Free DVRs in 2005!

Washington, D.C. (December 20, 2004) -- TiVo last week was the subject of buzz -- as usual -- when it offered free Digital Video Recorders to Comcast subscribers in the San Francisco area. The promotional stunt was designed to highlight the cable operator's failure to install its non-TiVo DVRs on the date it had promised. (Comcast blamed several reasons for the delay, including that old favorite, miscommunication.)

The announcement that TiVo was providing the free DVRs sparked a slew of stories in the media. After all, it's not every day that a company offers free DVRs. However, that's because this is 2004. In 2005, the free DVR will cease to be a news story.

Yes, I predict that in 2005 that both satellite and cable operators will offer free Digital Video Recording services as part of their overall programming packages. The free service will likely be launched during the fourth quarter of the year in anticipation of the holidays.

DIRECTV, which is now owned by Rupert Murdoch's News Corp., will likely kick off the free DVR campaign. The satcaster, which now sells a TiVo-DIRECTV set-top, is expected to add a no-frills DVR service called NDS, which is also owned by News Corp. This will permit DIRECTV to offer their customers two DVR options:

1. TiVo (The full-service DVR, which will require a monthly subscription fee.)
2. NDS (The basic DVR, which will not require a monthly fee. However, DIRECTV will likely require NDS customers to purchase a one-year programming package to get the free service -- and they will still need to buy the DIRECTV-NDS receiver.)

Both services will offer basic DVR tasks, such as pause, fast-forward, rewind and, of course, record. But the subscription-based TiVo service will have more bells and whistles, such as searching upcoming shows by actor and genre.

DIRECTV will try to use the free DVR option to slow down the growth of cable's DVRs -- and that of rival satellite TV service, EchoStar's Dish Network. Consequently, in short order, both cable and EchoStar will likely offer their own version of a free DVR service.

The TV providers will incur significant costs to subsidize free DVRs. However, as DVRs become more popular among consumers, the costs will be seen as a
necessary evil. The free DVR will be an important weapon in the war between cable
and satellite.

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Phillip Swann is president and publisher of TVPredictions.com. He has been quoted in dozens of publications and broadcast outlets, including CNN, Fox News, Inside Edition, The Chicago Tribune, The Associated Press and The Hollywood Reporter. He can be reached at swann@tvpredictions.com or at 703-505-3064.

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