Hollywood studios and US television networks have joined forces in a legal battle against cable operator Cablevision over the group’s plans to allow many of its customers to easily record TV programmes.
The outcome of the recently filed copyright suits could have implications far beyond the services Cablevision is allowed to offer its 3m TV subscribers.
Whether Cablevision, which is based in the New York area, can proceed with plans to offer a “network digital video recorder” – a service which would allow viewers to digitally record programmes which are then stored on Cablevision servers and played back at any time – could have a profound effect on television viewing habits and advertising spending.
Already, about 10 per cent of American households have digital video recorders (DVRs) installed. These boxes enable viewers to simply record programmes. When they are later viewed, the advertisements can be fast-forwarded.
“Although the functionality of the network DVR is identical to that of an in-home DVR, the threat posed to advertising is much greater,” said Craig Moffett, analyst at Sanford Bernstein. “It would instantly put ad-skipping in front of every digital subscriber, and indeed every room in the house with a digital set-top box, in one stroke. The number of viewing hours affected would dwarf the impact of in-home DVRs.”
Comcast and Time Warner Cable, the two biggest cable groups in the US, with more than 30m subscribers between them, have declined to comment on Cablevision’s plans. But privately, many executives in the cable industry are hoping for legal clarity on whether network DVRs violate copyright.
Currently, DVRs are not subject to any legal wrangling because home recording “fair use” precedents, established when video recorders were introduced, apply. However, content makers argue Cablevision’s plans are, in effect, an offer of all their content “on demand” – a service cable operators provide now but only with the express permission of content groups.
If Cablevision does get the all-clear, others are expected to quickly follow. That would cut the cost of offering DVRs, which currently require boxes worth about $200 each and a costly visit by an installer, and would give cable companies another service with which to tempt customers as telephone and satellite companies try to poach them.
“If Cablevision gets some resolution to this it will very soon allow network DVRs to spread across the cable industry,” said Josh Bernoff, analyst at Forrester Research.
Hollywood studios, TV networks and cable channels have made dramatic moves recently to embrace digital distribution. The growth of broadband connections is making video viewing on the web attractive, and TV programmes are increasingly being shown there, too.
In addition, top content is being made available – either for a one-off charge, a subscription price or with advertising – on iPods and other portable devices, mobile phones, for viewing on computers and “on demand” television.
Advertisers still spend most of their money on traditional television spots, a sector that was worth nearly $200bn in the US last year. But shifts in attention and the increased ability to speed through commercials has raised questions about its effectiveness. “The television networks are very much concerned about the advertising implications of a jump in DVR usage,” said Mr Bernoff.
A legal tussle in the courts could last many years. A compromise could instead be struck, allowing content makers to retain some control over advertising, such as preventing fast-forwarding or allowing commercials to be updated.
“There has been a lot of innovation in the last year to meet consumer demands for more flexible television viewing,” said Aryeh Bourkoff, analyst at UBS. “This is the first time the programmers are fighting back. It may be a negotiating tactic to ensure they retain control rather than have the distributors taking over.”
VIDEO RECORDERS NOT SO BAD FOR ADS
The impact of personal video recorders on television advertising viewing has been greatly exaggerated, according to research released on Thursday by London Business School, writes Andrew Edgecliffe-Johnson.
The ethnographic study, in which eight English families were filmed for up to three weeks, found that less than a fifth of programmes were “time-shifted” – recorded to be viewed later – in homes with equipment such as the Sky+ satellite set top box from British Sky Broadcasting.
The findings will be jumped on by broadcasters as evidence that their business model is less threatened than many investors and advertisers have feared.
LBS found 30 per cent of the commercials were time-shifted. Adjusting for TV sets without recorders, about 80 per cent of ads were viewed live.
Cablevision copyright suit timeline
March 2006 - Cablevision announces plans to test network DVR
May 24 - 20th Century Fox (News Corp), Paramount Pictures (Viacom), Universal Studios (GE), CBS, ABC (Walt Disney), NBC (GE) file suit against Cablevision in US District Court in Manhattan
May 26 - Cartoon Network and CNN (both owned by Time Warner) file suit against Cablevision in US District Court in Manhattan