Cablevision to Phase Out In-Home DVRs for Remote Storage

Cablevision is planning by year-end to stop buying DVRs to lease to its customers and phase out the in-home boxes in favor of its remote-storage system, Chief Operating Officer Thomas Rutledge told investors Thursday.

The new system, the subject of a legal battle with programmers, will reduce capital spending long term after Cablevision completes the core network DVR infrastructure, he said. “The basic notion behind the network DVR is that it’s fundamentally a better return on investment than physical DVRs,” Rutledge said. Cablevision isn’t concerned about the remote system’s capacity demands, because the company has plenty of bandwidth available on its network and adding storage centrally is far less expensive than buying a DVR for each subscriber, Rutledge said.

With an FCC waiver to encrypt its basic tier programming in hand, Cablevision is turning off analog service in New York City this week, Rutledge said. Afterward, the company’s digital service will take up less than half of its total network capacity, he said. “As we turn off analog signals throughout our footprint in the next year or two, we will have more capacity unused than we have used,” Rutledge said. “And that capacity will be available to put streaming video on it, which is the nature of RS-DVR."

The company will also begin testing a new channel that lets customers turn their TV sets into monitors for their home computers. That will allow them to display photos, videos and anything else online on their sets, Rutledge said. “We think it’s a breakthrough service for us,” he said. “We think that all sorts of interesting applications and utilizations of that will occur."

The test caught the attention of several Wall Street analysts on the call. They questioned Rutledge about how and when it would be available, on what devices and how it would change Cablevision’s relationship with programmers. Cablevision plans to make the channel available across its service territory and will work with all the set-top boxes it leases, he said. It also will help show the value of a cable subscription as additional programming goes online, he said.

"I don’t think it’s smart to fight the Internet in the TV space,” Rutledge said. Meanwhile, programmers have to weigh the benefits of making shows available online against the risks, he said. “One of the perils is if you put the product out there, and it’s free, it’s going to end up on TV screens,” he said. “As a distributor, we think we can manage our way through that issue and create products that enhance the value of the cable subscription."

Cablevision lost 2,800 basic video subscribers during the quarter, fewer than analysts had expected. It added 45,700 broadband customers and 51,400 phone customers, it said. Sales gained 5 percent from a year earlier to $2.14 billion. A $78.6 million profit was a turnaround from a net loss of $332 million produced by restructuring expenses, interest expenses and a loss on interest-rate swap contracts.