To many observers, the relatively slow consumer acceptance of the digital video recorders reflected the difficulty of marketing a genuinely new domestic appliance, one distinguished by several distinct and unprecedented features. The digital video recorder, despite its name, is not a simple functional replacement for the VCR, which was found in 90 percent of U.S. homes by 2002. Despite the VCR’s long-standing capacity to time-shift broadcast programs, most households use the device nearly exclusively for the playback of pre-recorded tapes ( only 4% of total TV viewing time in the United States is devoted to the playback of recorded television programs). Thus, while U.S. sales of DVD players exceeded those of VCRs for the first time in 2002, suggesting that the VCR's role as a playback platform for pre-recorded material was in eclipse, the technological shift of the VCR' time-shifting function to the digital video recorder is less certain. Much of the debate about the economic and cultural implications of the digital video recorder concerns the extent to which consumers will take up the novel features of the new digital device, including the ability to pause and perform “instant replays” of an incoming TV signal, instantaneously scan through commercials of recorded programs, and seek out and record programming via an interactive electronic program guide that can learn and anticipate viewing habits (and sell such information to advertisers). While the commercial-scanning capabilities of the traditional VCR are already familiar, recently enhanced by the widely licensed Commercial Advance technology, which automatically speeds through recorded commercials on playback, when Replay TV’s manufacturer announced that its 2002 model would be equipped with the same licensed feature, it was sued by a group of TV networks and production studios even before the new digital video recorders hit the market. Although the number of digital video recorder-equipped homes is still quite small, survey data suggests that most consumers routinely use the devices to evade commercials, and a large percentage report watching much less “live” TV generally. Likewise, the diffusion of the digital video recorder is widely expected to undermine the economic value of a network brand identity and challenge conventional notions of program flow,  schedule, and day part as viewers select programs without regard to the channel or hour they are offered. More broadly, some observers have worried that the decline of “live” reception at the hands of the digital video recorder would weaken network broadcasting’s traditional function As agent of a national identity and community. Many observers have argued that the ease with which viewers armed with digital video recorders might avoid viewing traditional TV commercials would lead to a proliferation of more invasive advertising techniques, including product placement, banner ads, and advertiser-supplied programming, though more sanguine observers argue that TV viewers will remain interested in viewing commercials that are more carefully designed to appeal to them. They point to TiVo's announcement that the segment of the 2002 Super Bowl broadcast that TiVo users most frequently selected for instant replay was not the last-minute winning field goal or any on-field action but instead a halftime Pepsi commercial featuring performer Britney spears. In any event, the pattern of video among today's early adopters of the digital video recorder may be of little predictive power as the technology becomes more widely diffused.

Meanwhile, the business models and hardware platforms on which the digital video recorder will eventually be based remains unsettled. TiVo, the U.S. market leader, draws on distinct revenue paths of monthly subscriptions, manufacturing and licensing royalties, and advertising revenues generated from its electronic program guide and dedicated advertising programming. The experience of the U.S. computer software giant Microsoft suggests the uncertain market for the digital video recorder; Microsoft integrated digital video recorder capability into its existing WebTV service in the 2001 launch of its Ultimate TV service, only to retreat from the market in the face of consumer indifference at the beginning of 2002. Replay TV, like TiVo, a late 1990s Silicon Valley start-up, burned through its original capital before being acquired by Sonic Blue in 2001, and its products have not yet been successful in mass-marketing terms. Internationally, the only other significant market for the digital video recorder to date has been the United Kingdom, where the devices are found in less than 1 percent of homes both in the form of TiVo stand-alone models and as part of enhanced set-top boxes from Rupert Murdoch's Sky satellite service. One fundamental unsettled issue in the digital video recorder market in the United States and abroad is whether the technology will reach consumers as single-purpose devices or be integrated into the set-top boxes provided by satellite broadcasters and cable operators or instead be integrated into DVD players, video game consoles, personal computers, new “home entertainment servers,” or simply TV sets themselves. In fact, by the middle of 2002, the largest single supplier of digital video recorders in the United States was the satellite broadcaster EchoStar, which was expected to place 1 million recorders in the homes of its 6 million satellite TV subscribers. At this point in the product cycle, the crucial market for digital video recorder manufacturers may be less than the handful of major cable operators who are currently rolling out enhanced digital cable backbones and household devices for millions of U.S. homes. In sum, while the ultimate consumer appeal of the unique features of the digital video recorder seems ensured (as does the digital video recorder’s potential to supply broadcasters and advertisers a more targeted audience), the specific mix of industry players, revenue models, and hardware platforms associated with the device are still unresolved. Furthermore, the validity of the often-extravagant predictions of the economic and social impact of the technology will take some time to be fully tested. Even if those effects turn out to be slower and more diffused than the most alarmist observers have predicted, they promise to revise the way in which commercial television is funded and consumed in the United States in significant ways.