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At Dish Network, subscriptions are way up, but so is controversy.
With the satellite TV bundler already grabbing headlines over an especially pungent carriage dispute with AMC Networks (s AMCX), Sanford Bernstein senior analyst Craig Moffett took Dish (s DISH) to task Thursday for implementing a series of new ad-skipping features into its new “Hopper” digital video recorders.
In fact, noting that Dish is ironically introducing these features at a time when its threatening to keep AMC’s ad-industry focused hit drama Mad Men away from its 14 million viewers, Moffett pungently titled his report, “It’s not just Mad Men … Dish hates all advertising.”
On Thursday, Dish sent out a press release unveiling its new ad-skipping features: “The new ‘Auto Hop’ capability for the Hopper whole-home HD DVR system is being activated today, and it allows customers to skip all commercials for most recorded primetime HD programs shown on ABC, CBS, Fox and NBC when viewed the day after airing,” the company said.
Noted Dish product management VP Vivek Khemka: “Viewers love to skip commercials. With the Auto Hop capability of the Hopper, watching your favorite shows commercial-free is easier than ever before. It’s a revolutionary development that no other company offers, and it’s something that sets Hopper above the competition.”
Moffett, however, is apparently not in the consumer group Khemka is talking about.
“It’s hard to maintain good affiliate relations when you introduce a service designed to cut out the bulk of your affiliates’ revenues,” Moffett wrote. “Auto Hop adds to an already long list of broadcast-unfriendly features of Dish’s service, including 30 second skip buttons on their remote controls…”
Going back more than a decade in terms of media technology litigation, Moffett noted that early DVR pioneer ReplayTV introduced similar functionality in the late 1990s, and the resulting litigation brought against it by broadcasters ultimately led the company into bankruptcy.
“And all this comes at a time when Dish (amid ongoing litigation with AMC Networks) is taking a hard line on programming costs by preemptively announcing its intention not to renew its carriage agreement with AMC, home to the wildly popular Mad Men (which, ironically, is about … advertising),” Moffett added.
This AMC thing really could be nasty …
With ratings for AMC shows including Mad Men and The Walking Dead way up, AMC Networks on Thursday reported a 20 percent uptick in first-quarter revenue to $326.2 million. However, AMC Networks CEO Josh Sapan warned investors of a significant “material effect” should Dish remove the company’s channels — which include AMC, IFC, Sundance Channel and WeTV — once the current carriage agreement expires on June 30.
“You should be aware that the loss of the affiliate fee and advertising revenue that comes from the carriage by Dish of our national networks may have a material impact on our financial results,” Sapan said.
While the vast majority of carriage disputes between programming suppliers and multi-channel operators have been settled before popular shows were pulled off the air, this particular impasse is compounded by litigation.
A New York appellate court last week ruled that Dish destroyed electronic evidence in a four-year-old case involving defunct service Voom HD. AMC Networks sued Dish for $2.5 billion for terminating its carriage of those channels, and the court has ruled that case can go to trial.
Meanwhile, as AMC tries to as much as triple its carriage fee for AMC — reported to be around 25 cents per subscriber — as well as secure carriage for lightly watched channels such as WeTV, Dish executives are quietly noting that their largely rural subscriber base is not hugely passionate about urban-centered, upscale-skewing shows like Mad Men.
In short, this carriage fight has the potential to drag on for a while. Stay tuned.