AMSTERDAM -- The pay-TV industry continues to struggle to shed its legacy, outdated technologies and strategies while at the same time reacting to a wide range of competitive challenges like Google Fiber and Apple TV -- and nowhere is the industry's challenges more evident than in the race toward cloud DVRs.
Of course, the notion of a cloud DVR -- one that stores TV show recordings on the Internet rather than on a device -- is not new, nor is it all that controversial. For example, Cablevision has worked for years to improve its cloud DRV service, while Comcast (NASDAQ: CMCSA) recently announced progress in adding the technology to its X1 footprint. But, despite the fact that cloud DVR technology is relatively straightforward, cloud DVRs are not widely offered by pay-TV operators in the United States. Indeed, TiVo two years ago announced cloud DVR capabilities in the set-top product it sells to the nation's smaller cable operators -- but the company still hasn't deployed the offering commercially. Jeff Klugman, EVP and general manager of products and revenue, said TiVo is testing its cloud DVR services with a large European operator, but he declined to say when the company would bring the product to market.
The problems dogging the rollout of cloud DVRs highlight the extensive challenges that are unique to the pay-TV industry.
First, and perhaps most importantly, operators must obtain permission from content providers like Disney or Discovery Communications to offer cloud recording. While some may agree to allow their content to be recorded and stored, some may not. Thus, operators will likely be left with some content that users can record in the cloud and some that they can't -- which creates a confusing situation for users and a logistical nightmare for operators. Here at the IBC show, Cisco is showing off its new cloud DVR management service for operators that offers controls down to the individual TV show as to whether the service will work or not. That's a lot of fussing that an operator may have to go through to offer this service.
Further, for those operators that do obtain permission for cloud recording, licensing rules still may require an operator to retain an individual copy of a recorded TV show for each of its customers. So if 100,000 customers record the latest Game of Thrones episode, that means an operator will have to store 100,000 separate but identical copies of the show -- the storage costs alone in such situations could quickly become burdensome for cable operators hoping to use cloud DVRs to eke out some more profits from a shrinking pay-TV market.
Beyond the licensing issues, cloud DVR technology also requires some significant footwork. Cloud DVRs require upgrades to set-top box interfaces and networks that are able to handle the loading, storing and transmission of the content. And in order to provide advanced cloud DVR features, like the ability to view recorded shows on other devices, operators must be able to securely transmit their content onto platforms including Android and iOS -- tasks that generally require sizeable teams of app engineers and designers.
And that doesn't even take into account the advertising situation in cloud DVRs. Such recordings might carry the ads originally broadcast with the show, or operators might swap out those ads with a different load of ads specific to delayed viewing. Operators might event create personalized ads specific to that user.
Finally, will operators be able to offer what is arguably one of the best features of a DVR -- the ability to skip commercials? Again, that depends on the operator's technical prowess and content providers' licensing provisions.
What's noteworthy about cloud DVRs is that they offer a range of advantages to operators. After all, with a cloud-based service, operators don't have to sell set-top boxes with large amounts of expensive storage, and users don't have to worry about maxing out their storage options. Operators may also be able to cash in on more lucrative and targeted advertising sales, nevermind the revenues they might obtain through selling cloud DVR access. And cloud DVR services that include multiscreen and out-of-home viewing might help convince users to remain in the pay-TV ecosystem, rather than moving to OTT offerings.
Cloud DVRs are not a new topic here at the IBC show, but they are conspicuous in their absence. In an industry facing new challenges such as Verizon's go90 service and Apple's (NASDAQ: AAPL) new TV gadget, the fact that operators still haven't been able to switch on cloud-based recording bodes ill for an increasingly competitive space. --Mike | @mikeddano