Cable operators who deploy DVRs are earning a thumbs up from the financial community. Richard Greenfield, an analyst with Fulcrum Global Partners, recently trialed Time Warner Cable's DVR service in New York, and wrote in a report that DVRs "offers a strong consumer value proposition, enhancing the existing digital-video product."
"We believe the rollout of DVRs will continue to drive digital penetration as DVRs require a subscriber to take digital service," Greenfield concluded in his report. "One of the core components of our cable industry thesis has been that cable operators need to expand the value of digital cable beyond more channels. In that light, the DVR is a significant step-up in value at a modest incremental cost to the consumer. To the extent that more cable operators embrace DVR, we would view it positively for cable-industry valuations."
In New York, the about-to-be-launched Scientific-Atlanta Explorer 8000 can record up to 40 hours of programming, provide start, stop, pause, rewind and fast-forward functionality, and contains two built-in tuners, picture-in-picture capability and an integrated program guide for future recording.
Greenfield estimates that Time Warner is paying between $150 and $200 per set-top and that those prices are declining. "The payback period is less that two years, assuming no change in churn," he wrote.
With DVRs, cable holds a number of advantages over TiVo, he wrote. There is no up-front fee, compared to TiVo's $249 to $349, and TiVo's monthly fee is higher. Moreover, TiVo requires a landline telephone connection, while cable does not.
Time Warner's DVRs also will integrate current PPV, VOD and subscription VOD offerings, and the dual-tuner capability allows consumers to watch one program while recording another.
But Greenfield also found room for improvement, saying that Time Warner's DVR lacked a program title search and had only four days of advanced programming, compared to TiVo's two weeks. There are other program-search, menu, recommendation-engine and home-networking issues, but some of those are being addressed in the next generation of boxes and software.
"While TiVo is still a superior product from a functionality standpoint, we believe the integration of [Time Warner's] DVR with the digital-cable service, along with the lack of an upfront fee, will make [Time Warner's] DVR very successful," Greenfield concluded.