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Supreme Court hits stop button on Hollywood's challenge to cheaper DVRs

June 29, 2009 | 11:46 am

The high court likes their digital video recorders.

The Supreme Court cleared the way for Cablevision Systems Corp., a New York-based cable operator with more than 3 million subscribers, to deploy so-called remote storage DVRs. Unlike current DVRs, which record programs on a device in a customer's home, remote storage DVRs record them in a central location.

As of March, the penetration of DVRs in the United States was 30%, according to Nielsen. Because storing shows on a central server is so inexpensive compared with deploying devices, the ruling clears the way for Cablevision and other distrubutors to offer the service to consumers at very low or no cost.

The move is a blow to Hollywood, which had fought the technology all the way to the Supreme Court. Fox, NBC Universal, Paramount, CBS, Disney and other programmers argued that because Cablevision transmits recorded programs to consumers over its cable lines, the remote storage DVRs actually constitute a new on-demand service for which they should pay licensing fees.

Of course, what this is really about is advertising. Television executives are very worried about the ease with which consumers can skip advertisements while watching recorded programs via DVRs.

The justices declined to hear arguments from programmers, in effect validating a 2008 federal appeals court ruling in favor of New York-based cable operator Cablevision's plans to deploy its remote storage DVRs.

"We are of course disappointed by the Court's decision not to hear this case but understand that the Court can only hear a limited number of cases each year," Daniel Mandil, chief of legal affairs and intellectual property protection for the Motion Picture Assn. of America, said in a statement. The MPAA has led the court case on behalf of the networks and studios. "We will continue to do what is necessary to protect the legal rights of our members with regard to their content and look forward to the continued development of the law in this area in future cases," he added.

Many DVR providers, including TiVo, have started working with the networks to develop new ways to serve advertising to consumers who are watching recorded shows.

"This is a tremendous victory and it opens up the possibility of offering a DVR experience to all of our digital cable customers," Cablevision Chief Operating Officer Tom Rutledge said in a statement. "At the same time, we are mindful of the potential implications for ad-skipping and the concerns this has raised in the programming community. We believe there are ways to take this victory and work with programmers to give our consumers what they want — full DVR functionality through existing digital set-top boxes — and at the same time deliver real benefits to advertisers."

— Ben Fritz


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