technology’s opportunities and challenges transform traditional media and entertainment, for better or for worse.

The new service, Auto Hop, is built in to Dish’s DVR boxes and allows viewers to skip through all commercials of recorded programming with the push of a button. Fox was the first to file suit against Dish regarding the feature. NBCUniversal followed, saying the move is “violating copyrights and destroying the fundamental underpinnings of the broadcast television ecosystem.”

If Dish Network can prove that Auto Hop does not infringe on any copyrights the networks could claim, than the feature is a big win for the company. The ability to offer a product that will let people skip commercials will likely endear Dish to new customers and give the company another advantage in a competitive market, especially as cable subscription growth comes to a standstill.

However, that doesn’t change the fact that Auto Hop threatens the traditional broadcast model, which relies on advertising to generate profits and revenue.

The Problem

For networks, nothing was more important than how many people watched their programming. That still holds true, but now it’s about how viewers are watching as well.

How many people are watching programs matters because it dictates how much networks can charge for advertisements, and even DVR’d programs are measured in the ratings because there is still a possibility viewers will see the ads. However, Auto Hop strips away any chance of that happening.

As viewers increasingly use DVRs to watch programming, the customer’s ability to completely skip commercials greatly impacts the amount of money networks can charge for airtime. Advertisers have no real way of measuring whether their commercials make a difference in the first place, making ratings the primary way they decide to advertise. If a company aims at the 18-49 male demographic, but 30 percent of those viewers are watching a program with a DVR with Auto Hop, then the impact of advertising with that network is severely diminished.

Auto Hop will likely turn from an isolated problem to a widespread issue if the court rules in Dish’s favor. Other providers are likely to copy the company, causing headaches for networks across the country as they’re forced to review their strategy.

The Result

As Auto Hop threatens to make DVR viewing completely useless for ads, networks will need to consider new ways to make their programming worthy of advertisers’ dollars. However, the changes will likely manifest themselves in ways that viewers will notice.

If advertisers can’t reach viewers with commercials during programs, networks may open up more opportunities to reach potential customers, and viewers may soon see some of their favorite television characters blatantly using commercial products.

For example, Ted from “How I Met Your Mother” may sit down to breakfast eating a bowl of Cinnamon Toast Crunch and he may say a few positive things about it in a scene. There’s nothing necessarily wrong with in-program advertising but it’s distracting when it’s done blatantly. However, it’s highly valuable to advertisers, because it guarantees viewers will see the plug for the product no matter how they watch a show.

Another way networks could increase their ratings and bypass DVR viewing is with more live programming. Studies show programs that networks air live such as American Idol, The Voice and sporting events have better ratings and little DVR viewing. If Auto Hop passes legal muster and eventually spreads to other providers, networks will likely place an emphasis on even more live reality television and decrease the amount of scripted shows they produce.

Reality TV is often inexpensive to produce for TV studios, but it performs just as well as hour-long dramas and half-hour sitcoms, giving programmers an added incentive to create more of it. Advertisers will also likely prefer to place spots on live programming events if they know more eyeballs will actually watch their ads, but the pull towards reality and live TV could endanger scripted entertainment even further, changing what actually will be seen by consumers on the small screen.

Short-Term Convenience, Long-Term Consequences

Customers may be excited about the prospect of a technology like Auto Hop allowing them to skip commercials. But what they may not realize is that skipping commercials greatly disturbs the traditional broadcast model by devaluing the very content that makes TV valuable to advertisers, and could begin to affect the type of programming they see on their favorite channels.

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