Digital Television Recorders
Summary
Looks at recent developments within the DTR market and includes latest industry forecasts and current marketplace dynamics.
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Contents
- Digital Television Recorders (DTRs)
- Current Market
- DTR Forecasts
- Impact on Television Advertising
- The Ad Skipping Phenomenon
- Challenge for Advertisers
• Globally, the US achieved the highest DTR penetration in 2008, with more than one-quarter of all US TV homes subscribing to DTR services.
• UK DTR penetration continues to rise, with almost 9 million DTRs sold (Q2 2009) and within this the number of Sky+ subscribers has now reached 5.5 million.
• Worldwide DTR penetration is expected to hit 208 million households by 2013, with top five countries accounting for two-thirds of this total.
• MAGNA Global believes that rather than negatively impacting on the TV industry, DTRs contribute to viewer attachment to television.
Highlights
Digital Television Recorders
Digital Television Recorders (DTRs)
Digital Television Recorders (DTRs) record television data in digital format, rather than the VCR’s analogue format, to a hard drive. The device allows viewers to pause live television, record one TV programme while playing back another and, more crucially for advertising, fast-forward through commerical breaks. The two most notable DTR brands are Sky+ in the UK and TiVo in the US.
Digital TV homes have a choice of a stand-alone DTR box which plugs into a set-top box or a combined set-top box/DTR.
Current Market
Globally, the US had the highest DTR penetration in 2008, with more than one-quarter (26.5%) of all TV households subscribing to DTRs by year-end, according to MAGNA Global.
Europe lags behind the rest of the world in terms of DTR adoption with just 5% of homes subscribing by the end-2008. However, within Europe, the UK has a comparatively strong DTR market.
The UK has been the first European nation to adopt DTRs in significant numbers, according to Parks Associates. UK households are also more likely to record TV programmes and skip commercials than their European DTR household counterparts.
UK DTR penetration continues to grow and currently stands at approximately 34% of UK TV homes (Thinkbox) – the total number of DTRs sold in the UK has almost hit the 9 million mark (8.9m). The number of Sky+ subscribers has risen to 5.5 million homes (June 2009), which equates to 58% of all Sky homes. Freeview’s DTR, Freeview+, has reached 2.6 million homes (June 2009). Other players in the UK DTR market include Virgin Media’s V+ with 668,900 subscribers (June 2009) .
Sky homes watch 17% more television when they convert to Sky+, according to the Skyview panel. 85% of viewing in DTR homes is to live broadcast TV and 45% of recorded breaks are watched at normal speed. According to Skyview, homes with Sky+ view around 2% more commercials ‘as live’.
DTR Forecasts
According to Informa Telecoms & Media, the long-awaited DTR sales boom is finally happening. Equipment prices have fallen rapidly and many platforms are now offering subsidised or free boxes.
Simon Murray, principal analyst at Informa, stated: “DTR take-up works best where there is intense digital TV competition. Platforms will not want to be left behind if a competitor is attracting new subscribers through DTR promotions.”
Informa forecasts 25 million added DTR homes in 2009 and, by 2013, DTR penetration will have increased to 208 million households worldwide, with the top five countries accounting for two-thirds of this total. Western Europe will record impressive growth, to 48.2 million homes in 2013. The UK will remain the top European
Digital Television Recorders
nation in terms of penetration, with 13.2 million DTR homes by 2013, followed by France (7.9m), Italy (6.8m) and Germany (6.3 m).
While MAGNA predicts that US DTR penetration will reach 30% by the end of 2009, UK TV marketing body, Thinkbox, suggests that UK penetration already stands at 34%. By year-end, therefore, it may be possible that UK DTR penetration will be greater than that of the US. In many other European markets, however, DTRs are virtually non-existent – although free DTR services are gradually leading to rising penetration in markets such as France.
MAGNA Global’s year-end 2014 forecast for DTR subscriber households in the US is 50.7 million (42% of TV households), up from 32 million (28% of TV households) as of the end of Q2 of 2009. MAGNA suggests the aggregated impact of DTRs will likely continue to be outpaced by a rising population and increases in consumption of conventional TV.
Over the ten year period between 2004 and 2014 MAGNA estimates that DTRs will contribute a 4% erosion of total viewing impressions across all dayparts. However, rising DTR penetration will be more than offset by increases in TV consumption and a rise in the number of total households. This will drive a 20% increase in total viewing impressions over the ten year period.
Impact on Television Advertising
Numerous research studies have focused on the effect the use of DTRs will have on advertising avoidance but while industry commentators had sounded the death knell for advertising, concerned at the potential loss of commercial impacts, most TV viewing in DTR homes is actually still live and viewers do still respond to advertising.
As with a range of studies conducted in the last few years, research from television marketing body, Thinkbox, found that DTR owners actually watch more commercials in real time as a result of owning a DTR. This is because only 12% of their viewing was to time-shifted material (much less for younger respondents) and around 40% of the commercial breaks were watched without fast forwarding. At the same time, owning a DTR appears to increase broadcast TV viewing by around 15%, mainly to commercial channels, resulting in an increase in the number of commercials viewed. While this may seem counter intuitive, it is nevertheless true and is supported by studies from BARB, BSkyB and the London Business School.
