Prof. Randal C. Picker, University of Chicago Law School
July 29, 2013

If you aren’t watching carefully, you are missing the ongoing skirmishes in the advertising tech wars.  There is an important privacy front there, but today I want to focus on a different question, namely whether an advertiser can have any confidence that its ad will even be presented to the viewer at all, and what that in turn means for competition among platforms over content.  Consider four recent battles:

  • In mid-March of this year, Google dumped AdBlock Plus from the Android Play Store.  As the name itself suggests, AdBlock Plus is designed to remove or hide ads from sites that users visit.  Free content without the ads, the ultimate free lunch.  Google’s Android platform is in fierce competition with Apple’s iOS empire and part of what Android has offered is a more open platform.  Apple imposes a variety of restrictions on the apps that it is willing to allow in its store, but Android was presented as being more open, hence the surprise in the tech community over Google’s decision.  As the Electronic Frontier Foundation put it in criticizing the decision: “This is hugely disappointing because it demonstrates that Google is willing to censor software and abandon its support for open platforms as soon as there’s an ad-related business reason for doing so.”
  • On May 15, 2013, Google’s YouTube sent a letter to Microsoft demanding that Microsoft withdraw its YouTube application for Windows Phone 8 from the Windows Phone Store.  The problem?  YouTube believed that the Microsoft app violated YouTube’s Terms of Service in a number of ways.  According to YouTube, the Microsoft app blocked advertisements from playing and YouTube, as an advertising-financed medium, saw that as a huge problem: “Unfortunately, by blocking advertising and allowing downloads of videos, your application cuts off a valuable ongoing revenue source of creators, and causes harm to the thriving content ecosystem on YouTube.”  Microsoft subsequently modified the app to try to address the problems identified by YouTube.
  • Return to Google and AdBlock Plus.  In early July, it was reported that even AdBlock Plus had bills to pay and was accepting money from advertisers, including purportedly Google, who could pay to increase the chances that their ads would get through to users.  (The tech is more complicated than that but we can skip the details.)
  • Finally, last week, a federal appeals court decided an important case on TV ad-skipping technology, Fox v. Dish Network.  The case is a rich mix of technology, copyright, and contract and will be sure to be read and re-read by copyright mavens (I think of myself as aspiring to maven status).  I will sidestep the legal issues here and just focus on the technology.  Dish Network is a leading satellite pay TV service in the United States and entered into a contract with Fox TV for the redistribution of its signal and content.  But Dish does more than just beam signals to its customers: It has created the Hopper, a DVR for recording shows and along with that, its Autohop service, which makes it possible for viewers to skip over commercials easily.  Fox objected to Autohop, as it saw it as interfering with the core financing model of free broadcast TV, and sought a preliminary injunction based on copyright and contract.  Last week, the Ninth Circuit ruled against Fox.  (Do read the opinion, as I assume that one of my co-bloggers will come back to it soon, as it raises a number of interesting contract and copyright questions and provides a nice framework to revisit the Supreme Court’s classic Sony VCR decision.)

Firms building content distribution platforms recognize that they need to provide reliable tools to finance that content.  That could be direct payments, and we do see more valuable Internet content moving behind paywalls, but advertising remains the dominant way that most Internet content and many services are financed.  But if advertising is blocked so that readers and viewers never see it, it has zero chance of capturing their attention.  Part of what a platform can do in competing for content is to make credible commitments to content creators that ads will actually be delivered to readers and viewers.  Google seems to be doing exactly that in policing the rules for access to the Android Store and to YouTube videos.

Platforms are constantly navigating between the interests of all sides of their platforms – here including content creators, app developers, and users – but we are seeing tensions break out into the open in these cases.  Google is an advertising-supported company and it is working hard to make sure that those advertisements get through.  On the open Internet, Google has to use cash as its main tool in trying to control ad-blocking technology – here via its reported deal with AdBlock Plus.  But on platforms it controls, such as Android and YouTube, Google can use contract and technology to ensure that ads get through.  Google understandably might see that as essential for making possible the rich world we have today of no-cash-fee services and content supported by advertising.

The federal appeals court found that copyright itself didn’t do the trick to protect Fox’s interest in seeing ads get through, but even if copyright were not enough – and I think that needs more analysis – Fox tried to rely on contract, but didn’t quite get that right.  I assume that Fox will seek to address that in its next contracting opportunity.  But contract only works if someone has to contract with you.  However, we are seeing TV distribution entrants who exist outside of the contract system – Aereo matches this as was suggested to me on a law prof email list – and who therefore can’t be controlled by that mechanism.  In that system, ironically, over-the-air broadcasting – the classic advertising-supported medium – looks like a key hole in the advertising system.  The inability of over-the-air broadcast TV to credibly deliver ads could further weaken over-the-air TV – already facing new entrants each day, such as Netflix with its 14 Emmy nominations – as a platform for distributing content.