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DVRs to become commonplace

Study says they'll be in half of U.S. TV homes by 2010

Joyzelle Davis, Rocky Mountain News

Published February 21, 2006 at midnight

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It won't happen overnight, but digital video recorders - which allow users to record programs, zip through ads and pause live TV - will someday be as common as remote controls in American living rooms, according to a new report.

By 2010, nearly half of all U.S. television-owning households will have a DVR, compared with about 14 percent - or 15.6 million - right now, according to a study by California-based consulting firm The Carmel Group.

EchoStar Communications' Dish Network, which Carmel estimates has installed some 3.4 million DVRs for its 12 million subscribers, was one of the first champions of the time-shifting technology. Dish rolled out its service in the late 1990s and gave free DVRs to subscribers in 2001. Cable companies, which initially positioned their own video-on- demand services as a response to DVRs, in recent years began offering the devices as well.

"DVRs are nearly unstoppable as the natural replacement to the VCR," the report said. "The sales crossover of VCR and DVR will take at least 10 years to transition but without question it will occur."

DVRs store dozens of hours of television programs on a computer hard drive rather than tapes, making it easier to record programs and fast-forward through commercials. Users also can record an entire season of a show with the touch of a button.

Douglas County-based EchoStar and larger rival DirecTV, which was also early to embrace DVRs, found that DVRs helped reduce the number of subscribers who dropped their service while boosting revenue from customers. The majority of DVR users, 7.8 million, were Dish or DirecTV subscribers at the end of last year. But that balance is set to shift this year as the cable operators continue to unroll the service, Carmel said.

Comcast, which has about 700,000 subscribers in Colorado, began offering DVRs here in late 2004. By the end of this year, the device will be available to all of Comcast's digital cable customers nationwide.

The survey comes as EchoStar prepares to head to trial next month in Texas federal court over rights to the technology. TiVo, one of the DVR pioneers that introduced the term "TiVo'd" into the lexicon, claims EchoStar is wrongfully using its "time warp" patent that allows viewers to record a program by replaying another.

If TiVo wins, it could then sue other DVR manufacturers - including Motorola, Scientific-Atlanta and DirecTV - to force them to license the technology.

The Carmel Group study goes on to project a roughly fivefold increase in overall revenue - totaling about $5.5 billion by 2010 - from DVR-related hardware software and service fees. Since 1999, the total for such revenue has been about $1.1 billion.

The top reason that people don't have DVRs is expense, followed by lack of interest in the technology, the survey said. But for most DVR users, the cost is nominal: The majority - 27 percent - of survey respondents said they received their DVR for free, and 70 percent said they spend $10 or less in monthly service fees.

The survey also predicts that DVR technology is moving toward mobile uses, like EchoStar's launch of the PocketDish late last year. The market for mobile DVRs will be about 1.5 million in 2010, up from a projected 200,000 at the end of this year, the survey said.

"Most consumers see mobile TV devices as 'cool and sexy' gadgets," according to the report. But "the magic price point for these new devices and connections, however, must come below $300 in order for the masses to embrace it."

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