Court Hands Cablevision Competitive Edge

Last week's federal appellate court's decision reversed a lower court's ruling that Cablevision infringed on exclusive rights of several media companies and vacated the judgment against Cablevision.

"In sum, because we find, on undisputed facts, that Cablevision's proposed RS-DVR system would not directly infringe plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works, we grant summary judgment in favor of Cablevision with respect to both rights," the court said in its ruling.

Since the court's decision, Cablevision's stock has jumped 20% to $31.25, although most of that move can be attributed to the company's announcement that it will explore options to enhance value for its shareholders, including a possible spinoff of its businesses or a dividend payment.

Cablevision originally unveiled its RS-DVR trial in March 2006, trumpeting the cost savings involved in ending the expensive purchasing and deployment of convention DVR set-top boxes.

Several media companies, including News Corp. and Disney, quickly sued Cablevision, and a U.S. District Court found that RS-DVRs violate the Copyright Act by infringing on rights of reproduction and public performance.

"We appreciate the Court's perspective that, from the standpoint of existing copyright law, remote-storage DVRs are the same as the traditional DVRs that are in use today," Cablevision said in a statement.

"DVRs have been one of the largest single drivers of capital spending in recent years, accounting for as much as 10% of capital spending for the major [cable operators]," writes Sanford Bernstein's Moffett. "For cable, it potentially means much lower capital spending going forward."

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