UK TV To Be Hit The Hardest By PVRs, Says Merrill Lynch
The impact of personal video recorders (PVR) is expected to hit the UK and more specifically ITV the hardest, says a new report from Merrill Lynch, with television advertising expected to drop in Britain by nearly 4.0% by 2010.
Research shows that around 40% of adverts are missed in PVR homes, however as advertisers become cleverer and adapt marketing to conquer the threat of PVRs, Merill Lynch estimates that in reality PVRs will cause a 25% reduction in advertising.
| Overall Impact Of PVR On Advertising | |
| Adjustment | % |
| Ad Skipped – Gross Figure | 90 |
| Recorded Viewing | 43 |
| Advertisements Skipped | 39 |
| Increase In TV Viewing | 18 |
| Increase In Audience Fragmentation | 11 |
| Advertisements Skipped | 36 |
| Increase In Sponsorship Revenues | -4 |
| Advertisements Skipped | 32 |
| Product Placement | -2 |
| Advertisements Skipped | 30 |
| Broadcaster Reaction | -5 |
| Total Advertisements Skipped | 25 |
| Source: Merrill Lynch, October 2004 | |
The impact of PVRs is expected to be subdued in all EU countries except the UK, where the reduction in television advertising is expected to fall as low as 3.8%, followed by Germany at 2.2% and France at 1.5%.
According to Merrill Lynch, the UK’s commercial broadcaster, ITV, is to set to be ‘Europe’s clear loser’ due to BSkyB’s aggressive target for its PVR device, Sky+, of 2.5 million customers by 2010.
Like all PVRs, Sky+ allows users to pause live television, record one programme while playing back another and more importantly, fast-forward through commercial breaks, with its main selling point being that it is very easy to use.
With so much at stake, Merrill Lynch says it expects broadcasters to react and re-invent spot advertising in order to fight off the threat of PVRs. This includes increasing sponsorship, product placement, targeted ads as well as more interesting and interactive commercials.
The chart below details Merrill Lynch’s expected impact caused by PVRs from 2003 to 2010 on television advertising’s compound annual growth rate. Most countries show little impact of between 0.1% and 0.3%, except for the UK at 0.6%.
Overall, Merrill Lynch does not believe PVRs will significantly change viewing habits or kill television advertising because if this happens people will have to pay to watch television and not everyone will want to or be able to afford to do this.
The report added: “In other words, we believe that PVRs will not kill the broadcast model but alongside audience fragmentation they will certainly cause it to weaken.”