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The U.S. Supreme Court announced Monday that it decided not to hear a case challenging Cablevision’s new digital video recording (DVR) service that it intends to roll out. This decision could have enormous implications, as far reaching as the famous “Betamax Case” that allowed consumers to “time shift” their viewing of broadcast programming by recording shows on a VCR. In that landmark case, Universal City Studios brought the suit because it felt that its copyrighted material was being recorded without their permission.

This new lawsuit again pits the content providers against new technology. Instead of putting an expensive set top box in every subscriber’s home, Cablevision wants to create individual storage on their central servers. Subscribers choose what is recorded, and they can then play that back on demand when they want. The 2nd U.S. Circuit Court of Appeals had decided that this new service was functionally the same as having a VCR at home, and so should be allowed. By deciding not to hear the appeal, the Supreme Court let that ruling stand.

The networks are worried that that this recording will allow subscribers to skip the advertisments in the broadcast content, which is a reasonable concern. This will likely cause the networks to seek higher fees from cable companies, as they lose advertising revenues (which could make cable subscription costs rise even higher). It could also accelerate the move to product placements within the programming itself. Watch for more conspicuous logos on the cars, computers, beverages, and other consumer items that appear on your favorite shows. (Did you really think that the Idol judges all love Coca Cola that much?)

This also has implications for set top box manufacturers. If the TVs have cable connections built in, and the DVR functions can be handled back at the cable company’s home office, there’s not much need for a separate box. And consumers are likely to appreciate reducing the part count and resulting clutter. Add streaming movies from the Internet, and you don’t even need a DVD player. So it’s possible that this court decision could reach out and touch a lot of aspects of the home entertainment market.