High-Tech VCRs Gain Attention

By KALPANA SRINIVASAN Associated Press Writer

WASHINGTON (AP) - Loren Finkelstein, a self-described "big TV watcher," was never home to enjoy his favorite shows. Instead, he relied on a stack of videotapes to capture them.

Then he discovered a new breed of VCR - a hard-drive system called a personal video recorder - that could store 14 hours of programming, select shows based on themes of his choice and play them back with a high-quality picture.

"It's phenomenal how good it is," said Finkelstein, a network administrator for a financial company in New York City. He rarely caught his shows as they were aired before. Now, he says: "I never watch live television."

Cutting-edge couch potatoes are taking advantage of these new services - like TiVo and ReplayTV. Although the services can cost about $700, they make it possible for consumers to watch what they want, when they want. Analysts predict that 14 million people will be using personal video recorders by 2004.

But the products also have raised a red flag among top broadcasting and cable networks, who want the companies behind the new systems to obtain licensing agreements to use their programming.

The recorders work like this: Consumers buy receiver boxes to use with their existing TVs. Instead of relying on videotapes, these devices contain a hard drive, much like in a personal computer. Programs are saved on the hard drive for later viewing.

The equipment is used with an accompanying service for more specialized features. Viewers can create their own customized channel filled with favorite shows, by entering information about their personal tastes into the recorders. TiVo has a "thumbs up/thumbs down" button on its remote control, so consumers can indicate their preferences and the system can suggest shows.

At night, the device dials up to servers run by the companies to download programming guides so it can automatically record the shows.

Finkelstein, for example, enters the key words "Star Trek" into his ReplayTV to get all versions of the show playing on any channel.

A ReplayTV model that can store 20 hours of programming costs $699 with the service included. TiVo's 14-hour receiver costs $499.99 with a monthly fee of $9.95 for the programming service or a one-time fee of $199.99.

Analysts say the new recorders could drastically change the way people use their televisions.

"Television viewing habits are based on laziness," said Josh Bernoff of the Cambridge, Mass.-based Forrester Research, which forecasts that 14 million households will use such systems in four years. With the exception of a few select shows, "people tune in because that happens to be the best thing on that particular moment."

But with the recording devices, people can assemble hours of customized programs to watch. It's quicker and easier than a VCR, Bernoff said, and viewers can watch live TV on a delay long enough to cruise past advertisements. As a result, he predicts consumers will watch 8 percent fewer commercials in the next five years and 50 percent fewer in 10 years.

The Yankee Research Group of Boston anticipates a growing trend toward incorporating personal recorders into direct satellite broadcast receivers and cable systems. Yankee analysts predict sales of separate personal video recorders will reach 500,000 units this year, with another 850,000 units being sold as part of satellite TV systems.

The very characteristics that have endeared the products to consumers are causing broadcasters to take notice.

A group of cable and broadcast networks, including CBS Corp (NYSE:CBS - news)., Discovery Communications Inc., The Walt Disney Company, News Corp. and Time Warner Inc (NYSE:TWX - news)., have joined together to urge companies who offer personal video recorders to enter into copyright licensing agreements with them.

Bert Carp, a lawyer representing the coalition, argues that personal video recorder companies offer a service, distinct from the function performed by a regular VCR, because they assemble customized channels for viewers.

But he stressed that the cable and broadcast networks just want to protect their content with licensing agreements and aren't opposed to personal recorders per se. As evidence of that, several media outlets already have invested in such companies.

NBC has agreements with both TiVo and ReplayTV. The network's chief, Bob Wright, admits he even uses a TiVo unit at home.

"I don't think we have anything to be too afraid of," Wright said at the National Press Club earlier this week. But he did wonder aloud about people who store hours and hours of shows: "The problem is when are you going to watch them?"