Ads key to AOL set-top plans

Like popular personal video recorder (PVR) devices such as TiVo and ReplayTV, Time Warner Cable's upcoming set-tops will let consumers pause and play back TV programming while it's being broadcast. People will also be able to record shows automatically based on personal interests. But unlike ReplayTV, which gives viewers controls to manually jump over 30-second commercials, Time Warner Cable's unit will be designed to ensure advertisers are seen and heard, at least partially.

AOL spokesman Mark Harrad confirmed the company's ad-skipping plans and added that the cable operator is also looking at including copyright-protection technology in such devices. The technology would limit how viewers can use content delivered to their homes.

"Anybody who's dependent on ad sales would be against devices that let consumers skip over ads," Harrad said.

The moves back up a vocal campaign by AOL Time Warner against devices that give consumers wholesale control to ignore commercials--the financial engine of TV programming. In recent months, several top-level executives including incoming-CEO Richard Parsons and Turner Broadcasting CEO Jamie Kellner have spoken out against the dangers of ad-skipping features, saying they undermine a network's ability to make money. The company is also part of a group of entertainment companies that have filed a lawsuit against ReplayTV manufacturer Sonicblue.

The decision to drop ad-skipping features came to light after May 1, when AOL Time Warner and TiVo restructured a deal that included jointly producing an interactive TV box.

Time Warner Cable CEO Glenn Britt talked about the features last week at the National Cable and Telecommunications Association annual convention in New Orleans and in an interview with Cable World magazine. AOL Time Warner's Time Warner Cable subsidiary oversees the Turner Broadcasting Network, which operates ad-supported stations including TBS Superstation, TNT, The WB, Cartoon Network, Kids' WB, Turner Classic Movies and CNN Headline News.

Researchers say one of the biggest selling points of PVRs is their ability to zap ads. Already, people who've bought into the technology are becoming comfortable with ad-free broadcasts. One in four people who own a TiVo-like device say they always fast-forward over ads, according to a survey from Memphis-based NextResearch.

"Programmers biggest concern is, How do I sell advertisers if my viewers can skip commercials altogether?" said Aditya Kishore, an analyst at The Yankee Group, a research and consulting firm. "It's also a big part of the bottleneck in the deployment of network personal video recorders," in which consumers would have PVR-capabilities through cable servers.

Content owners are afraid of such devices and reluctant to license their programming to cable operators for fear that their financial models will be eroded by consumers' ability to skip ads.

At the same time, AOL Time Warner is hedging its bets with several moves into the home TV market. The company has a deal with set-top box maker Scientific-Atlanta to offer PVR-enabled devices to its cable subscribers. Meanwhile, it has scaled back a relationship and investment in TiVo but is continuing to work with the company to provide a home-recording device that combines popular Net features such as instant messaging. Unlike ReplayTV, TiVo only lets people fast-forward through ads, not delete them altogether.

Several entertainment companies including AOL Time Warner have filed a lawsuit against Sonicblue over the recording and distributing capabilities of ReplayTV 4000. The networks say that the way it distributes shows violates copyright laws.