Broadband Cable Association of Pennsylvania

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March 4, 2014

Dish Network Corp. has agreed to curtail the use of a controversial ad-skipping feature on its latest digital video recorders for ABC shows, as part of a new long-term programming deal with ABC owner Walt Disney Co. , the companies confirmed late Monday.

As part of the deal, Disney granted Dish online video rights to its flagship TV channels on terms that would allow Dish to launch an Internet-based TV service, something Dish has talked about in the past. Disney said it was the first time it had granted such rights. Dish's agreement on the Auto Hop appeared to be a major concession in favor of Disney. Dish agreed to disable the "Auto Hop" ad-skipping feature for ABC shows until three days after the shows air. That period is important because advertisers pay for TV audiences measured up to three days after a show is broadcast. The Journal had earlier reported on the deal. ABC, along with other major broadcasters, has been embroiled in litigation with Dish over the Auto Hop since 2012, when the satellite company unveiled the feature in its Hopper line of digital video recorders. As part of the new deal, ABC agreed to drop its litigation over the Hopper. The two companies also resolved a longrunning legal dispute between Dish and ESPN.

Broadcasters, which sued Dish alleging copyright violations, are concerned the Auto Hop feature could undercut advertising revenue. Auto Hop makes ad skipping easier than on conventional DVRs. Viewers need only click an on-screen button once to automatically skip all the commercials in some prime-time shows carried by the four major broadcasters. Conventional DVRs require viewers to fast forward through commercials by pressing a button at each commercial break. Dish Chairman Charlie Ergen, whose company is the third-biggest pay-TV operator with about 14 million subscribers, said in mid-2012 that with Auto Hop he aimed to force the networks to develop "more meaningful" ads, using for example demographic targeting of viewers.

But on an analyst conference call in February, he said Dish had "really got no traction with broadcasters about trying to change the model to make commercials more meaningful to consumers." He said on the same call that he was willing to engage in this dialogue, adding that "perhaps we didn't go about it exactly right, the way we introduced the Hopper." Still, he said, "I don't think commercial skipping is going to go away." The deal raises the question of whether Dish and the other major broadcasters can agree to similar deals. Representatives for the others- CBS Corp.'s CBS, Comcast Corp.'s NBC and 21st Century Fox's Fox-had no immediate comment. In a statement Monday, Dish Chief Executive Joe Clayton said the agreement "has really been about predicting the future of television."

Dish's deal for online streaming rights places it squarely in the race alongside major technology companies including Sony Corp. that are looking to create an online version of pay TV. Dish in the past couple of years has been largely unsuccessful in winning such rights from TV channel owners. It has said it hopes to create a slimmed-down service that would appeal to younger consumers who don't want the big TV bundle. "We are creating opportunities to add new subscribers and introducing the value" of a pay TV subscription "to a small subset of broadband-only consumers," said John Skipper, President of ESPN.

In addition to the Auto Hop agreement, the deal allows Dish subscribers to get access to Disney channels' online and mobile apps such as WatchESPN. Dish also agreed to carry Fusion, a new English-language news and entertainment channel that is a joint venture between Disney and Univision Communications, along with the SEC Network, a channel to be launched later this year by ESPN that will broadcast Southeastern Conference games. Financial terms of the deal, such as how much Dish will pay for carriage rights, couldn't immediately be learned. Wall Street Journal

ABC's streaming-video outage during the Academy Awards on Sunday night highlights the technology challenges TV networks are up against as they try to make highly watched live events available online.A spokeswoman for ABC, which is owned by Walt Disney Co. , blamed the outage on a "traffic overload that overwhelmed one of our vendor's systems." ABC didn't answer detailed questions about the duration of the outage, its cause or whether the broadcaster will have to compensate advertisers. The network said late Monday it is still gathering such information.

The awards event, usually one of the most-viewed TV programs of the year, was a high-profile test for ABC's online distribution strategy. Sunday's telecast averaged 43 million viewers, up 6% over last year, according to a Nielsen estimate provided by the network. ABC didn't provide details on the number of streaming users.

The Watch ABC app streams the signals of local ABC stations on mobile devices and computers. But access generally is limited to consumers who subscribe to select pay-TV providers and who live in those major markets where ABC owns stations. Some extra content from the Oscars-like behind-the-scenes footage-was available to non-pay TV subscribers, but they couldn't watch the actual telecast. Such restrictions can be confusing for consumers-and the outage added to the frustration for some. "I think I spent a half-hour to 45 minutes trying to get in," said Matt Welsh, a 30-year-old IT analyst in Philadelphia who tried unsuccessfully to access ABC's website to stream the show around 8:30 p.m. Mr. Welsh said he only was able to stream the show when his friend pointed him to a site that led to an unauthorized stream.

David Paley, a 24-year-old event planner in Philadelphia, said he tried unsuccessfully to access Watch ABC "probably 20 times" through his Apple TV, iPad, iPhone and Mac computers. He tweeted: "Get your resume ready while you wait for the ABC Oscars stream. I think @ABCNetwork needs some network engineers! #fail." When it comes to online video, most other big media companies are following a similar approach to ABC-making TV shows and live events available online to cable- and satellite-TV subscribers as they try to reach younger viewers who spend more time in front of a tablet than a TV set.

The strategy takes TV companies into new territory that is technologically complex, requiring them to estimate demand and ensure they have the necessary capacity in place to serve many users trying to stream simultaneously. Other TV networks that offer apps that mirror what's airing on TV include Disney's ESPN and Time Warner Inc. 's Turner networks. "You make a bet on how many people you think are going to come through the pipe at any given time," said Ed O'Brien, a New York-based digital-media consultant who was involved in the launch of the HBO Go mobile app. Making live programming available online is more challenging and taxing on Internet infrastructure than on-demand streaming.

ABC didn't name the vendor involved in the outage. The broadcaster uses online streaming service upLynk, which is owned by Verizon Communications Inc., to encode and distribute its TV streams. In a post on Twitter, upLynk said it was experiencing "dramatically higher demand than anticipated" during the Oscars. UpLynk, in turn, uses Amazon Web Services to supply the computing horsepower needed to tailor its video for many different devices. An Amazon.com Inc. spokeswoman said the cloud-computing service didn't suffer any technical problems Sunday night.

Experts say the Internet wasn't engineered to carry video, much less live TV streams that demand nearly perfect timing from broadband providers' networks. Digital videos gobble up hundreds of times more bandwidth than other files, such as music or software, even if the files are stored well ahead of time. The challenge is particularly tough for live video, which can't rely too heavily on those storage caches because viewers demand content within seconds. "There are some challenges that are not there with movies," said Max Haot, chief executive of the online video service Livestream LLC.

Distributing a show like the Oscars online requires ABC to establish a two-way connection with every laptop, tablet and phone requesting the video. Standard cable and satellite TV don't have that problem because their one-way broadcast, as has always been the case, scales so easily. The amount of video consumers are watching online is still relatively small. A Nielsen survey found the average U.S. viewer watched about six hours of Internet video a month last year, compared with about 152 hours spent watching traditional TV. Media companies generally can get dual revenue streams from offering online TV apps. Pay-TV providers must pay for the right to make the apps available to their subscribers. And the networks also sell online ads. Wall Street Journal

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