The digital video recorder (DVR) is set to play a central role in the on-demand service strategies of most digital pay-TV operators, the Yankee Group reported this week.

According to the firm, DVR service offers a wide range of value-added functions that will appeal to the needs of most digital TV consumers -- not only replacing the VCR as the preferred means for recording broadcast TV, but also promising a cost-effective alternative to true video-on-demand (VoD). Indeed, the research house said DVR service penetration will increase to 20 percent of Western European digital TV homes by 2008.

Operator-provided DVR service faces numerous challenges, Yankee said further, adding that the most significant are marketing and consumer education and competition from standalone retail DVR and DVD-R units. However, as equipment prices continue to fall and platform operators increase their marketing push, consumer adoption of DVR service is increasing.

"DVR services will be more widely and frequently used by digital TV subscribers than regular VoD offerings that are limited to the less ubiquitous cable and broadband platforms," Jonathan Doran, Yankee's broadband and media Europe senior analyst, said in a statement. "However, DVR service will become more of a value-added product enhancement than a significant additional revenue stream.

"Although services such as Sky+ and PILOTIME have shown a strong initial appeal among early adopters, many users will be deterred by high subscription fees. Price cuts for STBs and services will be crucial in driving DVR services into the mass market, particularly as the retail market for standalone devices gains pace," he concluded.

From ElectronicNews