Studios lose appeal in DVR consumer case

Hollywood’s DVR problem has gone into fast forward.

A federal appeals court on Monday struck down a 2007 district court injunction that prevented Cablevision from offering its “remote storage” DVR, which lets users record programs on distant servers rather than on a set-top box in their own homes.

The decision opens the way for cable operators to sell DVRs at a significantly lower cost. That should increase their deployment and thus the number of consumers who skip ads while watching TV.

That’s bad news for networks, particularly advertiser-supported broadcast nets, as well as their content providers.

A coalition of major studios and networks argued unsuccessfully that by recording shows on its remote DVR servers, Cablevision violated their copyrights, and that the later transmission to customers counts as a public performance that should trigger royalty payments.

Cablevision claimed that even though the remote DVR records programs outside the home, it is essentially the same as TiVo and the generic knockoffs already in use.

“This is 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,” said Tom Rutledge, Cablevision’s chief operating officer.

The company has said that when it deploys the remote DVR network, it will reduce the monthly cost to subscribers. Competitors are likely to follows its lead.

“The ruling is a huge win for cable operators,” said Craig Moffett, senior cable analyst for Bernstein Research, because it “means much lower capital spending going forward.”

As a result of the lower cost, Moffett predicted in a report on the decision, millions more homes are almost certain to order DVRs, which would result in “a huge increase in the number of viewing hours per day potentially subject to ad-skipping.”

Plaintiffs in the case, which include Turner Broadcasting, ABC, CBS, NBC, Disney, Fox, Paramount and Universal, are still considering whether to appeal the decision to the U.S. Supreme Court.

“We are reviewing the court’s decision and will be considering all legal options,” the MPAA said in a statement on behalf of the plaintiffs. “We will continue to take the steps we believe are necessary to protect our legal rights with regard to our content.”

Networks and studios aren’t the only potential losers under this decision. Satcasters DirecTV and EchoStar’s Dish Network could be harmed as well. Because they are unable to stream recorded programs on demand, they can’t implement a remote DVR system.

That means they will have to keep selling set-top box-based DVRs, which, Moffett said, will burden them with “a significant technological and economic disadvantage.”

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