What's Wrong With Network DVRs?
Many people are familiar with digital video recorders in either a set-top box from their cable or satellite TV provider, or as a standalone TiVo-style box. This technology is very popular. In-Stat reported that 19 million PVR units shipped in 2005, a 60 percent increase over 2004. Some new technology has become available recently, but it has run into severe opposition from content owners.
Called "network DVR" or nDVR, this system replaces the hard drive in every viewer's home with a central file storage system that viewers can use to record and play back broadcast TV programs.
Tim Dodge of Concurrent, a major supplier of VOD technology, said "From a technology standpoint, the [nDVR] approach has been demonstrated and validated in real world conditions. In fact, Concurrent was the first to demonstrate nDVR technology in a field setting, and we did it over three years ago."
Unfortunately, nDVR has run into a roadblock. It seems that some content owners have decided that this technology should be treated like video-on-demand, not a set-top box system. This difference is significant to service providers, because the licenses for VOD content are negotiated separately from those for linear TV programming.
This controversy has gotten to the point where lawsuits have been filed, most notably in the case of Cablevision Systems. In May 2006, seven content distributors and program providers sued Cablevision to stop the deployment of a service called "RS-DVR" for remote storage DVR. The seven included CBS, Disney, Fox, NBC Universal and others. The suit charged copyright infringement, among other things, and it's shaping up for a battle that could take years.
Here's what I don't understand. Why are content owners fighting this? They should love nDVR. It can both provide better security for the content and make advertisers less unhappy with DVR technology. Let me explain.
Service providers and content owners have essentially no control over content that has been recorded by a viewer on the viewer's own DVR for later playback. It's a hard drive sitting in a consumer's home with unencrypted content.
Service providers have a slightly more control over DVRs that are embedded in a set-top box supplied by the service provider. At least they can ensure that the digital rights management function is working to protect any copyrighted content while it is on disk. But, it's still a hard drive loaded with content in a consumer's home.
With an nDVR system, the content is stored securely in the service provider's facility. The service provider can control when and how the video is played out, and can make sure that DRM functions in the set-top are working, and that high-bandwidth digital content protection is valid through to the user's display. Sounds like a pretty secure environment.
Another big controversy surrounding any kind of DVR is the role of advertising in recorded content. Advertisers have two main concerns.
One is ad skipping, where viewers fast-forward through ads and don't view them. Consumers have been accused of using this feature as their primary reason for buying a DVR, but I disagree. I bought mine so I could keep up with serialized programs like "24" and "Rome" in spite of my hectic travel schedule. I must admit, I do find myself skipping through most ads, although I have been known to rewind and watch ads that break through the clutter with some real visual appeal.
Another concern is ad timeliness, where viewers watch programs at times far removed from their original broadcast date. This is a big concern for some advertisers who have their ad campaigns targeted for specific time windows, such as pre-election political ads. On my DVR I still have some shows recorded before the November elections. It's actually quite amusing to see candidates bashing each other when you already know the winner.
To me, advertisers would prefer an nDVR over other DVR technologies. Consider what happens in a normal DVR scenario with an advertisement.
A typical standalone or set-top DVR faithfully records any advertisements along with the program content. Say you record a program on Feb. 12 with several ads for Valentine's Day. You wait until Feb. 17 to watch the program. The sales are over and the ads are completely worthless.
Now, consider the same scenario with an nDVR and some advanced technology for ad replacement in the server. With this technology, the service provider is able to replace the commercials that were in the original program with ones that are timely and relevant whenever the viewer watches the content.
In this example, when you watch the content on Feb. 17, the server could insert ads for a big President's Day sale. You might actually be willing to watch these inserted ads, and an advertiser might be willing to pay for this privilege.
With nDVR, service providers can also make sure that the some or all of the advertisements aren't skipped during playback. Since they are feeding the streams, they can control when your fast-forward button works. Of course, if they force too many ads on consumers, they will risk having some grumpy viewers, but if the service is very inexpensive (or dare I say free?), viewers might be willing to put up with a few ads.
All that's needed to make ad replacement a reality is some pretty serious software inside the nDVR server and a legal framework to govern bumping ads.
Regarding the ad replacement technology, Tim Dodge said "We are working on it, and with our subsidiary, Everstream, the ability to do this technically is there. The question is when the industry will be ready for it?."
On the legal front, the outlook is much murkier, and will probably remain that way until the outcome of the Cablevision case is clearer, or content owners change their minds.
REWIND FOR REPLAYTV
ReplayTV, one of the original competitors to TiVo, has emerged from its own legal wilderness and announced a new software-only DVR service. All you need to have is a PC equipped with a TV tuner card and their software, which retails for $99.95. After the first year, the program guide costs $19.95 per year. You can watch the recorded content on your PC's monitor, or on a TV if you have a suitable video output from your PC. No word yet on any legal filings.
So how about it, content owners? Why not give nDVR a chance to demonstrate improved security for your valuable content, and possibly even make your real customers, the advertisers, significantly less unhappy with DVR technology? You could make some of us DVR fans pretty happy.