While networks worry about Dish's service, commercials thrive on YouTube

When creative thinkers come up with the latest and greatest ways to watch TV, there’s often an assumption placed on the technology: They are just giving consumers what they want.

The decades-long drive to make it ever easier for the average viewer to skip through commercials — from the VCR to the DVR — has, by and large, survived legal morass.

But there are questions as to whether the latest effort to liberate us from the 30-second spot, Dish Network’s ad-skipping AutoHop, is really the next big thing that should have the aura of inevitability.

The broadcasters certainly are concerned. CBS’ Leslie Moonves has been especially vocal, calling it “illegal” and threatening to withhold programming if Dish continues to push the service. Other network executives also have been publicly critical, and one of the champions of broadcasters on Capitol Hill, Rep. John Dingell (D-Mich.), even referred to Dish chieftain Charlie Ergen as “Mr. Hopper” at a House hearing.

A federal judge’s ruling last week had at least some disconcerting news for the networks as they try to put a stop to the hop. U.S. District Judge Dolly Gee denied Fox’s request for a preliminary injunction to halt AutoHop, as well as the service it is connected to, PrimeTime Anytime, a glorified DVR in which a consumer can opt to record an entire night’s worth of programming on all four networks in one fell swoop and then decide what to watch.

But Gee’s opinion is a mixed bag that should give networks some solace and a reminder that when it comes to drastic changes in viewing habits, courts may be the ultimate deciders.

Gee rejected Fox’s claims that Dish’s PrimeTime Anytime infringes on copyright and violates a contract it has with the satcaster. Her rationale was that, even with a system that records entire nights of programming en masse, it is the user, and not Dish, that “causes” the copy to be made. Even though Dish exerts more control than a traditional DVR service over when recordings start and end and how long they are stored, Gee said it is “ultimately a user” that enables Primetime Anytime. That’s a key distinction extending back to the days of the Sony Betamax case, in which the Supreme Court ruled that the VCR’s primary application, time shifting for private home use, was a fair use.

“Despite Dish’s involvement in the copying process, the fact remains that the user, not Dish, must take the initial step of enabling PTAT after deciding he or she wants to initiate the recording,” Gee wrote.

Gee also cited the 2nd Circuit Court of Appeals’ 2008 decision upholding the legality of Cablevision’s remote DVR, ruling that the consumer had enough control to protect the cabler from liability. That was a controversial decision, and the networks may very well challenge it as they pursue an appeal in the 9th Circuit.

Where Gee found fault — and the networks surely see an opening as they press ahead — is with the AutoHop service. As much as networks object to the automatic deletion of their sponsors’ messages, which most consumers do with ease by fast-forwarding on a DVR, Dish took convenience a step further. But to make this work, they needed to make copies of the primetime lineup to make sure that the system functioned properly. While Dish argued that the copies it makes are fair use because they are for noninfringing purposes — “quality assurance” — Gee found otherwise.

“Here, the QA copies are used to perfect the functioning of AutoHop, a service that, standing alone, does not infringe,” she wrote. “The record shows, however, that a market exists for the right to copy and use the Fox programs: Fox licenses the copies of its programs to companies including Hulu, Netflix, iTunes and Amazon to offer viewers the Fox programs in various formats. In fact, the record suggests that Dish chose to offer AutoHop to its subscribers in order to compete with other providers who pay for the rights to use copies of the Fox programs through licensing agreements.”

Nevertheless, Gee turned down Fox’s request for a preliminary injunction, ruling that Fox had not shown its harms were irreparable. Her argument was that it was not the ad skipping itself that infringed copyright or breached a contract but Dish’s “quality assurance” copying. The harm, she says, comes from the former but not the latter.

That rationale may be puzzling to the networks, but the larger concern is that the technology will gain steam. The networks weathered the VCR and the DVR but, even in fast forward, there is at least some exposure to the sponsors. Not so with AutoHop. Bryan Sullivan of Early Sullivan makes the comparison between AutoHop and selling a book with some pages missing. “It is cutting pieces out of a copyrighted work,” he said. The price of automatic ad-skipping, he notes, will be a drop in the quality of network programming.

Jack Lerner, clinical associate professor of law at USC, says that while “new technology will keep coming up that will both evolve with and influence consumer viewing habits and what consumers will stand for,” he’s not ready to write off their acceptance of ads as part of the tradeoff.

“Many people still think that the traditional bargain between the networks and the consumers — we will give you topnotch programming in exchange for sitting through commercials — is a fair one,” he said. “That was not necessarily the case with say, CD prices in the ’90s. Many people felt that was not fair.”

Old habits, after all, are becoming new. Have you taken a look at YouTube lately? The price to watch many videos is the 30-second spot.

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