Behind the scenes, cable operators are experimenting with a new way to build giant digital video recorders (DVRs) at their headends instead of delivering expensive new settop boxes to their subscribers. The move is the latest attempt by the cable industry to turn plain old television into a highly personalized on-demand video service. But converting those experiments into commercial reality involves overcoming not only technical hurdles but content rights issues.
Both video-on-demand (VOD) and DVRs are part of a movement that is making the idea of a TV schedule a quaint bit of history. Now cable operators are headed toward giving subscribers myriad ways to create a customized television experience. It's Me TV.
“Consumers only care about accessing the content where they are whenever they want,” says Dave Davies, VP, strategy and product marketing for subscriber networks, Scientific-Atlanta (S-A).
As cable operators are discovering, there are many ways to drive revenue while helping customers customize their viewing options.
“Both VOD and the DVR are about choice, control and convenience,” says Page Thompson, VP and general manager, Comcast OnDemand. “VOD is more about choice and convenience while the DVR is about time management.”
Now some cable operators, Cablevision among them, are looking into building the equivalent of a massive DVR at the headend, using VOD servers. That model is cheaper for the operator because set-top boxes with DVR capability are two to three times more expensive than those without it.
Lots of Options
“We think we'll have a technical trial this year,” Cablevision COO Tom Rutledge said on a conference call to investors. “We think it's very promising as a way of providing DVRs and making them 'backward-compatible' with existing converters.”
Under the Cablevision model, subscribers would have personal space on a secure server rather than relying on DVR hard drives in set- top boxes. Cablevision would then charge customers a monthly access fee for the storage space.
That method lets the operator tap into DVR-related revenues without the large capital expense for set-top boxes.
“There are a lot of different deployment scenarios [for network DVRs], from simple to sophisticated,” says Joseph Ambeault, director of IP video systems for SeaChange International.
The simplest form of network DVR is already being deployed by a number of operators: time-shifting. Comcast, for example, has agreements with three NBC stations and six CBS stations in markets it serves—including Baltimore, San Francisco, Philadelphia and Chicago—to give viewers access to local newscasts.
“News on-demand hasn't been a killer application,” says Thompson, “but it's been popular.”
The most complicated aspect of that level of service is establishing how long a given newscast is available over the VOD platform. Besides the Comcast deals, SeaChange has deployed the service on about 70 cable systems nationwide. Says SeaChange's Ambeault, “That functionality is now a [standard] component of the new cable VOD systems we help launch.”
The time-shifting approach offers several advantages: It doesn't involve long-term storage, has a high recycling rate and can be done with a relatively small amount of storage. Five hours of available server storage would be enough to rotate in content from up to 18 networks.
Legal and Tech Hurdles
A video server can store one hour of video for every 2 gigabytes (GB) of storage (although the amount of content that can be stored will increase with continued advances in compression technology).
“We have a clustered-server architecture that does both the recording and streaming out at the same time,” says Mark Crandon, director of product management for VOD-technology provider Kasenna. “You can record 10 channels in and then stream out x number of streams, depending on the size of the system.”
The Kasenna system involves two layers of servers: one that holds a master copy and then cache servers located between that one and the viewer. When the viewer requests content, a copy is sent to the cache server so the system can meet streaming demands.
The DVR option that Cablevision is investigating requires a subscriber to interface with the on-screen channel guide and send commands to the VOD server at the cable headend.
The most challenging option is to have the VOD server record every program on the cable system for a given period—say, a week—and then make it available for playback, also for a week or so.
That's not easy. “Recording one or two channels isn't too difficult, but recording 100 channels simultaneously and storing them presents different problems in scaling and making sure content can be streamed out to viewers,” says Crandon. “But we've built the backend infrastructure that can scale to meet this need.” Recording a week's worth of content would require about 40 terabytes (TB) of storage.
But the real problem with these last two approaches involves business issues, not technical ones.
Traditional DVR set-top boxes, like VCRs, are for recording programs for personal use. But moving that recording technology out of the home and into the headend creates headaches. “When content is recorded that way,” says Ambeault, “it's basically a public showing.”
But a Cablevision spokesman says the company is “confident” its VOD personal storage plan doesn't violate copyright laws.
“Extremely Futuristic”
Other network-DVR models mean that retransmission rights must be negotiated with all the content owners, a daunting task given the vast number of programs and movies appearing on a cable system during a week.
“Recording every channel is extremely futuristic,” says Ambeault. “The networks themselves don't have the authority to tell the cable operator they can put all their content on a network DVR, and there will need to be a big, long change in content rules. Network DVR will occur overseas first.”
Crandon says Kasenna has some overseas deployments but those never involve recording internationally distributed content.
Artie Bulgrin, ESPN senior VP, research and sales development, says that, although network DVR sounds good conceptually, he has reservations about the ability of the technology to work well. “Consumers can't have a bad experience like they did in the early days of interactive television, which died because it didn't work well.”
New VOD and DVR distribution methods aside, Comcast's Thompson says the key, particularly with VOD, is programming. In March, Comcast, which has VOD available to 87% of its 22 million subscribers, logged 103 million VOD views, and subscribers watched 45 million hours of VOD content. “The depth of the VOD library is important,” he says. Comcast Philadelphia, for example, has 5,500 free programs, and more than 90% of them were watched at least once during the month.
“VOD is a better way to watch things like music videos and fitness programs,” says Thompson. “It's complementary to the DVR viewing experience.”
It also drives the buy rate of pay content. Comcast has found that adding free VOD drives the buy rate of pay content up 63%, according to Thompson. “The Internet never would have been successful if, the first time you used it, you had to pay,” he says. “People use the free content, get used to VOD, and then they go back and order movies.”
Cable operators and set-top–box manufacturers say DVR-adoption rates continue to climb. Time Warner Cable has deployed DVRs in 12% of its digital homes. Motorola Director of Strategic Marketing Bernadette Vernon says her company has shipped 1.5 million DVRs and these days is shipping almost as many DVR-capable boxes as regular set-top boxes. Now the company is looking to next-generation services, such as home networking, which allows DVR-recorded content to be viewed on TVs throughout the home, and the ability to program the DVR via cellphone.
“Some theorized that DVR and VOD would cannibalize each other,” says Vernon. “But we're finding the opposite. People are used to having things on demand, whether it's free or pay content.”
Scientific-Atlanta, DVR's other major supplier, reports total DVR shipments of 2.3 million, with 496,000 shipped last quarter, according to its strategy guru, Davies. He says that the popularity extends across demographic and income levels and that some markets have even reached DVR penetration rates of 30% among digital subscribers.
Like Motorola, S-A sees multi-room DVRs as the next trend. Time Warner Cable has deployed the service in Minneapolis, and early reaction is positive. “Consumers can pull the content up on as many as three TV sets on set-top boxes that are already installed,” Davies says. “It's a real straightforward solution.”
