Court Resurrects Cablevision's Network DVR

It's baaack!

Cablevision Systems Corp. (NYSE: CVC)'s Remote-Storage Digital Video Recorder, or (RS-DVR), has been given a new lease on life after a court ruled today that the MSO's network-based platform does not directly infringe copyright rules and should be afforded the same protection already given to more traditional stand-alone DVRs.

Monday's ruling, issued by the U.S. Court of Appeals for the Second Circuit, reverses a lower court ruling and gives the MSO the legal green light to once again pursue a network-based DVR service. ABC Inc. , NBC Universal , Twentieth Century Fox, Paramount Pictures Corp. , CNN, Universal City Studios, and The Cartoon Network were among the original plaintiffs. (See Net DVR Still Appealing for Cablevision.)

Among its arguments, Cablevision has long held that the RS-DVR concept holds up to the "fair use" rules established in the 1984 Sony Betamax case. That's because each RS-DVR customer, not the MSO, is responsible for making recordings. The RS-DVR system, meanwhile, was designed to make an individual copy of the program a customer requests. Likewise, the subscriber who made the request is the only one who has access to the recorded program. For additional details, please see a nuts-and-bolts, technical description of the RS-DVR that Cable Digital News published in April 2007: Inside Cablevision's 'RS-DVR' .

Cablevision's RS-DVR was far downstream well before activity in the courts heated up to a full boil. In March 2006, the MSO announced it was conducting a trial of the service with fewer than 1,000 so-called "friendlies." At the time, the MSO provided each customer with 80 gigabytes of dedicated server space -- enough to record about 80 hours of standard-definition video. Cablevision agreed to mothball the project in light of the litigation.

Cablevision has not said when it might relight the RS-DVR service, but COO Tom Rutledge called today's ruling "a tremendous victory for consumers, which will allow us to make DVRs available to many more people, faster and less expensively than would otherwise be possible.

"We appreciate the Court's perspective that, from the standpoint of existing copyright law, remote-storage DVRs are the same as the traditional DVRs that are in use today."

Ad-skipping and capex
Time Warner Cable Inc. (NYSE: TWC) has managed to steer clear of copyright questions with its own "Start Over" service, in part because the MSO has gone out of its way to secure rights for which shows can be restarted. Additionally, to prevent ad-skipping, the fast-forward feature of shows viewed in Start Over mode are disabled.

Bright House Networks has also launched Start Over in multiple markets. (See Bright House Starts Over in Tampa .) The largest MSO in the land, Comcast Corp. (Nasdaq: CMCSA, CMCSK), has plans to introduce a similar service in 2009. (See Comcast Feels Like Starting Over .)

Today's ruling, however, might embolden other cable operators and telco TV providers to pursue RS-DVR services of their own.

If so, a big (and popular) component of cable capital spending -- set-tops with on-board DVRs -- could be significantly de-emphasized. DVRs account for as much as 10 percent of capital spending for major MSOs, according to Sanford C. Bernstein & Co. Inc.

"Further, cable gains a huge differentiator versus their satellite competitors," notes Sanford analyst Craig Moffett. "Under the ruling, cable operators will not only be able to offer DVR functionality to all digital subscribers -- whether they currently have a DVR or not -- but also to every TV outlet in the house that has a digital set-top box."

Given the importance of this case to programmers and media companies, it "is all but certain to be appealed" and may eventually head to the U.S. Supreme Court, Moffett predicts.

We'll post a deeper dissection of today's ruling soon.

— Jeff Baumgartner, Site Editor, Cable Digital News