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Dish Network Corp Takes TV Networks To Court Over Ad Zapper

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By Liana B. Baker and Jonathan Stempel

(Reuters) - A legal battle erupted between DISH Network and some of the major broadcast networks Thursday as the two sides traded lawsuits over the satellite distribution company's "Hopper" DVR, which threatens to bring down the television business model by allowing viewers to skip over commercials entirely.

Dish Network Corp asked a Manhattan federal judge to declare that its "Auto Hop" feature does not infringe any copyright owned by the four major U.S. television networks: Walt Disney Co's ABC, CBS Corp's CBS, News Corp's Fox and Comcast Corp's NBC.

CBS, Fox and NBC, meanwhile, are filing their own lawsuits to stop Dish from transmitting their programs in a way that lets viewers watch them without commercial interruptions. ABC's plans were not immediately clear.

With 14 million subscribers, Dish is the second-largest satellite TV provider in the United States behind DirecTV.

TV networks are upset that Dish, led by billionaire chairman Charles Ergen, would introduce the "Auto Hop" feature that may well please viewers, but would undermine the networks' key source of revenue: advertising.

Dish introduced a high-definition DVR called the Hopper earlier this year and declined to say on Thursday how many of its subscribers are using the new device that contains the ad zapper.

It added Auto Hop on May 10 and began advertising the product just as the networks were conducting their crucial "up-fronts," where they tout their pr programming for the next season to their own advertisers. TV ad spending is estimated to reach more than $200 billion globally in the next five years.

Brean Murray analyst Todd Mitchell said Dish is embroiled in this latest dispute because it is sick of paying high programming fees and wants to negotiate better deals with broadcasters.

"This is about programming costs," Murray said. "Dish is saying, if you want to charge me up to the wazoo, we will disable commercials. But if you charge us less, we can disable the feature."

Ergen has consistently provoked programmers, most recently threatening to drop AMC Networks from its systems and criticizing it for devaluing its content by putting its shows on Netflix. Ergen once publicized the home number of Mel Karmazin, then-CEO of Viacom, during another tussle over fees.

In its complaint, Dish maintained that the Auto Hop lets viewers fast-forward through but not delete commercials, and said the feature does not alter the broadcast signal.

The feature does not affect cable programming, and requires viewers to wait until 1 a.m. on the morning after a show airs before they can skip over commercials.

Dish also said other companies offer products with similar features, citing Microsoft Corp's offering of a commercial-skipping feature as an add-on to its Windows Media Center.

Dish's senior vice president of programming Dave Shull said in an interview that Dish hopes to resolve the matter with networks and that the ad skipping feature "is not nearly as detrimental as they fear."

Fox, in its lawsuit filed in a California federal court, countered that Dish has only "narrow permission" to retransmit its broadcast signals, and should not sell a product that lets it trumpet "commercial-free TV" without permission. It also seeks compensatory and other damages.

Scott Goggin, a Fox spokesman, said Dish's launch of an ad zapper reflects a "clear goal of violating copyrights and destroying the fundamental underpinnings of the broadcast television ecosystem," requiring a swift response.

The Dish lawsuit is: Dish Network LLC v. American Broadcasting Cos et al, U.S. District Court, Southern District of New York, No. 12-04155. The networks' lawsuits include: Fox Broadcasting Co et al v. Dish Network LLC et al, U.S. District Court, Central District of California; and NBC Studios LLC et al v. Dish Network Corp in the same court.

(Reporting By Liana B. Baker in New York and Jonathan Stempel in Toronto; Editing by Carol Bishopric and Leslie Gevirtz)

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