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Will Ad-Skipping Win Hearts for Apple TV?

Will Ad-Skipping Win Hearts for Apple TV?

Apple seems to think ad-skipping technology will wow consumers enough to pay a premium for Apple TV. What we're talking about here, it seems, is paying extra to avoid the chore of fast-forwarding through commercials. Apple would make this possible by reimbursing service providers for not having their ads displayed -- kind of like the government paying farmers for not growing certain crops.

By Richard Adhikari MacNewsWorld ECT News Network
07/17/13 5:00 AM PT

Apple reportedly is planning to set up a premium version of a service on Apple TV that would let subscribers skip ads, according to former Wall Street Journal reporter Jessica Lessin.

The company apparently plans to compensate content providers for lost ad revenue; it's not clear whether it would do so out of its own pocket or by passing on the cost to subscribers.

If the report is correct, this might further complicate Apple's long-drawn-out negotiations with content providers.

"I'm not sure what the business sense of this is at all," Michael McGuire, a vice president of research at Gartner, told MacNewsWorld. "How does that help offset your operating costs and the cost of the service? I'm confused."

On the other hand, the idea might help Apple to stand out from the competition.

"I couldn't quite understand the value proposition for what Apple could do that would significantly differentiate what it was doing from anyone else, and this could be that thing," suggested Charles King, principal analyst at Pund-IT Research.

However, "most people have fast-forward buttons on their remote controls, and I can't remember the last time I willingly sat all the way through an advertisement on TV," King remarked.

Cupertino's Bulging Muscles

Apple has one thing going for it: It has 45 percent of all audio and video streaming on home networks in North America, according to Sandvine's Global Internet Phenomena Report 1H2013.

Meanwhile, sales of Apple TV units are picking up. About half of the more than 13 million Apple TVs sold so far were purchased in the last year, according to CEO Tim Cook.

Further, Apple recently added HBO Go and WatchESPN to its lineup of content for AppleTV. Other streaming video content includes Hulu Plus, Vimeo, Wall Street Journal Live, MLB.tv, NHL GameCenter and NBA League Pass.

Competitors such as Roku offer more content, however.

Where Angels Fear to Tread

If the rumors about Apple's planned service are true, the company will be charging headlong into a legal morass.

Back in the 1990s, Japanese VCR makers introduced a similar ad-skipping capability into their products but stopped using it after facing strong opposition from the broadcast industry there and in the United States.

In 2011, ABC, CBS and NBC filed suit against ReplayTV, which made a digital recorder similar to TiVo but let consumers skip ads and transmit recorded programs to others over the Web.

Currently, Dish Network is locked in a lawsuit with Fox Broadcasting over its AutoHop ad-skipping service. U.S. District Judge Dolly Gee in Los Angeles handed down a sealed ruling in November that let both sides claim victory, but Fox is now appealing the case in the Ninth Circuit Court of Appeals.

"Perhaps Apple think they're so well padded with cash that they can take on multiple lawsuits," Pund-IT's King told MacNewsWorld. "This legal issue has come up before, and it has consistently been settled in favor of the content providers."

Possible Solutions

One possible option would be for Apple to swap out traditional commercials for advertisements more closely targeted to the audience, McGuire suggested.

"You and I might be watching the same program through our Apple TVs at the same time -- live -- but we'd see ads targeted to our particular interests," he said, "and that would make a lot more sense than a run-of-the-mill ad skipping capability."

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