Court decision spells victory for Cablevision and MSOs


Carat Programming has issued a POV on the recent U.S. Court of Appeals for New York overturning a ruling from a lower court which had initially blocked Cablevision from deploying a centrally stored DVR service.

Said Carat: “This huge victory for Cablevision and other MSOs will allow them to substantially reduce their capital spending. Essentially cable operators would no longer need to provide a DVR for each individual subscriber who desires this functionality. They 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.

Currently, 26.4% of U.S. TV homes have a DVR, and just about 30% of DVR homes have two or more of these devices. While forecasts call for DVR distribution to potentially increase to 100% of digital cable homes because of this court ruling, we believe these projections to be a bit overoptimistic. The expansion of media technologies into the mainstream depends on ease of deployment and consumer acceptance, which is driven by price.

While technology will be easily accessible to millions of households, we do not feel that the current lukewarm demand for DVRs will suddenly move consumers to absorb the additional monthly expense.

DVRs have been available in the U.S. since the late 90’s. Despite its widespread availability, the rate of consumer adoption of DVRs has been much slower versus that of the VCR which arrived on the scene in the late 70’s. When the cost of VCRs was drastically reduced, consumers rapidly embraced them. VCR penetration exploded from 14% in 1985 to 90% in 1990. Once DVR functionality became available within the digital set top box, VCR penetration began to slowly decline and it currently stands at about 73%. Cable operators currently charge about $10 per month for DVR service. However,  even though a centrally stored DVR service eliminates the cost of providing individual DVR hard drives to subscribers (they will only need a special remote), the cable operators seemingly have no intention of passing along these savings to their customers. Led by the soaring cost of gasoline and food, the cost of living is rising at the fastest rate since the recession of the early 1990s.

Demand for DVR functionality has become less of a priority for consumers within this challenging economy. We continue to forecast that DVR penetration growth will remain slow and see no reason to believe that it will grow much beyond 40% U.S. by 2012.

The main reason that media companies had tried to block the rollout of networked DVRs was the potential increase in commercial avoidance. Based on our recent analysis of post-strike primetime viewing among Adults 18-49, while timeshifted viewing added about 18% additional audience to the average primetime show, nearly 60% of commercial minutes are skipped. Obviously, DVRs are not solely to responsible for ad-skipping…..lengthy commercial pods and increased clutter levels also greatly contribute. Therefore, this makes it all the more important that we continue to further develop program engagement metrics and also accelerate the use of DVRs as an additional enhanced advertising platform.”