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How Big Media Miscalculated DVRs Impact

According to Kagan Research, the digital video recorder is now something of a runaway train, after big media fumbled opportunities to curb the more corrosive aspects of the popular hard-disc video storage device.

Big media's worries: the commercial skipping capability of DVRs threatens to drain ad revenue and unauthorized peer-to-peer sharing of recorded video threatens video-on-demand. Already in the upfront ad selling market now under way, the broadcast TV networks were unable negotiate inclusion of delayed DVR viewing as part of their audience delivery.

A few years ago, cable operators and the networks could have collaborated to create networked DVRs that curb or eliminate ad skipping and unauthorized duplication of recorded programs. But they didn't move quickly enough. At end-2005, Kagan Research counted 1.9 million standalone DVRs in use � with TiVo the dominant brand � that are beyond the direct reach of platform operators. Cable and satellite platforms equipped another 9.4 million of their subscribers with their private label set-top DVRs.

Thus, there were 11.3 million DVRs in U.S. households, "It's the genie that can't be put back in the bottle," says Kagan senior analyst Ian Olgeirson. "The equipment in use today puts a lot of control in consumers' hands." Only recently have big TV channel platforms begun serious efforts to offer alternative approaches that eliminate worrisome features. Clearly, it's a 'lesson learned' in the perils of operating a business within a state of total denial about otherwise apparent changes.

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