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The Future of DVRs Is in the Cloud

November 30, 2018, 6:51 PM UTC

For nearly two decades, people have stored their favorite TV shows on hard drives in their homes. Tivo’s introduction of mass market digital video recording in 1999 opened the floodgates, with cable and satellite companies quickly adopting similar technology into their set-top boxes.

As a result, home DVRs became as much a part of the living room as sofas and throw rugs. But recently, amid a shift from TV as the prime the source of video entertainment, consumers are increasingly moving to cloud-based DVRs, which do many of the same things as their predecessors in the home.

For $5 to $10 monthly, viewers can record their favorite shows to watch later when they want—and, more importantly, where they want—along with the usual fast-forwarding and rewind.

The market for cloud DVR is expected to grow quickly. Annual consumer spending on such services is expected reach nearly $700 million by 2023, up from a projected $400 million in 2018, according to ABI Research.

There are some notable differences between cloud DVR and in-home DVR. Foremost among these is accessibility. By its very nature, a cloud DVR can be accessed from multiple devices, from TVs to tablets, regardless of the viewer’s location. A traditional DVR, in contrast, is largely tied to the TV it’s plugged into.

Additionally, cloud DVR services generally place no limit on the number of programs subscribers can simultaneously record. However, traditional DVRs can only record a finite number of channels—typically no more than eight, but more frequently closer to six—at once.

Not all of the differences are positive, though. Cloud DVRs sometimes limit the length of time content is stored, depending on the provider. So instead of saving your favorite episode of The Big Bang Theory for years, you may only be able to hang onto it for a month. DirecTV, for instance, only stores content for 30 days in the cloud, though users can pay more to store programs for longer.

Another shortcoming of cloud DVRs is that skipping ads is often impossible. That eliminates a major feature of physical DVRs that many consumers have become used to. The reason for the lack of ad skipping comes down to legal rights. Thanks to a landmark 1984 Supreme Court case, Universal Studios vs. Sony Corporation of America, consumers can legally record television programming in their home for non-commercial purposes.

Cloud recordings, though, are done on the cable or satellite company’s end, meaning that ruling doesn’t apply. Cable providers must negotiate separate license agreements with content producers, which sometimes forbid users from skipping ads.

It’s a potential headache in North America, where companies like Comcast, Dish Network’s Sling TV and AT&T’s DirectTV Now, are the dominant players. It’s a bigger problem in Europe, where courts have regularly sided with content providers in disputes about rights to store any programming on cloud DVRs without explicit agreements.

“The legal grounds for the implementation of cloud DVR services require a well-defined agreement between operators and content owners,” says Giulio Sinibaldi, an analyst with Analysys Mason. “This is especially true in Europe, where a recent ruling by the European Court of Justice forbids national legislations [sic] to permit commercial undertakings that offer cloud DVR recording. … Operators in this situation do not have the upper hand, and those who have successfully implemented such a service have agreed to share the profits to gain safer ground in the TV market.”

Cable companies that offer cloud DVRs, regardless of location, can make up some of those additional fees paid to content providers, though, through cost savings, since cloud storage is cheaper than physical in-home devices.

“Hardware cost saving is one of the major advantages of cloud DVR services,” says Khin Sandi Lynn, an analyst at ABI Research, a market-foresight tech advisory firm. “With set-top box DVR, users need to replace the hardware when they need more storage. By using cloud DVR, service providers can save hardware costs by supplying a non-DVR box, while providing DVR features using cloud storage.”

That’s partly why cloud DVRs are becoming more common. There are currently 37 million cloud DVR users worldwide, Lynn says, compared to an expected 64 million by 2023.

To put that in perspective, 43.5 million U.S. homes currently have a set-top box DVR. (Worldwide numbers were not available.) That number has been flat for several years, though, as video-on-demand options have made it easier for people to watch shows on their own schedule.

In fact, the physical DVR “take rate,” an industry term for the percentage of customers who sign up for a service, never passed 50% in the traditional cable and satellite industry, says Jimshade Chaudhari, vice president of product marketing and management for Sling TV. Cloud DVR sign ups haven’t reached that level yet, but adoption is increasing. (Sling, like other services, doesn’t share exact figures about how many customers have opted for its cloud DVR service.)

One of the biggest sources of consumer confusion when it comes to cloud DVRs is why they should pay extra for it when on-demand programming offers many of the same thing, including the ability to watch where and when they please with limited or no commercials.

The answer, say supporters, is the ability to record shows that are unavailable on demand, from your child appearing on the local news to special programming that may only be available only at certain times of the year.

Sling TV’s Cloud DVR lets customers save their recordings, delay a sporting event so they can fast-forward through the ads and eliminate the wait until their favorite show is available on demand,” says Chaudhari. “Cloud DVR users can also protect a recording forever (like their favorite sports team winning a game) and that content will probably never be available on demand.” Also, he said that on-demand content is sometimes removed from availability, “whereas DVR content will never expire.”

Ultimately, cloud DVR services may seem more tailored to cord cutters, people who forego traditional cable subscriptions for over the top services like Sling TV or DirecTV Now. Those users, traditionally younger, are more likely to watch programming on the go (or from places other than the living room couch). But cable and satellite companies expect existing set-top box DVR customers to copy that behavior, watching TV on the go, in a limited way as viewer habits continue to evolve.

As a result, says Lynn, you can expect more services to adopt models like Comcast, which now offers 60 hours of cloud DVR storage to customers for free.

“In a market with high ARPU [average revenue per user], the user expectation is high,” she says. “Cloud DVR is more of an additional value to customers than a main DVR feature in such [a] market.”