By Liana B. Baker
(Reuters) - An executive war of words is escalating between Dish Network CEO Joe Clayton and CBS Corp boss Les Moonves over Dish's service that lets customers skip over commercials, the main revenue source for the broadcast networks such as CBS.
Speaking at an event in New York, Clayton took dead aim at Moonves, head of the No. 1 rated CBS broadcast network.
"Let me say this to Mr. Moonves and the broadcasters, they would be well advised to tune into the consumer," Clayton said.
Clayton added in an interview: "Mr. Moonves feels that he can bully the consumers and that he can bully his programming partners. I don't think that plays well."
Dish introduced a DVR called the Hopper earlier this year with an "autohop" function that allows subscribers to skip commercials automatically when they are watching recorded shows.
Dish maintains That the product is something consumers desperately want. But CBS and its broadcasting brethren -Disney's ABC, Comcast's NBC, and News Corp's FOX - argue that Dish, led by chairman Charles Ergen, is undermining the networks' key source of revenue: advertising.
In May, Dish, which ranks as the third-largest U.S. pay TV provider with 14 million subscribers, and the broadcast networks have traded lawsuits over the technology. Fox also asked a court in August to put a stop to Dish's product because it was hurting the TV network's business.
Clayton's comments came one day after Moonves, speaking at a Bank of America Corp conference, threatened to remove CBS from Dish's systems if it deploys the autohop feature on its "Hopper" DVR.
Moonves said media companies cannot spend millions making TV shows and allow Dish to eliminate commercials. CBS will cease doing business with Dish if the satellite company continues to market this product, he said.
"If they want to continue down that line, then we will just not be on Dish. That's what will happen," Moonves told investors at the conference.
So far, Dish's commercial-skipping feature only works with the broadcast networks and does not apply to ads on cable channels.
Dish is no stranger to disputes with media companies. It has blacked out four of AMC Networks' channels since July, including the main AMC network, which airs such popular shows as "Mad Men" and "The Walking Dead."
But losing the No. 1 broadcast network in the country would test the patience of its subscribers more than the loss of AMC has, according to Todd Mitchell, an analyst with Brean Murray.
"Dish needs CBS a lot more than AMC," Mitchell said. "But Dish is 13 percent of CBS's distribution roughly, so it would be painful for CBS to lose that."
Mitchell added that, unlike a cable network where distribution is not required, CBS as a broadcast network might have to get a court injunction to remove itself from Dish or it could be in violation of its carriage agreement with the company.
CBS declined to comment on Clayton's remarks.
CBS shares ended 79 cents higher, up 2 percent at $36.95 on Thursday, while Dish shares closed 44 cents higher, up 1.3 percent.
(Reporting By Liana B. Baker; Editing by Peter Lauria, Gary Hill)