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U.S. Supreme Court allows Cablevision’s server-based DVR model

In a major victory for Cablevision Systems, the U.S. Supreme Court refused last week to consider a legal challenge by the television networks and Hollywood studios that would block the use of a next-generation digital video recorder. Cablevision is now free to launch the new server-based remote DVR service later this year.

The content owners, making up some of the largest media conglomerates in the nation, had argued that Cablevision’s remote program storage service violated copyright laws. The new service, they said, was more akin to a video-on-demand service, for which they receive additional licensing fees. Allowing the recording would illegally copy their programs without a license, they argued.

The media owners suggested that making a recording on a server is not covered under a home viewer’s right to make a copy for personal use, as was established more than 25 years ago by the high court in its ruling in the landmark Sony Betamax case.

In 2007, a New York federal trial judge agreed with that argument, giving the content owners an initial legal victory. However, the 2nd U.S. Circuit Court of Appeals overturned that ruling last summer and sided with Cablevision. The appeals court found the DVR service was not so different than using a VCR to record programs. It also ruled that Cablevision was not liable for copies of programs made by customers.

Last week, the U.S. Supreme Court, without comment, left the appeals court ruling in place, giving the victory to Cablevision. The cable operator received the support of the Obama administration, whose solicitor general urged the court not to review the case. Now all legal challenges for the case — Cable News Network vs. CSC Holdings, 08-448 — are exhausted.

The high-profile case was a major loss for the plaintiffs, who included General Electric Co.’s NBC; CBS; Walt Disney Co.’s ABC; and News Corp.’s Twentieth Century Fox. They were backed by music companies, publishing organizations and professional sports leagues — all of which filed friend-of-the-court briefs supporting the plaintiff’s arguments.

As mentioned, Cablevision is expected to launch the new DVR service later this year. It will allow subscribers to record and store video programs on the cable provider’s central computer server, rather than on storage media at home. Cablevision said the service will cost less than the home-based recording hardware it now provides subscribers in select markets.

The new technology could have huge ramifications for the media industry. Experts predict digital recording services could now double, entering about half of U.S. homes in a short time. The DVR technology is already present in about 32 percent of U.S. TV households, according to Nielsen, up from about 25 percent this time last year.

This fast growth worries content owners, who see DVRs as an easy way for viewers to avoid commercials, the primary income source for the networks. Also, time-shifting makes it harder for television networks to draw mass audiences at once — a phenomenon highly desired by premium advertisers and a platform long used to launch new programs.

Tom Rutledge, Cablevision’s chief operating officer, called the high court’s decision a tremendous victory for his industry. However, he addressed the ad skipping fears. “We are mindful of the potential implications for ad skipping and the concerns this has raised in the programming community,” he said in a statement.

Rutledge said the cable provider believes there are ways to work with programmers to give the new technology to customers and “at the same time deliver real benefits to advertisers.”

The Supreme Court’s action was also applauded by public interest groups. Gigi Sohn, president of Public Knowledge, praised the high court for using common sense in the case.

“From a common sense point of view, the lower court and the U.S. solicitor general were correct in their interpretation of the copyright law that a recording is a recording, whether done on a set-top box or at the cable headend, as Cablevision’s proposed service allows,” she said.