Will DirecTV Also Introduce Ad Skipping After Dish’s Dustup With Content Owners?

by Trefis Team
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There is a chance that DirecTV (NASDAQ:DTV) might also deploy an automatic ad-skipping technology for its subscribers, following in the footsteps of rival Dish Network (NASDAQ:DISH). [1] However, the decision will likely be influenced on the outcome of the lawsuit filed by the content owners including News Corp (NASDAQ:NWS) against Dish Network’s Hopper DVR, which features automatic ad skipping and recording of prime time shows from major broadcast networks. There are a few other elements to consider as well.

See our complete analysis for DirecTV

Outcome Of The Legal Battle

The legal battle between Dish Network and media companies such as News Corp, CBS and NBCUniversal is likely to determine the validity of the automatic ad-skipping feature, which potentially threatens the ad dollars of the broadcasters. Hence, this will be the biggest factor in determining whether DirecTV will follow the same route or stay clear of this new technology.

Nevertheless, there is great uncertainty around this important factor as the Hopper DVR seems more like an experiment for now. Previously, we wrote about Dish’s dispute over the new ad-skipping feature and how it really fits into its strategy (see Dish’s Hopper Threatens To Shake Up Pay-TV Industry).

Growing Retransmission Fee

The increasing push for re-transmission fees by broadcasters may reduce its reliance on advertising revenues in the longer term. This will give more freedom to pay-TV companies such as DirecTV to introduce features such as ad skipping for consumer convenience, without jeopardizing the economics of the media industry. Even if DirecTV does not introduce it now, it may do so at some point in the future, citing growth in re-transmission fee as an argument.

Possibility Of Broadband Launch

The more likely DirecTV is to diversify its business in the U.S., the less likely it is to introduce ad skipping. This is because it could potentially strain its relations with media companies who provide content for its U.S. pay-TV business, which accounts for close to half of its stock value, by our estimates. However, there are no clear indications in this area, except that the company is expanding its 4G broadband service in Latin America.

Increasing Competition

Dish Network has revived itself, thanks to the Blockbuster service and focus on quality subscribers. Cable companies are doing better than before. DirecTV has had a good ride in the past few years owing to the appeal of its NFL Sunday Ticket. However, that can’t help it forever.

In order to stay competitive, it will need to continue introducing new technologies and features to enhance consumer convenience, flexibility and personalization – and this includes ad skipping too. Unless DirecTV and Dish decide to merge in the future to gain greater leverage in pay-TV industry and benefit from possible synergies, DirecTV is likely to follow Dish in introducing ad skipping, provided Dish wins the lawsuit.

Our price estimate for DirecTV stands at $54.55, implying a premium of about 25% to the market price.

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Notes:
  1. DirecTV could also deploy ad skip technology, Reuters, June 11 2012 []
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  • commented 2 years ago
  • tags: DTV NWS DISH
  • Why don't CBS, FOX, and NBC execs want consumers to enjoy commercial-free TV? It's what we want! I'm a customer and employee of Dish, and I think Auto Hop is great because you can easily watch commercial-free TV. A well known consumer advocacy group, Public Knowledge, agrees that people should have the right to control how they watch TV. They're taking a stand for consumers by creating a petition that tells CBS, FOX, and NBC media to keep their hands out of your living room and DVR. Sign their petition to keep control of how you watch TV http://bit.ly/KigXAn
    DirecTV Logo
  • commented 2 years ago
  • tags: DTV NWS DISH
  • I heard about the possibility of DirecTV joining Dish in providing commercial-free TV today from my boss at Dish, but I didn't believe it until now. What I don't get is if DirecTV were sitting on technology that could do this, why wouldn't they have provided their subscribers with something so great? I now watch more TV because the PrimeTime Anytime feature on my Hopper records all of the primetime shows from the four major networks, and now I have the choice of watching those recordings commercials-free. Dish has made me a fan of TV and a subscriber for life with their technology. DirecTV shouldn't have said anything unless they were announcing the launch of something like this for their subscribers.