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High Court Boosts Remote DVR

By: Vishesh Kumar and Sam Schechner , The Wall Street Journal

The Supreme Court declined to hear a challenge to a new type of digital-video recorder from Cablevision Systems Corp., setting the stage for wider use of the technology.

The decision may also clear the way for U.S. cable operators and the TV networks and Hollywood studios that mounted the challenge to compromise on how to use the new technology, possibly including curbing viewers' ability to skip ads.

The new DVR service would work by storing a viewer's recordings in computers housed at the cable operator, rather than in a box attached to the viewer's TV set, making it easier and cheaper for cable and phone companies to offer a recording service. The court said Monday it wouldn't disturb a federal appeals court ruling that the technology doesn't violate copyright laws.

Cablevision has said it would launch the service as soon as this summer. Spokesmen for other pay-TV companies, including Time Warner Cable Inc. and Verizon Communications Inc., said they are looking into using such a technology but declined to comment on when they might do so.

The decision is likely to accelerate adoption of DVRs in the U.S., potentially eating into ad revenue at TV networks. As a group, people watching recorded shows on DVRs fast-forward past more than half the commercials, according to network and advertising executives. That makes DVR viewers less valuable to networks selling ad time than the viewers who watch shows live.

But DVR viewers also watch more TV, some network executives say, making an argument for a potential upside to broader DVR penetration. The technology was already in 30% of the U.S. households with televisions as of May, according to Nielsen Co.

"It's a tradeoff. But it could bring more people to top-rated programs," said Janice Finkel-Greene, a TV analyst at Interpublic Group's Magna Global. "That's the chance you take."

Spokesmen for network owners including CBS Corp., Time Warner Inc. and News Corp.'s Fox Networks Group declined to comment or referred questions to the Motion Picture Association of America. (News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.)

In a statement, the MPAA said it was "disappointed by the court's decision not to hear this case" but argued that the decision "does not mean that the Supreme Court agrees with the appeals court's ruling."

As part of broader negotiation, at least some networks might be willing to grant cable operators broader rights to use remote DVRs than the appeals court ruling would allow, according to one network executive. For instance, the current ruling -- based on earlier rulings that allowed VCR owners to record shows for personal use -- requires that cable operators make recordings for each user, using up space and bandwidth. The networks could agree the cable companies don't have to keep individual copies for each household in return for, say, curbs on ad-skipping technology.

Networks may also be interested in discussing how to substitute up-to-date advertisements when playing back shows, which could fetch higher prices for both parties.

"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," a spokesman for Cablevision said.

-- Shira Ovide contributed to this article.


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