Switched On: Hollywood's remote control turns revenue off
Each week Ross Rubin contributes Switched On, a column about technology, multimedia, and digital entertainment:
n compared two devices that only peripherally compete with each other today, but which represent different approaches to acquiring TV shows. In a fit of serendipity, the arrival of the Apple TV occurred just as Cablevision's remote DVR service (RS-DVR) got the smackdown from a U.S. District Court. I am not a lawyer, but I can understand the rationale. RS-DVR is a video equivalent of the music locker service that MP3.com tried at the beginning of 2000. A CNET article written slightly after that service's launch noted:
MP3.com admits that it has created a database of some 45,000 unlicensed CDs that it serves through its My.MP3.com accounts. But company executives argue that it is toeing the legal line by offering tracks under the "fair use" exemption of the copyright law, which allows consumers to make copies for personal use.
Now, substitute "Cablevision" for "MP3.com, "TV shows" for "45,000 unlicensed CDs," and "RS-DVR service" for "My.MP3.com accounts." Cablevision's legal defense differed from that of MP3.com's, though. Trying to leverage the established legality of DVRs, it claimed to offer the equivalent of a legally protected DVR device, whereas the court found that RS-DVR was a service -- not a device. Consumers lose because RS-DVR could have enabled cheaper deployment not only of basic virtual DVR service but of long-delayed advances such as virtual multi-room DVR.
Which, interestingly, brings us back to Apple TV.
Hollywood loves AppleTV (at least for now) because it extends the benefits of revenue ($25 to $35 for a season of TV shows without the overhead of DVD production, packaging and distribution) for programming that would ordinarily be given away. It arguably even extends an audience for cable shows beyond cable. In contrast, DVRs, and by extension RS-DVR, cuts Hollywood out of the pie -- which is why they would love nothing more than to abolish even local DVRs (much as they tried with its clunky predecessor, the VCR).
But the DVR genie is out of the bottle and, regardless of the fate of TiVo, cable and satellite companies are shipping millions of them into American homes. Given this, RS-DVR would have been better for studios and networks. Streamed content is probably more secure than TV shows sitting on a hard drive, and Cablevision might have even been able to justify removal of fast-forwarding past ads with the lower price.
RS-DVR infrastructure might have even been able to open new VOD revenue streams for content producers, á la Apple TV, with Cablevision offering nearly instant purchasing of TV shows after aired. Studios would get their cut, or offer promotions and recommendations for other shows on a network. This would be like the partial redemption TiVo should be receiving in Hollywood's eyes by opening a living room portal to Amazon Unbox.
For the foreseeable future, though, the total combined installed base of TiVo, Apple TV, Akimbo and even Xbox 360s in the US won't be close to the massive reach of the cable companies that would have followed suit with RS-DVR had Cablevison prevailed. In its courtroom victory, Hollywood set back perhaps its best prospect in years for monetizing its content and expanding its audience.
Ross Rubin is director of industry analysis for consumer technology at market research and analysis firm The NPD Group,. His blog can be read at http://www.rossrubin.com/outofthebox. Views expressed in Switched On are his own.