According to Jack Myers, over the next two to three years, DTR penetration is going to expand exponentially in the US. TiVo completed deals with both Direct TV and Comcast, and with HD expected to move into homes significantly over the next couple of years, digital set-top boxes will come with DTRs. As a result, more than 50% of TV homes will have DTRs – radically altering TV viewing behaviour and the value of traditional network television, compounded by the erosion of network television and the loss of mass audiences.
Digital Television Recorders
Recent research from MAGNA Global, meanwhile, suggests that playback of recorded TV on DTRs as a percentage of total TV consumption is rising in the US – but the reasons for this remain unclear.
One answer could be that new adopters of DTRs may not spend as much time playing back content on their DTRs compared to people described as “power-users” (past research indicated that around 30% of DTR users account for around 70% of aggregated DTR consumption), who were likely to be among the first to acquire DTRs.
It should follow that DTR use will not increase as rapidly as penetration rises. Although there was a decline in DTR consumption within DTR homes between Q4 2006 and Q4 2007, in recent periods, this trend has reversed. Changes are modest (falling within a statistically insignificant range), but a few factors may explain them:
•More years of owning DTRs causes all audiences to increase reliance on DTRs
•More years of owning DTRs causes some audiences to increase reliance on DTRs
•Programming strategies produce more “DTR-worthy” content which causes increased DTR consumption
The true answer (or answers) behind live TV erosion are difficult to know with certainty. However, MAGNA explains it can be said with certainty that total DTR consumption is small in total. By 2011, 10 years following widespread availability, DTRs will be in approximately 35% of all US TV homes. With less than 10% total-day DTR consumption, less than 4% of total universe TV consumption will occur on DTRs. But over the same 10 years, TV consumed per person and the US population will have increased by more than 10% each. The cumulative effect is a significant increase in absolute measures of live TV consumption despite the presence of DTRs.
This reinforces MAGNA’s view that DTRs do not necessarily negatively impact the TV industry. Instead, they contribute to viewer attachment to TV and in turn allow it to remain a primary marketing vehicle for the foreseeable future.
The Ad Skipping Phenomenon
Previous industry opinion has been that DTRs would cause a severe threat to advertisers, with viewers using the devices to skip through adverts. Research from Accenture predicts that nearly 10% of all television commercials will be skipped by the end of 2009 due to the fast-forwarding technology.
A study by Actual Consumer Behaviour and the London Business School, funded by a consortium of Ofcom, Channel 4, Five and Initiative, took a qualitative sample of 8 homes, or 22 people, and filmed them each for two to three weeks. None of those taking part were aware the study concerned advertising.
The results of the experiment showed that 80% of advertisements in the households studied were watched live, and although the subjects fast-forwarded most time-shifted commercials, attention was high during fast-forwarding. Of those that were fast-forwarding, only one third were at full speed.
When fast-forwarding ads, viewers invariably concentrated on the screen and sometimes commented on the advertisements or watched them at a slower speed, with some even rewinding to watch the ads again. However, it is not known whether those seen to be concentrating on the ads were doing so in an attempt to avoid missing the start of a programme.
Research from Millward Brown showed that DTR users do not display any significant difference in ad recall or ad recognition when compared with viewers not using the technology. Commenting on the research, Michelle
Digital Television Recorders
de Montigny, senior vice president, stated: “Counter to recent industry concerns, TV advertising is not dead, and DTR owners are not less engaged with TV ad viewing.”
These findings add to the mixed signals advertisers are being sent about DTR usage, confirming US research from Frank N. Magid Associates which claims that, despite advertiser fears of TV commercials being skipped using the new technology, 55% of DTR users stop to watch adverts that catch their eye.
Challenge For Advertisers
In spite of the plethora of research that suggest most TV viewing in DTR homes is actually still live and viewers do still respond to advertising, the ability to avoid TV commercials through the use of DTRs is nevertheless costing UK advertisers £30 million a year, according to a white paper produced by media analyst Big Picture.
The growth in the penetration of DTRs, such as Sky+, has given a significant number of TV viewers the opportunity to skip commercials during ‘live’ and recorded programmes and Big Picture estimates that advertisers are losing around 1% of commercial impacts. As total UK adspend on commercial channels is more than £3 billion, over £30 million is being wasted on adverts that the viewer will never see.
Simon Andrews, founding partner at Big Picture said: “Ad avoiders are a real issue. Once people realise that the DTR captures live TV, they choose to start viewing a few minutes into the programme. They rewind to the beginning of the programme and then fast-forward through each ad break.”
However, Big Picture has highlighted new approaches that advertisers can take to counteract the problems posed by the uptake of DTRs.
Andrews explains: “We think smart advertisers will respond in two ways – by challenging their agencies to create advertising people enjoy and respect; and by investigating how they can best use the new opportunities of branded content – be that on TV, on the mobile or on broadband. Now people have the power to choose whether they give you their attention, advertisers need to earn that attention with content that people want to watch.”
Digital Television Recorders
Featured Tables & Charts
- Total Sky DTH Subscriptions and Sky+ Subscriptions 2003-2009
- DTR US Forecasts
8 pages, featuring 2 tables and charts