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Supreme Court's Ruling A Blow To Big Media

Tuesday, 30 Jun 2009 | 11:51 AM ET

The media conglomerates are trading down today, off more than the Dow. One factor pulling them down is the Supreme Court's decisionnot to consider their appeal to challenge Cablevision Systems new DVR service. This is a direct blow to NBC Universal, CBS, ABC, and 20th Century Fox, who sued Cablevision in 2006.

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This decision will enable Cablevision to soon roll out a new kind of DVR, which requires much less capacity.

This DVR service stores a viewers' recordings on the cable operator's servers, rather than on the box in your living room. That'll make it easier and cheaper to sign up more customers for this service. Comcast and Time Warner Cable say they're looking into this kind of technology, which could quickly put DVRs in twice as many homes as they're in now, in about about half the country. There's no doubt this is a win for cable operators, who will be able to deliver higher capacity storage for shows. And this system uses an infrastructure their rival satellite TV companies (DISH, DTV) can't replicate.

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The media giants already have their hands full. They're struggling with declining ad prices as marketers find more targeted ways to reach consumers. And DVRs have been eating away at their commercial-viewing audience for a while - as of May they're in about 30 percent of US households. Some studies indicate that DVR viewers watch more TV, but the question is whether that TV watching can be monetized: people watching recorded shows fast-forwarded past more than half the commercials.

So what next? The TV networks will have to figure out how to adapt to this setback. They may try to take advantage of cable's interactive capability to update ads with more up-to-date commercials when viewers start watching recorded shows. And of course they'll try to implement restrictions on ad-skipping, though that seems unlikely. This Supreme Court decision is also sure to spark more long-hard thinking about distributing more content online through websites like Hulu.com, where the nets can control when and how ads run. Online video may not include many ads, but at least (for now) they can't be skipped.

And if this technology isn't a violation of copyright laws, what's next?

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Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.