Insight Analysis: Should Advertisers Fear Digital Video Recorders?

There are two obvious ramifications of such technology. The first is that the traditional idea of the TV ‘schedule’ could potentially become outdated as viewers create their own schedules by picking and choosing programmes to record to the PVR from the increasing array of channels on offer. In fact, the notion of a schedule has already been eroded to some degree simply as a result of ‘flicking’, via the remote control, through this broad range of channels.

The second side-effect of fast navigation through a programme is that viewers can effortlessly skip through the ads in any given broadcast; at least this is the worry. Moreover, this problem is itself to some extent compounded by the disappearance of a ‘proper schedule’, which would normally keep people anchored to their sets as they move through an evening’s viewing, during which time they would almost inevitably sit through the commercial breaks.

A change in the viewer dynamic Even if the ads cannot actually be filtered out, the ease with which they might be skipped could cause serious problems for advertisers. Clearly TV is the major conduit for big brand marketing – it took a share of advertising of around 30% in 2001, according to the Advertising Association.

Television advertising, along with radio, are largely effective because the audience cannot easily ignore the ads. In the case of TV it would mean getting up off the sofa and going somewhere else (unlikely); switching channels (much more likely); or just turning the set off altogether for three minutes (unthinkable). The only way to completely avoid radio ads is to turn off the radio.

An active audience Enter the internet. The web has struggled, it seems, to consolidate a lucrative and effective approach to advertising. Banners, pop-ups, pop-unders, interstitials, full-motion video and so on have all attempted, essentially, to grapple with the problem that people use the internet in an active way. They search for information, they use it and then they go somewhere else. Why hang around on one site? It’s not as if the next programme is coming along…

Should PVR technology really take off, TV may find itself with a similar problem: viewers pick want they want, watch it, move on to the next programme and then go and do something else completely. Why would they bother with the ads?

So that’s the worry, but is the threat real or imagined? Certainly, a survey by Media Audits (see Forecasts) of the opinions of the advertising industry at the end of 2001 found that many see the Tivo system as a threat (Tivo is just one brand of PVR, but is the most established at present).

However, a report from this week’s National Association of Television Program Executives (NATPE) convention in the US, filed by economist Jack Myers, indicates that uptake of PVR systems is minuscule, despite fairly hefty marketing. Not only that, but the signs are that the US public does not really want another device that will ‘complicate’ their television viewing, reports Myers.

It seems that whilst the industry is worried, the public is disinterested. PVRs are currently installed in just 400,000 homes in the US; what percentage of them are owned by television executives and those in the technology industry?

Myers reports that Debbie Myers, vice president of media services, entertaining and licensing at Taco Bell, believes that consumers are not interested in the PVR technology. Sales of DVD players during Christmas, on the other hand, ‘sky-rocketed’, whilst “the needle didn’t even move for PVRs,” she said. From Debbie Myers’ point of view, PVRs are simply not worth worrying about.

Jack Myers reports that Paul Lenburg, an executive consultant for BrandMedia Entertainment and also speaking at the NATPE conference, said that “the PVR issue is a huge problem for advertisers and TV stations,” but then conceded that the “distribution of these things is really small.”

However, Myers is keen to point out that a small uptake at this stage by no means indicates that the technology will not eventually be widely adopted. Consumers resisted the ‘intrusion’ of the cable box when it first emerged, he notes. What Myers is concerned about is that the media has a ‘peculiar proclivity to lose track of reality and race ahead of itself, manufacturing false or premature phenomena, the consequences of which can be severe at worst and embarrassing at the least’.

It’ll never catch on… or will it? A survey by the Media Edge, conducted last year, concluded that the PVR system may prove to be the new Betamax, an ill-fated video cassette system of the 1970s (see Forecasts). Of the 170 people that took part in the survey, 84% either already own a Tivo recorder (39%) or intend to buy one within a year (45%). Nevertheless, 46% agreed that the system could be the new Betamax and that it might well be superseded by new technology in the near future.

“We believe that viewers will increasingly screen out the traditional 30″ advert, and that short length sponsorship credits, content provision and even longer length ‘blockbuster ads’ will grow in importance,” says Brad Fairhead, Media Edge’s managing director.

The full results of the Media Edge survey are shown here.

	Yes	DonÂ’t Know	No
Is Tivo the start of a broadcasting revolution?	62.9	28.2	8.82
Will Tivo make your viewing more specific?	59.4	36.4	4.11
Will Tivo mean that passive TV viewing becomes obsolete?	48.2	46.4	5.29
Will TV advertising be less effective in a Tivo environment?	58.2	31.1	10.5
Will Tivo make programme or channel sponsorship more important?	76.4	15.8	7.64
Will TV stations have to work harder to promote their new programming offerings in a Tivo environment?	61.1	32.3	6.47
Will Tivo be the death knell of TV listing print titles?	37.6	48.8	13.5
Does Primetime TV necessarily mean a passive experience?	40.5	50	9.41
Is Tivo another betamax?	46.4	35.2	18.2
Do you understand how Tivo works?	68.2	25.8	5.88
Do you have Tivo?	38.8	–	61.2
If not, do you think that you will buy it within the next year?	45.2	–	54.6
Source: The Media Edge

Research from Informa, also from last year, forecasts that almost 500 million homes worldwide will have PVRs by 2010, with 54 million installed by 2005. The boom in growth is expected to kick in around 2005 when equipment costs will begin to fall.

Datamonitor predicts that by 2005, 48% of digital set top boxes will include PVR technology.