Good-Bye TiVo, Hello Network DVRs?

The simplicity of the idea behind network digital video recorders is what makes them so powerful. Unlike buying a TiVo or some dedicated device (including poorly designed set-top boxes), network DVRs allow you to save your favorite television shows online and play them back whenever your schedule permits.

The fact that you can’t rip the videos and share them with others makes this an ingenious solution for copyright owners, too. Which is why I could never understand the opposition on the part of media companies to the network DVR idea that was being promoted by Bethpage, N.Y.-based cable operator Cablevision. Fox, Universal, Disney and others sued Cablevision in May 2006 to block the service. Had the media companies asked, Cablevision, could have easily made it impossible to skip ads, which would have been a win-win for everyone. Instead, it turned out to be one long legal battle.

But today that battle came to an end, with the U.S. Court of Appeals for the Second Circuit overturning a lower court decision and allowing Cablevision to offer networked DVRs. Cablevision had appealed the earlier decision, arguing that the Betamax decision that allowed folks to tape videos off television and cable at home set a precedent for its service. Cablevision is obviously is overjoyed by the court’s decision. Public Knowledge, a not-for-profit group, in a statement noted:

This decision is a great victory for innovation, technological progress and consumers’ rights. The Appeals Court reversed a lower-court ruling last year that made an artificial distinction between a VCR or TiVo device located on a customer’s TV set and a remote recording system (RS-DVR) operated by a cable company. The Appeals Court properly found that copies of material buffered for a mere 1.2 seconds do not constitute a copy over which a customer or cable company could be sued.

However, this ruling is not set in stone and will be open to more litigation. As Cynthia Brumfield notes on her blog, the “court also held open the door that Hollywood could argue that the RS-DVR is responsible for contributory, as opposed to direct, infringement.”

So what is the impact of this decision?

First of all, it wouldn’t be a surprise if other cable operators started offering this same feature, for it is clearly something that makes cable service useful. Time Warner Cable has a similar service called Mystro, which it scratched because entertainment giants were growling. Now it can get back in the business and start to use it as a tool to compete with Verizon’s FiOS TV service — at the very least in New York and surrounding areas.

I wouldn’t be surprised if telecom operators who are hawking IPTV jump on the bandwagon and use this as a way to compete with Hulu, NetFlix and Amazon’s pro-content, over-the-Internet services. The ability to record and watch television content anytime puts them on equal footing with the web-based video offerings — along with better quality.

I think the development is a positive for Cisco Systems (CSCO), which had acquired Arroyo, one of the key providers of this technology. On the flip side, it is not such a great development for TiVo (TIVO), which could see its standalone business come under pressure, especially if all cable operators start offering similar services. It could, of course, start licensing its user interface.

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