The Deal: Cablevision's "network DVR" is a system that allows regular digital cable boxes to record, pause, fast-forward and rewind programs, much like a TiVo, except the hard drive that stores the programs isn't in a subscriber's set-top box but at a central Cablevision facility. A network DVR system is appealing to cable operators because it allows them to convert currently deployed non-DVR set-top boxes to DVRs and eliminates certain operational expenditures, such as sending out the trucks and workers to replace the boxes and repair hard drive damage.
The History: In March, Cablevision announced a trial of its network DVR, scheduled for June. Then, in May, a group of Hollywood studios and TV networks sued Cablevision for copyright infringement and Cablevision agreed to delay the test until the matter was resolved. The two sides agreed to expedite the process and a hearing is scheduled for late October.
The Studio's Beef: Studios and networks accuse Cablevision of essentially creating an on-demand offering, because under VOD models the programs are stored at a central hub and are then sent out to viewer's home when a viewer requests it. But it's also important to note that a ruling in Cablevision's favor would likely spur cable operators around the country to adopt the system, speeding DVR penetration (and further undercutting networks' primary revenue source as advertisers have so far refused to pay for time-shifted viewing).
The Defense: Cablevision said it only records programs when a customer puts the system in motion. Each home has its own storage allotment and if 500,000 Cablevision subscribers choose to record "Desperate Housewives" on a Sunday night, then there are 500,000 copies of the program saved at the central hub. It argues network DVRs are merely an extension of a 1984 fair-use law: "The technology that consumers use to time-shift television programming has progressed (from the Betamax to the VCR and now the DVR), but the principle that time-shifting is fair use has remained settled law," a Cablevision countersuit stated.
The Ad Angle: The immediate effect of network DVRs is more time-shifting, more quickly. Down the line, however, it could create opportunity for dynamic ad insertion, which would allow networks and advertisers to refresh advertising on recorded shows, because the content could be manipulated at the cable operator end. Cablevision is clear, however, that that would require separate agreements with programmers.