Cable considers network DVR

PHILADELPHIA – If the nation’s largest cable TV operators have their way, the home digital video recorder could soon become a relic.

Leading the way is Cablevision Systems Corp., which plans to roll out a system in early 2009 that will let viewers record any show without a DVR, only a digital set-top box. Shows will be stored on Cablevision’s servers instead of a home DVR – a shift the company said could save it upward of $700 million.

Philadelphia-based Comcast Corp., Time Warner Cable Inc. of New York and Charter Communications Inc. in St. Louis also are interested in deploying network DVR – as the technology is known – but are farther away from implementation. The four companies serve about 45 million TV customers – or 70 percent of U.S. cable subscribers.

Cablevision offering network DVR “paves the way for the rest of the industry,” although most other companies won’t deploy it for years, said Tuna Amobi, an analyst with Standard & Poor’s.

In spite of the savings, network DVR has some problems.

Time Warner pointed to the legal cloud surrounding it. The Motion Picture Association of America, whose members include major movie and television companies, has said it is “considering all legal options” after losing a federal appeal of its 2-year-old copyright-infringement challenge of Cablevision’s plan last month. The next stop would be the U.S. Supreme Court.

Tom Rutledge, Cablevision’s chief operating officer, is unfazed.

“We did win our case, and the law of the land right now is that our network DVR is lawful,” he said. “So we want to use it. Simple.”

But Cablevision must tread carefully not to undermine the winning argument it made before the 2nd U.S. Circuit Court of Appeals in New York that its network DVR essentially acts like a home DVR.

Subscribers will have to initiate the recording of shows, not Cablevision; and the stored programs will have to be unique to each viewer and not set aside for all subscribers.

Rutledge said subscribers will start out with 160 gigabytes of storage, about what a standard DVR has, and fees likely won’t change from about $9.95 a month.

“If the functions are exactly the same (as a home DVR), I don’t think we’ll price it differently,” Rutledge said.

Consumers who sign up for the recording service won’t have to wait for an installer to hook up a new box. Instead, their TVs will display a new DVR screen where they can choose programs to record and play using a new remote provided by Cablevision.

Subscribers can store their shows on network servers as long as they want, just as with a home DVR, Rutledge said. Once the 160 gigabyte capacity is reached, the network DVR will automatically record over older shows.

As for the DVR boxes already in the field, Rutledge said, they will probably stay in customers’ homes until they’re gradually phased out.

Craig Moffett, senior analyst at Sanford Bernstein, said the network DVR will save cable companies money because DVR boxes make up as much as 10 percent of their capital spending.

The boxes cost as much as $400 for high-definition, and it can take years to recoup that cost with monthly fees.

Once it’s that easy for subscribers to record shows, Moffett sees usage tripling to 60 percent of cable households.