News Corp. (NWSA)’s Fox Broadcasting Co. asked a federal appeals court to overrule a district judge and halt Dish Network Corp. (DISH)’s AutoHop ad-skipping service that it says threatens television’s advertising system.
Dish’s PrimeTime Anytime allows subscribers to automatically record the entire prime-time lineup of all four major broadcast networks every night. It’s similar to a video-on-demand service, which Dish can only provide under its contract if it doesn’t allow viewers to fast-forward through commercials, Paul Smith, a lawyer for Fox, argued today to a three-judge panel of the U.S. Court of Appeals at a hearing in Pasadena, California.
Instead of disabling fast-forwarding through the ads, the AutoHop service allows subscribers to skip them entirely when they watch the recorded shows, Smith said. Fox alleges that the Dish services breach their license agreement and undermine Fox’s business selling shows online through Apple Inc. (AAPL)’s iTunes and Amazon.com Inc.
“This is an unlicensed service that competes with a licensed service that we get paid for,” Smith told the three-judge panel of the Ninth Circuit Court of Appeals.
Fox alleges the AutoHop service threatens the ad-supported television model because it diminishes the value of commercials, which are the main source of financing for primetime programming. The ABC, CBS, NBC and Fox affiliate associations, as well as the National Association of Broadcasters, filed arguments in support of Fox’s appeal.
U.S. District Judge Dolly Gee in Los Angeles last year rejected Fox’s argument and ruled that the Dish service was more akin to digital-video recording than to a video-on-demand service because the subscriber decides to enable PrimeTime Anytime.
Circuit Judge Raymond Fisher, who said he records “Masterpiece Theater” and Jon Stewart’s “The Daily Show,” asked Smith to explain how this practice of creating a library of television shows to watch at some later time is any different from what Fox accuses Dish of doing.
“I do exactly what you’re complaining about,” Fisher told the lawyers.
Smith said it’s a fundamentally different process when a viewer decides what to record as opposed to a service that automatically records blocks of programs every night.
Dish, based in Englewood, Colorado, introduced its Hopper digital video recorder in March of last year. It can record all the major networks’ primetime shows and store them for eight days after their initial broadcast. AutoHop, introduced in May 2012, allows viewers, with the touch of a button, to skip all the commercials on recorded shows automatically.
Dish’s lawyer, Joshua Rosenkranz, told the panel that Fox didn’t complain about PrimeTime Anytime until Dish introduced AutoHop four and a half months later.
The Dish lawyer also argued that the satellite-TV provider’s subscribers are already paying for Fox’s programs and that Fox can’t argue that it’s unfair if a subscriber who misses a show doesn’t pay for it again to watch it.
Circuit Judge Sidney Thomas challenged Rosenkranz’s argument, saying he didn’t see much of a difference between the PrimeTime Anytime service and a video-on-demand service.
“I see them as very close,” Thomas said.
Fox, Comcast Corp.’s NBCUniversal and CBS Corp. (CBS) separately sued Dish, the No. 2 U.S. satellite-television provider, in May 2012, claiming the service will destroy the “advertising supported ecosystem” that provides free, over-the-air primetime television. Dish sued the networks in New York, seeking a court ruling that it isn’t infringing copyrights.
The satellite-TV provider has argued that Fox’s claims were decided by the U.S. Supreme Court 30 years ago when it found that Sony Corp. (6758) couldn’t be held liable by movie studios for selling video recorders. Television networks “are raking in record revenues” in spite of the availability of ever-more efficient home recording devices, Dish said.
The case is Fox Broadcasting Co. v. Dish Network LLC, 12-57048, U.S. Court of Appeals for the Ninth District (Pasadena, California).
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