A PVR Revolution

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In our "Cable Execs Examine Broadband Evolution" roundtable this week, two MSO executives and a pair of programmers got into it with us, trying to gauge how quickly consumers will embrace new technology and which services would revolutionize their businesses — specifically, the personal video recorder (see page 3).

The question is whether what's underway is an evolution or a revolution, as cable companies keep rolling out new services to keep early adopters out of the clutches of direct-broadcast satellite.

For example, Insight Communications Co. president and CEO Michael Willner, back from a visit to London to check out DBS technology there, said despite the bird's inferior technology, it does deliver enhanced television pretty effectively.

And that's what the race is about — keeping cable's subscribers from defecting to DBS as that medium gains more market share in the U.S.

Time Warner Cable senior vice president of new product development Kevin Leddy is certainly dancing as fast as he can. He sees the next stage of enhanced-cable services rollouts in this order: video-on-demand, subscription VOD, personal video recorders and, finally, network PVRs.

At the recent Cable & Telecommunications Association for Marketing Summit in San Francisco — where this roundtable took place — the corridor talk was abuzz with the potential of PVRs.

But can PVRs lift cable's boat, and how quickly? And when will mass-market acceptance of the devices actually occur?

Granted there are many obstacles, among them daunting legal and technical problems. And where does cable actually fit in? In large part it, PVRs pose a storage issue. Cable operators are looking for a model that encompasses storage in the home and at the system headend.

It's pretty apparent that households that already have PVRs, such as the product offered by TiVo Inc., watch television a whole lot differently than those that do not.

"Real-time viewing in the home goes down significantly," said Home Box Office Inc. U.S. Network Group president John Billock.

Right now, PVR acceptance indeed looks to be evolutionary, not revolutionary. While there are 200 million TV sets in the U.S., there are only a little more than 200,000 PVRs in the marketplace. That's not many, considering the devices have been on the market for three years.

The debate over PVR's reminds me of the early 1980s, when compact disc players first came to market. I remember looking with bemusement at the limited number of jewel-cased albums available from the music industry — and at the astronomical prices record companies were charging, compared to vinyl.

But shortly after the compact disc player came out, prices fell, more titles became available and the rest is a tale for the corporate history books. At that time, no one imagined the scope of the revolution underway in the music industry.

Could that be the case with PVRs? Unlike many at the CTAM Summit — who felt that PVR penetration could hit 70 percent of the market in the next several years — our roundtable members predicted the devices would face a slow rollout.

I'm not so sure who's right on this one. Existing PVR users apparently love the freedom to watch what they want to when they want to. And as was the case with CDs, prices are coming down for those devices — which will expand the audience.

The PVR is a development that bears watching. Cable, with its plucky broadband pipe, must somehow to find a way to get into the thick of this potential revolution.

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