ReplayTV Hopes Time Warner Doesn't Fast Forward

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ReplayTV, Mountain View, CA, will be the first personal video recording company to reach customers through a cable operator when it conducts a trial with equity investor Time Warner, New York, in August.

But the satisfaction of that milestone may be short-lived as the cable giant's impending merger with America Online has put a damper on possible future agreements with the fast-growing PVR firm.

The test trial has 500 randomly selected digital cable subscribers in the San Fernando Valley area of Los Angeles receiving a specially enhanced ReplayTV box for six months. The customers will be surveyed and personally interviewed, and some aspects of their behavior will be tracked electronically through the box.

The boxes will be augmented to allow customers to access highlights and promos for video-on-demand films available through Time Warner, which is how the company seeks to profit the most by using a PVR.

Customers using the ReplayTV box can access Replay Zones, a walled-garden environment that categorizes available VOD content and makes it easier to schedule, record and purchase programs. With a PVR added to digital cable subscribers' packages, customers are receiving a VCR with advanced functions that allows them to order a plethora of video programs at the touch of a button -- a fact that has many cable operators eager to get on board to increase revenues, market digital subscription packages and improve overall customer satisfaction.

"The main focus of the trial is video-on-demand," said Eric Brown, vice president and general manager at Time Warner Cable, Los Angeles, who is overseeing the trial. "We will begin to monitor customers in the trial and see how their purchase behavior and viewing habits differ from the rest of the population without the ReplayTV box."

The potential problem traces back to the point when, as separate companies, Time Warner invested in ReplayTV and AOL invested in TiVo -- ReplayTV's biggest competitor in the relatively new industry of PVR.

"The ReplayTV trial was put in place before the AOL-Time Warner merger was announced," Brown said. "The AOL investment in TiVo and our investment in ReplayTV took place before the merger. The key here, as far as the test is concerned -- whether or not we look at TiVo or Replay -- is understanding how to create the most value for our customers from this new technology."

TiVo is already scheduled to be included this winter in a new version of AOLTV, the company's interactive set-top box, and is part of a VOD arrangement with DirecTV and BlockBuster that debuts next year. With Time Warner finding success in non-PVR VOD trials in Honolulu, Austin, TX, and Tampa, FL, the possibility of the merged Time Warner-AOL choosing to use TiVo in future set-tops and cable-run VODs has not escaped ReplayTV, said Jim Plant, director of corporate communications at ReplayTV.

"There are some best-case and worst-case scenarios possible here, as there are with all agreements between businesses," Plant said. "The thought [of AOL/Time Warner going ahead with TiVo] has definitely crossed our minds, and we are prepared to deal with it if it happens. Certainly we are aware of the AOL-Time Warner connection and the AOL-TiVo connection. There are so many relationships intertwined, and TiVo and ReplayTV share a ton of investors. If we were going to be paralyzed by all the different intertwined relationships we would have stopped a long time ago."

Plant added that regardless of what the future holds, the trial gives ReplayTV a chance to prove assertions that have been made about its products' accessibility and functionality.

"Working with Time Warner gives us a lot stronger position to influence them and other companies and show them what we can do," Plant said. "We welcome all opportunities to do that -- even those in which TiVo might have a prior relationship with the company. Cable is a very important method of distribution, and we are certainly very interested in exploring ways to get the ReplayTV service deployed in the homes of as many consumers as possible, and certainly cable by far has the bulk of those."

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