Media Wonk

Free VOD v. Virtual-DVR - July 25, 2007

Time Warner president-COO Jeff Bewkes on Tuesday proposed making essentially all TV programming freely available on-demand, with advertising support.

Bewkes said consumer would accept advertising in on-demand programs if they were properly targeted for each viewer.

An all-VOD model would also reduce the need for set-top digital video recorders, he added, saving operators money, because consumers don’t need to time-shift what they can access on demand.

“If we as an industry can take all of these networks and put them on-demand for free, [operators] don’t need to go installing and worrying about all of that stuff,” Bewkes said.

The catch is that the operators would have to agree to turn off the ad-skipping and fast-forward functions, so the networks could assure advertisers that their ads are being seen.

It’s an interesting idea—one you would not have heard from a programming or network exec a few years ago—but I wonder if he’d be making it even now if the decision in 20^th Century Fox, et. al. v. Cablevision had come out the other way.

If the court had allowed Cablevision to operate its virtual-DVR system on behalf of its subscribers as planned—giving users the ability to control playback of recorded programs from a server instead of a set-top DVR--it’s hard to see how Bewkes’s proposal could be implemented.

Programmers will only accept free VOD if they can sell ads against it, which they can only do if they can assure advertisers the ads will be seen. But they can only offer that assurance if they can somehow stop people from skipping the commercials on playback.

You can’t force consumers to turn off the fast-forward function on their own DVRs. But you could turn it off globally if all functionality is controlled from the head end.

The key is having leverage over the functionality that gets enabled.

Had the court accepted Cablevision’s argument that it was simply providing the technical means for users to exercise their own fair use right to record and playback programs, the networks would have no leverage over the functionality.

In ruling that Cablevision needs a license to operate its virtual-DVR system however, the court handed the networks the power to set limits on how it could be used.

As a practical matter, of course, the networks probably aren’t particularly interested in licensing virtual-DVR systems. They’re more likely to be interested simply in preventing their unlicensed deployment so they can offer an alternative that better fits the content owners’ business model, such as ad-supported VOD.

One way to look at the outcome is as an example of how upholding intellectual property rights makes new business models possible.

You could also see it as a case in which overbroad IPR claims stifled technological innovation.

Or, you could just get the shows on DVD and watch them that way.

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