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Some Adventures in DVR Time

The thing the Time Traveler held in his hand was a glittering metallic framework, scarcely larger than a small clock, and very delicately made.

— H.G. Wells, "The Time Machine," 1894

H.G. Wells wasn't all that far off. Turns out time machines do exist — at least the type that can shift television time. They're called digital video recorders, and the people who own them are a famously zealous bunch.

Behind the enthusiasm of the DVR-converted is the genuine foundation of a consumer revolution. Like the VCR in the early 1980s, the category of on-demand television is poised to explode. Already, we can see some of the reasons why.

The most striking finding about the "DVR Nation" is that the majority of DVR owners no longer watch "live" television. Instead, nearly every pixel appearing on the screen is the product of digital manipulation that originated inside a set-top DVR.

TV shows carefully arranged by network executives into the 8 p.m. Wednesday time slot are instead viewed on a lazy Sunday afternoon. The nightly news becomes the next morning's update. The majestic home run is admired again and again, at the mere whim of the viewer.

Findings like these tell us that on-demand television has struck a primal chord with consumers. But despite the enthusiasm, something's amiss. The truth is that the DVR is the wrong implementation of the right idea.

It's not the box

Listen closely to what the DVR owner has to say and you'll realize it's the result, not the device, consumers are embracing. People love their newfound control over TV. They can't resist the ability to pause a program in mid-stream. They adore being able to watch what they want, when they want. But there is no evidence to suggest that they love the box that sits atop the TV set.

And within that realization resides the big opportunity for cable television. With the world just awakening to the possibilities of on-demand television — and with DVRs in only a sliver of U.S. homes — there is a compelling and singular opportunity for the cable television industry to seize the moment, to literally define and own the on-demand television category and to take it to the masses.

Cable operators possess the power to provide an on-demand viewing environment that delivers the same key functionality as the DVR, but with superior value.

First, cable operators have the ability to embed technology within their current network infrastructure to deliver on-demand and time-shifted television without requiring consumers to buy another expensive gadget. The Motorola Inc., Pace Micro Technologies plc, Pioneer Inc., Scientific-Atlanta Inc. or Sony Corp. digital set-top box already in place within the cable home is fully capable of rendering the same on-demand functionality as an individual DVR — but without the $300 to $500 consumer price tag.

Second, operators can deliver more convenience by erasing the need for consumers to consciously program their DVRs. After all, despite all the advanced technology that resides within it, a DVR isn't a terribly intelligent machine. It needs to be told directly and precisely to capture particular programs or types of programs. It places the burden of selection and provisioning squarely on the user.

Cable's way easier

With a cable-delivered service, however, there's no need to pre-select anything. Plop down on the couch, and content is simply available for viewing on-demand, replete with the same VCR-style control DVR owners love.

Finally, cable operators can spare the country millions of moments of frustration associated with a growing population of complex digital media devices that, like it or not, are saddled with something the computer trade calls MTBF: mean time before failure. Having tasted a few nibbles of time-shifted TV, we want more. In fact, we want it all, and the truth is that there is no internal DVR hard drive out there that's big or sturdy enough to satisfy our demands.

A mightier system is needed. One that can take the raw tonnage of hundreds of television channels and programs and cobble them into a neatly available, on-demand menu that is simply there for the asking anytime you like, viewable over equipment that's already in your home.

It's called Network Digital Video Recording (nDVR) – an automated and systematic recording of television content in accordance with on-demand rights arrangements.

Cable television is uniquely poised to realize the nDVR vision. By harnessing the broadband networks they have spent $70 billion to build over the last six years, U.S. cable operators alone are able to satisfy the mounting appetite for time-shifting television. The fundamental encoding, delivery and set-top equipment is already in place. And there is an immutable efficiency by developing a large, reliable, scalable mechanism to render on-demand TV, rather than outfitting millions of homes, with DVRs that are doomed to an early obsolescence.

Other advantages

Technology isn't the only enabling factor. Today there are dozens of cable networks that have cleared substantial portions of their 24-hour schedules for licensed, ready-to-go on-demand access. More programming will become available over time.

As for economic incentives, there are plenty to go around. The most powerful economic argument for nDVR is its ability to fend off competition from satellite television and reduce digital tier churn.

One MSO we know has grown fond of calling on-demand television "our digital set-top box retention tool." As the investment banking firm Needham & Co. put it in a recent report on video-on-demand, "Forget about people actually paying to order movies or view content — it appears the VOD business model is more than justified based exclusively on reducing churn to satellite."

Beyond the retention aspects, nDVR promises incremental revenue streams of its own. Operators may choose to introduce tiered nDVR service packages, ranging from no-charge access for selected programming to subscription fees. Incremental service fees will come as more programming is made available and the category is better defined for consumers.

To be sure, there are serious engineering and storage cost hurdles to overcome in order to realize the full potential of nDVR. A two-week "look-back" window on 150 on-demand channels, for instance, requires more than 50,000 hours of storage. Wide-scale deployments of such magnitude using today's approaches would be cost prohibitive. However, there are new and interesting ways to manage things.

An intelligent system can make use of very inexpensive storage alternatives by caching content at the most appropriate and cost-effective position among various storage levels within a hierarchy. And by insisting on server technology that complies with open standards, operators can take advantage of ongoing innovations that add flexibility and reduce costs.

On-demand television today is barely in its first inning. Cable operators have an historic opportunity to define and seize the market. The DVR and its zealous adherents have affirmed beyond question that time-shifted and consumer controlled viewing of TV satisfies some heretofore-unfulfilled desire.

Now, it's time to feed that budding consumer interest with the real thing. nDVR is where television should be taken. The good news is that, like the Time Traveler dreamed up by H.G. Wells in 1894, we now have the technology to get there.