Makers of remote storage DVR systems have won a major legal battle against movie studios and TV networks. This morning the Supreme Court declined to hear the case of Cable News Networks v. CSC Holdings Inc. The remote storage DVR allows viewers to store shows for later viewing without having to use a box. Instead, the shows are stored on remote data servers. Analysts believe that this will almost double the percentage of consumers who embrace remote DVR to 50%. The remote DVR system allows consumers to skip commercials.

Plaintiff, supported by movie studios, TV networks, the Screen Actors Guild, and major sports leagues, argued that the remote system violates copyright laws. Plaintiff argued that the system is analogous to on-demand programming, in which the studios and networks receive a licensing fee.

The Second Circuit Court of Appeals ruled that the customers, and not Cablevision, would be making the copies. Thus, no violation of copyright law occurs.

Implications For Entertainment Industries And Cable Companies

This decision has important implications for movie studios, TV networks, and sports leagues. First, remote storage DVR is cloud computing for TV. This by itself is nothing new. Internet TV is also cloud computing for TV. The difference is that remote storage DVR gives viewers more control to skip advertisements without the consent of the original copyright owner. While you can watch programs commercial free on Hulu, the studios and networks have negotiated license agreements with Hulu. The license fee replaces a portion or all of the advertising fees that the studios and networks would receive if the program ran on regular TV.

Second, if consumer adoption of remote storage DVRs reaches 50% as predicted, the studios and networks will suffer major revenue losses. Studios and networks may decide not to distribute popular programs to cable operators that offer remote DVR systems. They may decide to distribute high revenue, popular programs only where they are more likely to receive a licensing fee. If copyright owners lower the quality of programs offered to cable operators, companies like Cablevision and Comcast will need to rethink how they implement remote DVR systems. Otherwise, their customers may switch to other avenues to watch popular programs.

Douglas Y. Park
Twitter: @DougYPark