It has been two or three years since the first personal video recorders rolled off the assembly lines and into the consumer electronics market. And they are – there can be little doubt – truly revolutionary machines. All store 30 hours or more of programming on massive hard drives. Viewers can pause and replay live TV. Time shifting, offered by Bell ExpressVu and others, picks up shows as they air in different time zones. And TiVO, available in the U.S. and U.K., not only remembers and records the shows you like – it also guesses, based on what you watch, what other shows you might like, and takes the liberty of recording those as well.

So why don’t we all own one? Why is the next killer app of television still, in the words of one cable exec, ‘stuck somewhere between neutral and first’?

The boom will come eventually. But before that, PVRs, and the all-important customer loyalty they inspire, will become crucial pieces in the great and ongoing game of Stratego between satellite and cable operators. Cablers across Canada are about to package PVRs with their killer app – video on demand – while Bell, not to be outdone, has found a way to offer VOD via satellite. At least three major companies will debut new VOD/PVR products within the year.

Several things have held back PVRs in Canada. First, the cost. The sticker price on set-top boxes has yet to drop below the ‘magic number’ of $300 ($200 in the U.S.) – before sales will take off. That could take a while given that these gizmos currently run close to twice that amount and, for now, there is little competition to drive down costs. Bell ExpressVu, with some 50,000 units moved since fall 2001, still owns the game. The only other PVR product in the country comes from Quebec cabler Videotron, which got in late, quietly and has made only a few thousand sales since Christmas.

Satellite and cable operators have also been slow to partner with PVR providers – Pace, TiVO or The Dish Network, to name a few – and, at first, were spooked by the need for expensive marketing campaigns touting complicated technology.

But things are changing and, step one, new partnerships are forming in Canada. StarChoice has signed a letter of intent to do business with TiVO, and Rogers Cable in Toronto will introduce a PVR, perhaps from Scientific Atlanta or Microsoft, in 2003.

‘When we see the price drop, we’re going to see some acceleration,’ says Ian MacLean, a VP at Montreal-based Media Experts and an authority on interactive television. ‘Anywhere you’ve got satellite and cable companies competing, and they both have a PVR product, that’s going to have an effect on price.’ Being the first certainly gave Bell ExpressVu, and by extension the entire satellite biz, an advantage to which cablers have been slow to respond.

Only when partnerships, marketing and cost act in concert will PVRs be in a position to finally ‘boom.’ But no one can say when that will happen because, here’s the rub: selling them is tough. Outside of tech-savvy types, already well-versed in the wonders of time-shifting and predictive scans, it is hard to sell what looks like a glorified, overpriced VCR to mom ‘n’ pop consumers who, odds are, still don’t completely grasp the finer points of satellite TV or digital cable. Slow and unpredictable word of mouth has been, and remains, an essential part of PVR marketing, even at Bell.

‘People who have PVRs become emissaries or crusaders for other people to get it,’ says spokesperson Ron MacInnes. ‘We do our marketing, of course, and in-store demos, but a lot of it is word of mouth.’

That’s a big reason Rogers Cable ignored the first wave of PVRs, choosing instead to test the interactive waters by offering a video-on-demand service to its digital subscribers in Toronto. ‘We knew [VOD] would act as a good precursor, to introduce the concept of controlling television,’ says VP of product development Mike Lee. VOD offers many of the same basic functions as PVRs, such as pausing and replaying live TV. Now that its 78,000-or-so digital customers are used to it, Rogers will soon announce a ‘second generation’ PVR – with dual-tuner functionality and a larger hard drive.

Videotron is using the same gambit, although slightly backwards. It will relaunch its PVR this spring in lockstep with the introduction of a VOD service, working in partnership with video distributor and Quebecor sister company Archambault.

‘According to our research, here in Quebec the biggest product in demand is VOD. There’s no question,’ says general manager of communications Jean-Paul Galarneau. ‘But quite a few people are interested in PVR.’

But cablers stand to lose the competitive edge of VOD within the year when Bell ExpressVu brings a similar service to market.

The next Bell PVR, an Echostar 5800, will, on its own, download entire movies to its hard drive in the middle of the night, when bandwidth is available, says MacInnes. The selection would be small, the current top 10 or 20 rentals, and would likely rotate every week or month. This differs from the cable VOD model, in which a few hundred movies are stored on neighborhood servers that communicate back-and-forth with the end user’s set-top box.

By 2004, the competitive ball should get rolling as satellite and cable use PVRs to jockey for position. But it remains unclear when, exactly, the boom will come. Maybe 2004, more likely 2005, when the more crowded market will cross paths with lower prices and word of mouth.

‘Once one or more companies in Canada are offering it, you’re going to see a lot more competition and that’ll drive the price down further,’ says MacLean. ‘The more people that have one, the more people there are that talk about it and then it really starts to accelerate.’