TABLE OF CONTENTS
II. A Useful Model: Emerging Solutions to the Crisis
in the Music Industry
A. Napster and Grokster Restricted the Promotion of
B. The Subsequent Rise of Innovative Music Distribution
III. Establishing a Legal Framework To Encourage
Solutions to the Advertisement Avoidance Crisis
A. The Legality of DVRs Remains Unclear
B. Distinguishing Sony
1. DVRs Cause Greater Harm to the Market
2. The Post-Hoc Justification for Sony Is Inapplicable
3. DVR Technology Allows for Crafting a Remedy that
Separates Infringing and Non-Infringing Uses
C. Drawing the Appropriate Legal Line for DVRs
D. The Proposed Legal Standard for DVRs Should Result
in Innovative Solutions Beneficial to Consumers and
The CEO of TiVo, the company that invented the digital video recorder ("DVR"), recently warned a group of advertisers that "what happened to the music business" is bound to happen to the television industry due to rising "television commercial avoidance and the growing epidemic of fast forwarding thru [sic] ads." (1) Recent data on DVR adoption and usage supports this prediction. DVR users record 30% of their total television viewing to watch at a later time, a practice known as time-shifting. (2) When viewing these recorded programs, users watch approximately 40% of the commercials, presumably fast-forwarding through the remaining 60%. (3) Additionally, DVR penetration is rising rapidly, growing from under 5% of households in January 2006 to over 30% by March 2009. (4) The result is declining live television ratings and advertising revenue. (5) Due to this increased DVR usage, the television industry faces an "advertisement avoidance crisis" that threatens to destroy the decades-old revenue model of advertiser-supported television.
Moving away from an advertiser-supported television revenue model is not necessarily an unwelcome development. A different revenue model might lead television networks to produce a broader range of programming, since the current model places constraints on the type of content broadcast. For example, advertisers may not be willing to support controversial content, effectively stifling its production. Similarly, because television advertisers seek to reach a large number of people in the most desirable demographics, programming that appeals only to a niche audience receives little support from advertisers. Additionally, the time viewers spend watching television commercials is largely wasted, as they typically receive little value from watching advertisements. (6) A replacement revenue model could potentially eliminate these negative aspects of advertiser-supported television. However, no replacement revenue model is in sight.
The lack of a replacement revenue model has the potential to reduce the quality of television programming as networks are forced to cut costs to maintain profitability. As costs become more salient, there is bound to be a shift away from expensive scripted television programs toward less expensive reality shows, games shows, and talk shows. (7) Programming decisions will increasingly depend not on the quality or popularity of a show but rather almost entirely on the production costs of alternative content choices. Failing to solve the advertisement avoidance crisis likely will make both viewers and content providers worse off, as networks eliminate programming choices to maintain profitability in response to reduced ad revenues. Advertisement avoidance could even result in the wholesale elimination of free or low-cost television if networks cannot sufficiently cut costs to generate profits in the face of declining advertising revenue.
This Note argues that a replacement revenue model (or any effort to sustain the advertiser-supported model) has yet to emerge primarily because DVR providers lack any incentive to work with content providers to craft a solution to the advertisement avoidance crisis. …