July 3, 2012
On July 1, 1941, NBC interrupted its broadcast of a Brooklyn Dodgers baseball game with a message from the Bulova watch company. It was the world's first television commercial, and it lasted 10 seconds. Ever since, TV networks have been jamming the airwaves with longer, louder and more insistent ads, and viewers have found increasingly sophisticated ways of avoiding them.
Now a high-profile legal test could resolve this TV tug-of-war that has been building for decades. Satellite TV provider Dish Network's new ad-skipping feature, AutoHop, enables subscribers to black out ads on programs they've saved on their digital video recorders. When activated, AutoHop turns the screen dark when a commercial arrives, then returns to the show a few seconds later. CBS, NBC and Fox have sued, saying the feature violates copyright laws and jeopardizes the financial foundation of the entire television industry. The AutoHop, which launched in May, is only available for use on shows on broadcast networks CBS, ABC, NBC and Fox and not on cable channels.
On Monday, the legal battle over AutoHop between Dish and the broadcast networks is scheduled to start in New York, where U.S. District Judge Laura Swain will hear arguments to determine whether the case will be heard in New York or Los Angeles. Dish maintains that its new feature is legal. "I think it was settled 28 years ago in the Betamax case," Dish Network Chairman Charlie Ergen told Congress last week, referring to the landmark 1984 case that established that consumers did not violate copyright laws by recording shows at home for their own enjoyment.
At stake are billions of dollars in advertising revenue. The estimated $68 billion in ad dollars the television industry collects each year helps to offset the spiraling production costs of prime-time dramas and comedies, network news operations, late night talk shows and sports. "I can't produce premium shows like 'CSI'without advertising," CBS Corp. Chief Executive Leslie Moonves said. The alternative to forcing consumers to watch commercials would be to ask them to pay more for all the TV time they consume. No one knows exactly how much viewers would be asked to fork over to make up for lost revenue if commercials suddenly went away.
Consulting firm Frank N. Magid Associates Inc. figured that each household would need to come up with an additional $49.74 a month - on top of the money already paid for monthly cable service. "Advertising pays for the programming," said Howie Cohen, the advertising executive who created Alka-Seltzer's iconic 1972 "I can't believe I ate the whole thing" television commercial. "I don't think America can afford to pay its own way when it comes to programming."
Commercials won't disappear any time soon. Media companies and major marketers have too much invested in the system. In fact, even as they squabble with Dish over AutoHop, the major networks last month quickly sold billions of dollars' worth of ad time to companies eager to buy commercials for the upcoming TV season. Demand was so strong that the networks were able to raise ad rates despite concerns over viewers bypassing commercials through technology.
TV remains marketers' preferred medium. But advertisers increasingly are searching for alternatives to conventional advertising, including opting for so-called product placement. On the CBS comedy"The Big Bang Theory," for example, a character used the hand sanitizer Purell. On the ABC comedy "Suburgatory," a can of Red Bull horned its way into a starring role. Last year, Nielsen counted 8,113 instances of product placement in TV shows, a 65% jump over 2009. And just as technology is making it easier to skip ads, media companies are developing ways to make viewers watch ads even while they're trying to skip them.
Cable giant Comcast Corp. - which is also the parent of NBC and cable channels, including USA, MSNBC and Bravo - is developing a technology that would trigger a commercial to pop up when viewers tried to fast-forward through ads. The networks are taking a similar approach online. TV shows that are streamed on Hulu and other video sites have fewer commercials than their broadcast versions - but viewers can't fast-forward through them.
As consumers have found more ways to avoid commercials, the networks have responded by adding more ads. In the 1970s, a typical half-hour sitcom often had only four minutes of commercials and promotional spots. That figure is more than double now. Commercial breaks have also increased, with as many as four in a half-hour sitcom. Viewers got their first look at commercial skipping hardware in 1955, when Zenith introduced the first wireless remote control. The Flash-Matic, a battery-powered gizmo shaped like a Buck Rogers ray gun, let viewers change channels, mute commercials and turn the TV on and off. "You can even shut off annoying commercials while the picture remains on the screen," the Flash-Matic ads boasted. The device cost $100 on top of the $500 set.
The Flash-Matic was usurped a year later by the Space Command, which changed channels using ultrasonic waves. "The Space Commander changed the way we watched TV," said technology futurist Paul Saffo, managing director of research firm Foresight. "To me, it's the beginning of the arms race between the audience and the producers." Zenith's founder, Cmdr. Eugene F. McDonald Jr., wanted to go further. In 1947, Zenith introduced PhoneVision, which enabled delivery of broadcast TV over telephone lines - without commercial interruptions. "Hollywood killed it," said John I. Taylor, vice president for LG Electronics, which now owns the Zenith brand. "Hollywood executives were worried that if people could watch movies in their homes, they would no longer pay to see them in theaters. Ultimately, it became impossible to license content for the service."
Those primitive tools were succeeded in the 1970s by videocassette recorders, which enabled consumers to record shows to watch later. The digital video recorder, which started to appear a decade ago, made recording shows and skipping ads even easier. Nearly 50% of the nation's 114 million TV homes have DVRs. "We don't watch any commercial TV live," said Anthony Zazzu, a 72-year-old Huntington Beach retiree. He has turned ad-skipping into a science, knowing that "The CBS Evening News" contains seven commercials during each break. Zazzu zips past them. "It's becoming a pain in the neck to keep fast-forwarding because there are so many commercials."
Sensitive to viewers' allergic reactions to ads, shows such as CBS' "The Good Wife" sometimes run more than 10 minutes without a commercial, hoping viewers will stay for the commercial breaks that come later. The History Channel miniseries "Hatfields & McCoys" began its run last month with a 39-minute commercial-free opening. For television producers such as"Modern Family"co-creator Steve Levitan, the modern technology is a double-edged sword. "On the one hand, I wish people were watching 'Modern Family' live," he said. "On the other hand, there are many who would miss it if not for their DVRs." If advertisers want their ads to be seen, maybe they should make better commercials, he added. After all, Levitan said, "People stop to watch Apple ads." Los Angeles Times
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