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ReplayTV Hits 'Stop' on Advertising Bypass

June 11, 2003|Jon Healey | Times Staff Writer

The maker of ReplayTV is adding a new feature to its video recorders: commercials.

Bowing to pressure from Hollywood studios and television networks, Digital Networks North America is eliminating the recorders' abilities to skip commercials automatically and send shows through the Internet, two of ReplayTV's most celebrated and controversial features.

Executives at DNNA, the D&M Holdings Inc. subsidiary that bought the Replay line from Sonicblue Inc., said they made the concessions to cooperate with the entertainment companies and be "a positive force in the industry."

The major studios and TV networks sued Sonicblue in federal court in Los Angeles two years ago, arguing that the ReplayTV 4000 models abetted piracy and undermined programmers' ability to make money. Studio executives said the changes, which will be introduced in new ReplayTV models later this year, were a step in the right direction.

But consumer electronics and technology advocates said they were troubled by Hollywood's ability to push DNNA to remove consumer-friendly features that had never been declared illegal.

"This is the great fear," said attorney Fred von Lohmann of the Electronic Frontier Foundation, a civil liberties group that sued the studios and networks on behalf of five ReplayTV owners. "Do you really want copyright owners to be calling the shots on what kind of features technology companies can offer consumers?"

The dispute is significant for Hollywood, device manufacturers and consumers because ReplayTV's personal video recorders, or PVRs, represent a new breed of machines that could transform the way entertainment is delivered to and experienced in the home. Though PVRs so far have reached fewer than 3% of U.S. homes, they promise to let consumers receive and store huge libraries of music and videos, potentially reducing demand for movie rentals, pay-per-view programs and DVDs.

Despite the concessions, DNNA may not have done enough to satisfy all of the studios and networks, which sued Sonicblue for copyright infringement and unfair business practices in the fall of 2001. That suit was put on indefinite hold when Sonicblue filed for bankruptcy protection this year.

Santa Clara, Calif.-based DNNA tried in vain to negotiate a legal cease-fire with Hollywood, but some of the entertainment companies wanted DNNA to eliminate more features. Sources familiar with the discussions said the main targets were the recorders' ability to fast-forward through shows in 30-second increments -- the length of the typical TV commercial -- and to store programs for an unlimited amount of time.

The discussions broke down after the studios offered DNNA only a promise not to sue for 30 days. On Monday, DNNA sent the studios a letter outlining the concessions it was willing to make now, leaving open the possibility for more talks in the future -- or a new lawsuit against DNNA.

Jim Hollingsworth, president of ReplayTV Products, declined to comment on the discussions. He said company executives decided "basically on our own" to drop the two features, "based on how we thought the product was perceived in the market and what we thought were the right business decisions."

Among PVR developers, Santa Clara, Calif.-based Sonicblue was the most aggressive when it came to offering new features that tested the limits of copyright law. Rival TiVo Inc. of San Jose has taken a more conservative approach, offering fewer commercial-skipping capabilities and restricting the transmission of shows to TiVo boxes in the same home.

Entertainment-industry executives insist they're not trying to stop innovative products. They say they're only trying to protect their programs and preserve their ability to explore new business models made possible by digital technology.

"This lawsuit was never about shutting down PVRs," said attorney Robert M. Schwartz, who represents AOL Time Warner Inc. and other entertainment companies on this issue. "It was about establishing some ground rules that were fair to consumers, fair to electronics manufacturers and fair to the creators of content."

Legal experts say the Internet-transmitting feature would have been the most difficult for DNNA to defend because it seemed to violate the entertainment companies' distribution rights.

The entertainment companies maintain that ReplayTV's commercial-skipping and archiving features could harm them financially, too. But they don't have strong copyright infringement claims because PVRs only make it easier for consumers to do things they can already do, said attorney Doug Wood, a copyright expert and general counsel to the Assn. of National Advertisers.

"Are we going to start telling consumers that they have to turn in any videocassette that's over a year old?" Wood said. "Just because you have an economic harm doesn't mean you have a legal remedy."

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