MSOs face a thicket of sharp sticks as they debate whether to deploy digital video recorders in their set-top boxes

Byline: W. F. GLOEDE

Comcast CEO Brian Roberts certainly stirred the proverbial pot at BroadbandPlus when he announced that the nation’s largest MSO was going to focus on VOD instead of DVR deployment in its set-tops. This did not come as good news to the set-top makers, who were in the exhibit hall at BroadbandPlus showing their brand new, full-featured boxes, some including DVRs. It certainly was not taken well by the digital dilettante set, which avers that information (and entertainment, apparently), should be “free.” (In response, I offer the following, equally ridiculous notion: so should orange juice; it’s better for you.)

Roberts wins the case on the merits, for a number of reasons. First would be copyright protection. As evidenced last week by Viacom’s announcement that CBS would drop HDTV if “broadcast flag” content protection is not implemented next year, Hollywood is not going to let what happened to the record business happen to the film industry. Those who argue that creative content should be available to consumers to copy and distribute at will should be dismissed out of hand as their argument is manifestly absurd. The FCC, despite its generally laudable penchant for deregulation, should simply step in and mandate that copy protection be included in all software and hardware in the marketplace. Case closed, issue resolved.

A more thorny issue is the ability of the DVR to skip advertising. Several evenings last week, on my trip home from the office, I heard an ad for ReplayTV on the radio. It was all about skipping TV ads. An ad for a device that skips ads. Ah, the incongruity of it all. Unfortunately, the technology is out there, although fortunately, consumers have not rushed to embrace it. Maybe Replay and its primary competitor TiVo will run out of money and be forced to liquidate, but that’s probably wishful thinking. It strikes me as imprudent, however, for the cable industry to assist in the deployment of technology that at the least would upend the economic base of television and, at worst, threaten the entire U.S. economy. The 30-second TV spot was the greatest innovation in sales and marketing since the invention of the salesman. Even with the fragmentation of the TV audience and ever increasing commercial clutter, there is no other form of advertising or combination thereof that is as efficient and effective at convincing consumers to buy. Sure, print works, but is doesn’t reach half of the population. Radio works, but it is even more cluttered and possesses only one of the big three elements of TV: sight, sound and motion. Outdoor is most effective when it works in tandem with TV or displays a big arrow pointing at a store. Direct marketing is, and always will be, low rent and disturbingly intrusive. The Internet is primarily a direct marketing/direct sales vehicle; banners, interstitials and pop-ups are very good at angering the consumer, which is not a very good way to sell something.

It used to be said that advertising drives the entire economy. This is probably still true, but since it is a cost of doing business, and the people who run businesses these days know little about anything other than cutting costs, it has become something of a dirty little secret. Heck, even the ad agencies are run by bean counters. It remains a fact, however, that ad spending is a leading indicator of recession and a lagging indicator of recovery. And when ad spending is strong, so too is the economy. Which is the cause and which the effect? Do we really want to find out?

There is a third reason to keep the content on the server at the head-end: the boxes themselves. It seems to me that it would behoove both the cable operator and the set-top maker to keep the boxes in the home. With plug-and-play a near certainty, there would be nothing to keep consumers from buying Replays or TiVos and ditching the cable box, and with it advanced cable services. That would deprive the set-top makers of sales and operators of VOD customers and the annuity provided by set-top lease revenue.

But wait. All is not lost. The VOD model can peacefully coexist with the DVR in the set-top, as long as the set-top does not incorporate any sort of direct digital video output that could be rigged to feed a computer or DVD burner and does not include an ad-skip button. Beyond that, all content should be time limited and perhaps fitted with software that would alert the FBI should it be copied.

VOD content should remain at the head-end; the DVR should not be able to access it as there would be no need to do so. And down the road, as MSOs experiment with price points on VOD content, perhaps a two-tiered pricing system would be in order – a higher price for ad-free content and a lower price for those who will take the ads. Maybe, just maybe, viewers might appreciate the price break and watch them.

COPYRIGHT 2002 Access Intelligence, LLC

COPYRIGHT 2008 Gale, Cengage Learning

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