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Fair Use

Do you get frustrated when you miss your favorite show because the digital video recorder maxes out midway through your vacation? Your friendly neighborhood cable company now has permission to help.

The U.S. Supreme Court this week cleared the way for Cablevision, a major provider in the New York metropolitan area, to offer its customers remote-storage video recording. Rather than storing programming on a hard drive in the consumer’s set-top box, the system would save the content on servers at the cable company’s facilities.

A coalition of movie studios, actors’ unions and major sports leagues sued Cablevision to stop the service. They argued that remote storage recording is basically a video-on-demand feature for which the content owners should be compensated. A lower court agreed with them, but the Second U.S. Circuit Court of Appeals reversed that initial ruling. Because consumers must decide before the original broadcast which programs will be recorded, the appeals court ruled, the service is more akin to traditional home-based video recording.

Content owners, you may recall, once went to court to block home-based recording also. That led to the Supreme Court’s famous Betamax decision, which held in 1984 that a consumer’s use of recording equipment to “time-shift” a broadcast program represents fair use under copyright law, and therefore is not a copyright infringement. This is true, the court held, even if the practice of recording allows consumers to fast-forward through the original broadcaster’s commercials.

By refusing to review the appeals court’s decision in the Cablevision case, the Supreme Court is allowing the Betamax logic to apply even when the recording equipment is housed someplace other than at the consumer’s home. This seems reasonable.

As always, it will take time to sort out the real winners and losers. In the original Betamax case, movie studios said they were afraid commercial-skipping home recorders would kill their market for television rebroadcast of theatrical films, while television producers were worried about rerun syndication. But the advent of home video opened an enormous new market that benefited both groups (think of all the Seinfeld and Friends boxed sets that have been sold), while the television syndication business continued stronger than ever.

At the moment, however, Cablevision and other cable companies look like the winners. Remote-storage DVR could free them from having to purchase, upgrade and repair millions of set-top hard drives in customers’ homes. It also might permit the cable companies to substitute their own commercials in place of broadcast spots, or to display some other type of advertising message while a consumer fast-forwards the broadcast commercials. The TiVo DVR service already is experimenting with such advertising.

Satellite broadcasters lack the capacity to offer remote DVR and might find themselves at a competitive disadvantage. Producers and broadcasters will worry about threats to their subscription and advertising sales, but I suspect this will be addressed over time as they negotiate new contracts with the cable companies.

What about consumers? Certainly, expanded recording capability will be of some benefit. But the bigger issue in the battle between content producers, such as studios and sports leagues, and distributors, such as cable and satellite companies, is over access to our television and computer screens. To get the cable company to record your shows, you have to be a cable subscriber — and the service is not cheap. Why use a cable company at all when, if your screen is connected to the internet, you can view (with advertising), buy, or rent your content directly from the producer, from a broadcaster, or through another intermediary such as Apple’s iTunes store?

Access to your screen is where the real war is being fought. Cablevision’s victory this week is interesting, but it amounts to little more than a skirmish.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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