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Content Rights Battle Could Nuke the Network DVR

Despite the way it may look, the growing legal battle between Cablevision Systems and nine Hollywood studios and TV networks over a proposed new digital video recorder service really isn't about the DVR.

Rather, the recent spate of federal lawsuits and countersuits over Cablevision's proposed network-based DVR (nDVR) service center on the much larger issue of who has the rights to distribute video content when it travels outside the home.

Background: Cablevision, the nation's sixth largest MSO with about 3 million cable subscribers in the New York metro area, says its nDVR will let digital cable customers record and store programming on the company's remote network video servers instead of on their own set-top boxes. That concept, cheered by the other MSOs, would help the cable guys boost revenues, cut down on hardware costs (and DVR support issues), and, they believe, make consumers more loyal.

In a prepared statement, Cablevision COO Tom Rutledge said the company could add DVR functionality to "more than 2 million digital cable homes instantaneously, without ever rolling a truck or swapping out a set-top box."

Content owners, movie studios, and TV networks insist that they control all the distribution rights and must be paid accordingly when content is stored, broadcast, or used in more than one place. They contend that the MSO's proposed nDVR offering really amounts to a VOD service in disguise, requiring separate rights deals with program producers.

"While Cablevision apparently will call its service ÔRS-DVR,' presumably to make it sound like a mere extension of digital video recording equipment, the proposed service is nothing of the kind," seven major entertainment networks and studios complained in the first suit. "Cablevision's proposed service is an unauthorized video-on-demand service that would undermine the video-on-demand, download, mobile device and other novel and traditional services that plaintiffs and other copyright owners have developed and are actively licensing into the marketplace."

Cablevision officials counter that consumers have "fair use" rights to view network DVR programming that they exclusively select and record, even if it's stored outside the home. Citing the U.S. Supreme Court's famous 1984 Sony Betamax ruling, which held that consumers could tape and time-shift programs on their home VCRs for their own use, MSO executives say they have crafted their service so that it can act as a 'virtual' DVR.

This copyright dispute, which has never been resolved by the courts, has implications far beyond the cable or telecom industries. It could have an impact on the distribution of digital content on a wide range of new media platforms, ranging from cell phones to portable media players to video-on-demand (VOD) services, even devices such as Sling Media's Slingbox. As a result, some copyright law and other industry experts think the issue could go all the way up to the Supreme Court and Congress before it's finally settled.

"This will have to be decided by the courts," says John Mansell, a senior analyst at Kagan Research. "But it may ultimately be settled by Congress." As things now stand, the U.S. District Court for the Southern District of New York plans to rule on the case as early as the end of October.

In a similar fight between the content and distribution forces three years ago, Time Warner Cable abandoned a more ambitious network DVR venture, known as Mystro TV, because of fierce opposition from programmers. Under the Mystro TV project, Time Warner sought to make its entire program lineup available on-demand to digital cable subscribers for up to two weeks at a time. But programmers torpedoed that effort, arguing that their affiliation deals with the MSO did not permit such remote recording, storage, and on-demand playback.

After that failed effort, Time Warner went back to the drawing board to develop its new headend recording service, Start Over. Actually a cross between a DVR and video-on-demand (VOD) product, the 'DVR-lite' service lets digital cable subscribers restart specially 'enabled' shows in progress without any advance planning or new home recording gear, just by pressing the 'select' button on the cable remote. Viewers can also pause and rewind the enabled shows, just as they could with regular DVRs.

However, the programs immediately disappear from the video servers where they've been stored once their normal viewing times end. Unlike DVR users, Start Over subscribers also can't skip through recorded commercials. Finally, unlike Cablevision, Time Warner has gained copyright clearance from programmers for the enabled shows.

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