Cablevision can hit the fast-forward button on its remote DVR plans.
The Supreme Court dealt Hollywood’s studios and networks a blow Monday, declining to review their legal challenge to Cablevision’s plan to offer DVR service to subscribers without the need for a separate set-top box. The companies are still hoping to see the high court rule against the DVRs on other grounds, but for now, Cablevision is clear to proceed.
Disney, News Corp., CBS Corp., Time Warner’s Turner Broadcasting and NBC Universal parent General Electric were among those that sued to block Cablevision’s rollout of its remote-DVR service on the grounds that it would violate copyright laws.
Even as top primetime skeins such as “Grey’s Anatomy,” “House,” “CSI” and “Lost” garner an increasing percentage of their overall viewership through DVR viewing, the major nets and studios put up a big fight against the implementation of remote-DVR service, which would allow viewers to record shows that would be stored on its central servers rather than on a subscriber’s home set-top box. Cablevision maintains that the remote DVR feature will make it easier and less expensive for subscribers to have access to the service.
The majors emphasized the copyright issue in their legal challenge, but driving the litigation was concern that Cablevision’s initiative would accelerate DVR use among viewers. The major showbiz congloms have been grappling with the fast growth of DVR use: They are present in about 32% of U.S. TV households, according to Nielsen, up from about 25% this time last year. “Grey’s Anatomy” was the most-DVR’d primetime skein last season, with some 32% of its 17.8 million viewers watching episodes via DVR playback within a week of the premiere telecast.
DVRs’ ad-skipping function takes aim at the primary revenue source for the broadcast nets, and time-shifting viewing makes it harder for nets to draw the mass audiences that command the biggest bucks from advertisers and use established shows as a springboard for launching others.
The Supreme Court’s decision to take a pass on the review paves the way for Cablevision to deploy its service later this summer. The U.S. solicitor general had urged the high court not to hear the case.
Despite its clear victory, Cablevision chief operating officer Tom Rutledge said the company is not impervious to Hollywood’s concerns.
“We are mindful of the potential implications for ad skipping and the concerns this has raised in the programming community,” Rutledge said in a statement. “We believe there are ways to take this victory and work with programmers to give our customers what they want — full DVR functionality through existing digital set-top boxes — and at the same time deliver real benefits to advertisers.”
Rutledge also noted that the service will give cable operators an advantage in their competition with satellite and telco subscription TV providers.
“This landmark case gives the cable industry, and Cablevision in particular, the opportunity to do something that our satellite competitors cannot do,” he said. “We expect to begin deploying the first application of this new technology, the ability to pause live television when the phone rings, as a value-added benefit to our customers later this summer.”
The Supreme Court’s move was applauded by public-interest orgs and the tech biz.
“From a common-sense point of view, the lower court and the U.S. solicitor general were correct in their interpretation of the copyright law that a recording is a recording, whether done on a set-top box or at the cable head-end, as Cablevision’s proposed service allows,” said Public Knowledge prexy Gigi Sohn.
“We applaud the U.S. Supreme Court today for letting stand a decision that supports the growth of technology and innovation,” said CEA prexy Gary Shapiro. “The ability to record television programming has become commonplace to millions of Americans, which has benefited consumers and allowed the consumer technology and content industries to contribute billions of dollars to our economy and create millions of jobs.”
The Cablevision technology is based on setting aside sufficient server space so that each customer gets enough dedicated storage to make and manage individual copies of shows, but with that space on network servers rather in the home. That means, for example, that if 1,000 Cablevision subscribers want to record Fox’s “House,” there will be 1,000 copies at the network facility.
With that underpinning, Cablevision successfully argued that it was essentially the same result as home copying, just remotely stored.
CNN, Cartoon Network and others who supply programming to Cablevision had argued that its contracts with the cabler were for carriage of the channels, not DVR recordings or other performances.
Copyright holders believe making a recording on a server is not covered under a home viewer’s right to make a copy for personal use, as established more than 25 years ago by the high court in its landmark ruling in the Sony Betamax case — which some of the majors challenged on similar copyright grounds.
In the Cablevision case, the appeals court had reversed a lower court ruling that barred the virtual DVR functionality as a copyright violation.
The studios’ support of CNN et al.’s petition to the high court to overturn that appeals court ruling came as no surprise. Several Motion Picture Assn. of America members were petitioners to the suit, and the studios filed suit to block the technology when it was first announced in 2006, claiming it would constitute an unauthorized reproduction of their work.
The initial suit was filed by Turner Broadcasting System’s Cartoon Network and CNN, plus Fox, NBC, Disney, CBS and ABC, after Cablevision announced plans for the service in 2006. In 2007, a New York federal judge sided with the majors, but that decision was overturned on appeal by the 2nd U.S. Circuit Court of Appeals last summer.
CNN and the others last fall sought the Supreme Court review of the appeals court decision, saying the ruling “fundamentally distorts copyright law.”
But the U.S. Court of Appeals for the 2nd Circuit in New York last August reversed that ruling, saying such a service “would not directly infringe plaintiffs’ exclusive rights to reproduce and publicly perform their copyrighted works.”
The court lifted the U.S. District Court’s injunction against Cablevision and remanded the case back to the lower New York court for further proceedings.
Now, studios want to push those further proceedings to the Supreme Court, arguing that the appellate court made the wrong call.
“We are, of course, disappointed by the court’s decision not to hear this case but understand that the court can only hear a limited number of cases each year,” said Daniel Mandil, the MPAA’s senior exec veep and chief of legal affairs and intellectual property protection. “The court’s decision to deny the petition for review does not mean that the Supreme Court agrees with the appeals court’s ruling but is simply a decision not to hear the case. We will continue to do what is necessary to protect the legal rights of our members with regard to their content and look forward to the continued development of the law in this area in future cases.”
(John Eggerton writes for Daily Variety sister publication Broadcasting & Cable.)