The U.S Court of Appeals in New York has ruled today that Cablevision Systems (News - Alert) Corporation is free to launch its network-based digital video recorder (DVR), as it does not violate copyright law. With this court ruling, Cablevision cable subscribers will be able to record TV shows and movies with a digital video recorder for future viewing, rather than relying on set-top boxes.

 

The Court of Appeals overturned a lower court ruling which speculated that Cablevision’s network DVRs infringe on the copyright interests of the Cartoon Network, Cable News Network and various Hollywood studios the Long Island-based operator.

The Court also lifted an injunction that banned Cablevision from using the technology pending appeal. Cablevision first announced plans to use the technology in 2006.

“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 Cablevision COO, Tom Rutledge. “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.”

Cablevision’s victory can be seen as a huge win for cable operators, and could significantly lower future capital spending.

 

Bernstein Research Analyst, Craig Moffett, noted, “Cable operators would no longer need to provide a unique piece of hardware for each individual subscriber in order to offer DVR functionality.”

 

“DVRs have been one of the largest single drivers of capital spending in recent years, accounting for as much as 10 percent of capital spending for the major [cable companies.] Further, cable gains a huge differentiator versus their satellite competitors. Under the ruling, cable operators will not only be able to offer DVR functionality to all digital subscribers - whether they have a DVR or not - but also to every TV outlet in the house that has a digital set top box,” added Moffett.

 

On the other hand, Moffett states the ruling is “a major loss for media companies”. He added, “with a stroke of a pen, the Appeals court has opened the door to a massive increase in the penetration of DVR capabilities. Core among these is ad-skipping.”

 

According to Moffett, DVR penetration is now about 25 percent of TV households and it could rise to 60 percent, with an even larger increase in DVR outlets per home. Moffett believes that broadcast TV companies are “especially exposed,” since then are 100 percent ad supported.

 

Satellite companies may also get the short end of the stick here, since they have no way to offer network DVR capability, which requires point-to-point connectivity. Satellite operators could be pushed to operate at a huge technological and economic disadvantage.

 

Moffett believes that the case is likely to be appealed to the Supreme Court.

 

It is believed that media companies could have settled the case by agreeing to network DVRs in return for a commitment to block ad skipping.

 

“By failing to settle, the media companies now face the bleak prospect of a massive increase in ad-skipping,” Moffett contends.

 

Stay tuned…