Remote DVR Decision

Yesterday the 2nd Circuit Court of Appeals announced a finding that a lower court erred in ruling that Cablevision's plans to introduce a remote-storage DVR system would violate copyright laws. This potentially opens the door to cable, telco and Internet video service providers offering virtual-PVR functionality without having to place and manage set top boxes with hard drives in the home. The decision will most probably be appealed, but if it stands, it will have dramatic implications.

One of the obvious implications is that it further de-values the already challenged business model of pay-per-view video on-demand since it makes large quantities of free, time-shifted content available on-demand. Though this isn't a major revenue stream for studios, it's something they'd rather not lose.

Another implication is that the trend toward time-shifted viewing will accelerate from its already rapid growth. According to e-Marketer, between May of 2007 and May of 2008, average time spent watching time-shifted programming per month among unique US users grew from 3 hours and 44 minutes to 5 hours and 50 minutes -- an increase of 56%. As this grows, the significance of scheduled programming time slots, and the value of in-line advertising decline, while the value of carousel broadcasting of unique shows, and non-traditional advertising (e.g. product placements) will grow.

It will be interesting to see how rapidly Cablevision moves to take advantage of this decision, and how fast the content owners move to challenge it. In time, I expect more and more content will be served directly from content aggregators to end-users through the Internet or on-demand channels from service providers, but for many years, the PVR model will dominate. One can only imagine how tempting it will be, if this decision stands, for the virtual PVR provider to argue that they only need to keep one copy of every show they offer time-shifted, and how adamantly the content owners will argue that doing anything more than offering the end-user a virtual space to shift in would violate their rights. It's a fascinating time.