Two of the largest cable operators in the US - Charter and Cablevision - have announced steps to move away from conventional DVRs in an attempt to meet consumers' changing preferences.
Charter announced a multi-year agreement with TiVo to combine traditional TV programming with internet content and social networking. During the initial phase, which is slated for later this year, Charter will deploy TiVo-branded internet-connected Premiere HD boxes and license TiVo's user interface for non-DVR set-tops. Charter has also committed to deploy TiVo's upcoming multiroom and non-DVR platforms when they become available. The initial product will have the following features, according to TiVo:
- TiVo's high-definition user interface: includes search of TV, VoD, and available online content, to help find what customers want to watch
- Web applications: allows customers to access local news, sports and weather, on line video, Facebook and Twitter from the TV
- iPad app: serves as command central, with an ability to browse the program guide and recorded shows, schedule recordings, post on Facebook or Twitter, schedule, search and browse for shows from anywhere
- Multiroom DVR: view a common list of recordings and playback recorded content throughout the home, pause a recorded program in one room and resume playback in another, use trick-play functions on recorded content and delete recordings from any room.
Separately, Cablevision has debuted its non-physical, network-based DVR (nDVR) system and discontinued conventional DVR set-boxes in the Bronx for new customers only - existing DVR customers will retain their DVR set-top boxes. The service will be priced the same as conventional DVR at $10.95 per month, and will have the same storage capacity. The service, which is named DVR Plus, allows for multiroom viewing. The service is compatible with most Cablevision set-top boxes, with some limitation on the ability to initiate and manage recordings for the older models.
It is no secret that customers have developed high expectations of their TV providers in the past few years, and the companies that meet those expectations will be well rewarded. Whether by integrating the internet, moving to the cloud, or providing TV Everywhere and multiscreen access, subscription TV operators and their technology vendors have been scrambling to prepare for the next stage in the evolution of television.
The agreement between Charter and TiVo is a good example of this trend. For Charter, which has shelved its TV Everywhere plans due to lack of deals with network owners, the partnership with TiVo allows it to please its customers by incorporating internet content into its traditional TV platform, without exposing itself to unnecessary risks from over-the-top video providers. Notably, Netfix's instant-streaming functionality will be excluded from TiVo boxes distributed by Charter. Furthermore, TiVo's technology will enable Charter to offer its customers advanced services such as multiroom viewing and iPad-based functionalities, similar to those offered by larger operators, without significant investments in R&D.
As for TiVo, which has seen its service subscriptions decline since 2007, this partnership adds a much-needed revenue stream. The timing of this agreement is especially propitious for TiVo whose long-running legal entanglement with DISH, AT&T, Verizon and Microsoft over patent infringement issues seems to be getting increasingly complicated. While decisions in most of these legal skirmishes have tended to be in TiVo's favor, the multiple setbacks the company experienced in its costly litigation have made its shareholders jittery. The deal with Charter, the fourth largest cable operator in the US, will certainly help calm nerves, as it demonstrates that the tech company is making headway with the top league of providers.
But the true significance of the deal with Charter lies in that it confirms TiVo's place as one of the leading providers of software solutions to integrate internet-delivered content with traditional TV programming. By moving away from a hardware focus to user interface (UI), the company could potentially improve its bottom line since software companies' gross margins tend to be much larger than those of hardware companies. Furthermore, a software focus allows TiVo to stay relevant in the case that the cloud becomes the preferred medium of storage for operators in the future.
Cablevision's strategy to switch subscribers to the newly-minted network-based DVR (nDVR) is case in point. While other operators, such as Comcast, TWC, Cox, Mediacom and now Charter, seem to have opted for physical multiroom DVRs for the time being, Cablevision has chosen to adopt a cloud-based solution in the hopes that it would give the MSO more flexibility down the line. Not only does nDVR support multi-room and multi-screen viewing in-home, but it also allows for seamless viewing of recorded content outside of the home once multiplatform rights issues are resolved with content providers.
It is not entirely clear what kind of impact the nDVR will have on Cablevision's bottom line. The company hopes in the long run to recuperate its initial investment in setting up the system (and defending it in court) from savings on hardware deployment and onsite service calls. These savings may prove elusive in the future, however, due to the nature of US intellectual property law. To avoid copyright infringement, Cablevision has opted to create individual copies of requested shows for each user forcing the company to dedicate a storage partition in the network for each user. This condition may hinder the creation of economies of scale since storage-related costs will scale in line with the number of nDVR users. As for savings from reduced onsite service calls, it remains to be seen if the shift to nDVR will have any impact at all on the total volume of such calls. Cablevision appears to believe this will be the case. Otherwise it would not have pushed through with project in spite of adversity from content owners.
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