Cablevision’s Network DVR Wishes Come True: Supreme Court Rejects Appeal

The media companies got one on the chin, sort of: The U.S. Supreme court has rejected an appeal by the Hollywood studios and TV networks to block Cablevision’s use of remote network-DVR technology, which means the cable company and others may soon be launching it later this year. The media companies have argued that the use of network DVR, where the programs are stored on the cable company’s servers — in the cloud, as today’s lingo would call it — and “streamed” on demand when users request/record it, violates copyright laws. Also, they had argued that the service is more akin to VOD, for which they negotiate licensing fees with cable providers. Cablevision (NYSE: CVC) initially argued that it was covered under fair use (though it waived that argument later and one of the main reasons why the apex court decided against considering the case), and that it didn’t matter where the storage of programs was happening, locally or in the cloud.

The media companies — including NBCU (NYSE: GE), CBS Corp. (NYSE: CBS) ABC (NYSE: DIS), and Twentieth Century Fox — sued Cablevision in 2006, and Cablevision fought back, counter-suing the media companies. A New York federal trial judge agreed with media companies in 2007, but the 2nd U.S. Circuit Court of Appeals overturned that ruling last summer. In its ruling, it said the remote-DVR was not that different from a VCR, or current crop of DVRs, and that Cablevision was not directly liable for copies of programs that are made at a customer’s request.

Analysts have said previously that Cablevision’s victory could have “seismic” implication on the TV industry: cable operators will now be able to deliver these services with much lower capex. And that the new technology could put DVR service in nearly half of all American homes, about twice the current number, thus resulting in a lot more commercial skipping, in turn affecting the networks’ bottom lines. Local broadcasters will be the hardest hit. Additionally, this is a win for cable operators over satellite operators, since the latter are unable to deliver the same service due to the nature of the infrastructure. From the user’s perspective, it means larger (160 GB, Cablevision has said before, though that’s likely to increase) capacity to store programs (though it will likely have expiration dates) and one less box in the house. Comcast (NSDQ: CMCSA) and Time Warner (NYSE: TWX) have previously said they would launch similar services if Cablevision won.

The broader question: how does DVR usage change as networks start putting more and more programming online, where commercial skipping is disabled. Also, cable co’s own TV Everywhere intitative will affect DVR usage as well, and in effect does on-demand the way network DVR is proposing; lots more on TV Everywhere here.

Most of the case documents are here on ScotusBlog.