Cablevision Eyes Networked DVR Service

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Cablevision Systems Corp. could launch a networked digital-video-recorder service later this year, and it may have found a way around the copyright issues that forced Time Warner Cable to scale back a similar product -- called Mystro TV -- last year.

Cablevision’s disdain for DVRs is no secret -- while the MSO makes the product available, it is not aggressively marketed. And last week, during its fourth-quarter earnings call with analysts, president and chief operating officer Tom Rutledge called DVRs an “inelegant solution.”

At the Bear Stearns Cos. Inc. Media Conference in Palm Beach, Fla., Wednesday, Rutledge expanded on those comments, adding that one of the drivers not to push DVRs is an economic one.

“We have placed over 3 million digital boxes in the field in our particular marketplace,” Rutledge said. “Every one of those is capable of interacting with a network server and having all of the functionality of a DVR without any hard-drive investment, without any truck rolls to the house, without any new hardware on the part of the consumer. We think that the product will be ready for rollout this year.”

He continued, “We look at the DVR as a transition product, something you do for competitive reasons and for satisfying the market today where it exists. In terms of where this product should really go, it should be in the network. Our network is capable of delivering it at a much more efficient capital investment per customer than the DVR model provides.”

Asked if a network DVR product would pose copyright problems -- difficulties in obtaining copyrights was one of the reasons why Time Warner Cable scrapped Mystro -- Rutledge said that depends on how the service is configured.

“If a consumer has a ‘condominium’ that it owns in our headend from an operational perspective, where the consumer stores its media the same as it would on a DVR that we own, there may not be a copyright issue,” Rutledge said. “You may be able to provide a networked DVR with all the same features and functionalities as a set-top DVR without a significant portion of the investment.”

Also at the conference, Cablevision chief financial officer Michael Huseby offered a little more insight to the liabilities it will have to assume concerning its decision earlier this week to shut down its Rainbow DBS HD direct-broadcast satellite service, marketed as Voom.

Huseby said the biggest cash outlays will involve Rainbow DBS’ obligation to Loral Space and Communications Ltd. -- estimated to be about $42.4 million, according to securities filings -- and for transponder leases.

According to the Form 10 filed by Rainbow Media Holdings LLC in November, Cablevision issued a $19.8 million irrevocable letter of credit to SES Americom Inc. as a security deposit for leases for 13 transponders.

However, what it will cost Cablevision to cancel service contracts for Voom is undetermined. Huseby said Rainbow DBS had several contracts for call-center service and other services, and it will have to negotiate with each party to cancel those deals.

Cablevision had planned to sell the remaining assets of Rainbow DBS -- it agreed to sell its satellite assets to EchoStar Communications Corp. for $200 million -- to Cablevision chairman Charles Dolan and his son, Cablevision chief information officer Thomas Dolan. But Monday, the company said it had ceased negotiating with the Dolan group and plans to shut down the service in 30 days.

Despite a press release by the Dolan group stating its desire to obtain financing for Rainbow DBS, Rutledge seemed to give little hope that Cablevision will seek other buyers for the Voom assets.

Asked if Cablevision would be receptive to other offers for Voom, Rutledge said, “I’ve been directed to close it down, which I am in the process of doing.”

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