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June 30, 2009

Supreme court virtual DVR decision is a turning point

This isn't social technology, but indulge me. I used to be a TV analyst. And this is big news for marketers.

The U.S. Supreme Court yesterday decided to let stand a ruling that Cablevision can go forward with its virtual DVR product.

Let me explain what this is, and what it means for marketers.

Cablevision's service works just like a DVR, but uses storage on the company's VOD servers instead of a hard-drive in your home. So when you ask to record "Hung" on HBO, the company makes a recording on its servers (and needs only one recording to serve all the people with the same request). Works just like a DVR otherwise.

When Cablevision told me about this product in 2006 (in advance of the general announcement) I told them "you will get sued." They knew that, of course. And it has taken 3 years to get the legal issue resolved, which is fast as these things go.

Here's why this product is more than just a DVR with no disk.

1. They don't have to put limits on disk space. Since everyone is sharing the same recordings, there's no reason to limit you to 100 or 1,000 hours of recorded content, in high definition. No limits.

2. Retroactive recording. No more "damn, I wish I'd thought of recording that." They could, in theory, allow you to ask to record something that's already passed. Or when you find out about a program on episode 4, why not ask to see the previous 3 episodes.

3. Un-delete. Assume deleted programs hang around for 12 months. When you ask to delete something, they just take it off your recorded programs list. If you want it back later, just ask to see it again.

None of these features have been announced, and some might be subject to further suits. But it's possible that, within two years, all of these features will be available to all digital customers, not just on Cablevision, but on Comcast, Time Warner Cable, Cox, and the TV services of AT&T, and Verizon. Why? Because they can do this, and DirecTV and Dish Networks can't. And differentiation from satellite is a big problem for cable operators.

If you're an advertiser, this means a whole lot more customers are about to get DVR service. Not one at a time when they upgrade. En masse, system by system. If cable is smart, they will give everybody a free level of this service, as a taste, and then encourage them to upgrade (the "Freemium" model).

Commercials will become optional for many more people, and on nearly every program.

If you advertise on TV, this could be a problem.

It's all part of the transition to video available on any device, any time. Omnivideo, you might say.

I'd also say it's time to figure out how to make your commercials more engaging and interactive, on those same digital television systems. Can you Canoe? Better learn how soon.


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Shel Holtz

From the "blinding flash of the obvious" department: This is also a significant blow to TiVo unless they can launch a competing product that integrates their unique features. Which they probably can't.

Michael Leis

Really interesting points Josh -- but isn't this also a tremendous opportunity for creating whole new dimensions of revenue and integrated communications between people, operators, and brands.

One example that came to mind as I was reading your post would be using sponsors to facilitate other people in your peer group who have saved similar programming, and whether they've seen that episode or not -- allowing people to send or recommend shows to other peers without logging onto the computer.

There's also the no-brainer of device integration, like MTV's backchannel for sponsored and free versions of shows that integrate your friend's (or people with similar viewing habits) comments like a live tweet stream or directors commentary as part of the broadcast.

Thanks for the thought starter. I think it may be an interesting way for TV to embrace new contexts.


Alan Wolk

While all the features you list above are appealing to an early adopter like me, I don't see them as being particularly compelling to those who've avoided DVRs so far.

Many, if not most, cable companies heavily push their own vesions of the devices and yet penetration is far from universal.

Yes, DVR and complete on-demand is inevitable as a generation raised on it grows up. But as far as this being the impetus to get all those non-users onboard... I'm not so sure.

Jamie Favreau

If I were an advertiser I think this would move into the realm of more product placement.

Already, The Big Bang Theory and My Boys are heavy into product placement.

I am thinking if this happens this will turn more into the norm.

I am not sure how much a company is charged for product placement but my guess this will become more of a steady practice if this were to happen.


I'm curious to see if virtual DVR will enable a better understanding of a television show's viewer demographics. Do you think that this type of service will render Nielsen obsolete?

As the post mentions, perhaps Nielsen will be rendered obsolete due to a two-pronged impact from this new technology:

1) Nielsen will become obsolete because the virtual DVR technology will ascertain better demographic information.

2) Nielsen will become obsolete due to the cessation of TV advertising viewership, leading to the cessation of TV advertisements.

While these impacts may be years away, I think it would also be interesting to explore the potential paradigm shift in commercial TV culture (types of shows, show demographics, perhaps the change in traditional sit-com writing).

Josh Bernoff

@MeganMcQ I don't actually agree. Virtual DVR technology doesn't necessarily deliver better demographic info. (For example, ratings on VOD aren't very sophisticated demographically.)

If there are not ads as you predict, the problem is way bigger than Nielsen!


Good point, Josh. Thanks for your insight into VOD (I was unclear). I always enjoy your posts!

Tony Loftis

Given the dwindling number of people who watch network television, advertising revenue on television has been under attack for some time. It's also facing increasing pressure from Netflix and Redbox, the one dollar video rental kiosks that are popping up around the country. But in truth, the Virtual DVR is an extension of Video On Demand, albeit with a more extensive library, something many people still view as a nice to have, not a must have.

Research shows that last year 39 million homes had HD television sets, but 17 million of those homes didn't have HD service. With millions of Americans not taking advantage of a technology advantage they already have, it will be hard to convince them to upgrade to a service they regard as unnecessary.

I will agree with you though that offering it as Freemium, especially for new subscribers, the way cable companies offer three free months of HBO, will spark interest. But I also agree with @Alan Wolk, getting current subscribers to upgrade is probably an non-starter unless cable companies are willing to put some marketing muscle behind it. And even then in might not work.

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