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PVR Threat Growing

Sep 1, 2003  •  Post A Comment

Advertisers are poised to waste $5.5 billion in television ad expenditures in 2007 if television networks don’t adapt to the rising penetration of the personal video recorder, with its ability to zap commercials.
That’s the conclusion of a new Yankee Group study, which estimates that 19.1 million households, nearly 20 percent of the U.S. total, will have PVRs by the end of 2006. Assuming that 70 percent of all ads during 80 percent of all programming will be fast-forwarded by then, the report concludes that PVR households will be missing 55 percent of advertising; thus 55 percent of 20 percent-or 11 percent of a total $50 billion in ad expenditures-will be wasted.
Although 3.8 million, or less than 2 percent, of U.S. homes now own a PVR (such as those manufactured by TiVo or Replay TV), the study predicts that figure will climb to 19.1 million by 2006. That is the result of satellite and cable operators furiously integrating the technology into set-top boxes and other devices. The study estimates that 80 percent of viewed prime-time programming currently is time-shifted in PVR households, and 65 to 70 percent of advertising is fast-forwarded during that programming.
The study goes on to suggest that the networks need to implement additional advertising options designed to reach a rising number of personal video recorder users armed with the ability to fast-forward through commercials.
“TiVo will change broadcast as we know it, and it is not something we can ignore,” said Dennis Wharton, a senior VP at the National Association of Broadcasters.
Broadcasters and advertisers “need to be planning now for the day when PVRs have a penetration in households,” Association of National Advertisers President-CEO Bob Liodice said. “Product placement is one avenue. Program sponsorship is another opportunity.”
“Almost 50 percent of media buyers will be engaging in some kind of product placement buy in the next coming year,” said GartnerG2 analyst Denise Garcia. But they also need to consider buying interactive television. “Right now it is not likely 1 percent of their buy is there.”
According to Ms. Garcia’s March 2003 GartnerG2 report, 75 percent of media planners say they have no plans to recommend interactive TV advertising at any date. Only about 9.6 percent of media planners currently recommend it. That is a mistake, she said, considering the projected 3,780 percent growth rate in PVR users from 2001 to 2006.
Ms. Garcia suggested viewers of the Academy Awards or similar shows could get a chance to win prizes if they “teleweb” with their computer. “Smart advertisers are already developing strategies for ITV,” She said.
“We have the exact combination advertisers want,” said TiVo President Marty Yudkovitz. “We can measure how long [or if] a viewer watches a certain program or commercial … We are measuring it on a super-granular basis. We are offering [consumers] the ability to enter a contest right then and there [while watching live TV]. Just hit the green thumbs-up button on TiVo, it pauses live TV and takes you to another version of the ad. The viewer doesn’t view that as an intrusion, but a service.”
For a currently running Buick ad on TiVo, users who see the live commercial are instructed by the thumbs-up icon to press that button if they want more information on the car.
TiVo’s capabilities are there, but Buick isn’t using the technology to its fullest ability. According to Gartner’s Ms. Garcia, a click of the button takes you to a screen of text about the car and then directs you to the manufacturer’s Web site.
Despite the advertisers’ lack of full grasp of the medium, “Our users are using that service to a very high degree,” said Mr. Yudkovitz. “They are spending 4 minutes with this drill-down experience. The fact that [a consumer] spends four minutes with a product is an advertiser’s dream.” TiVo advertisers during 2003 have included General Motors, Chrysler, Acura, Porsche, PBS and Universal Studios.
Good news for them, because the most popular prime-time programming fares poorly in retaining PVR viewers as these programs are most often recorded, according to the “TiVo Commercial Viewing Report.”
Developed with assistance from Starcom MediaVest Group, the report ranks each prime-time program’s ability to capture viewers during commercial breaks. It found that the programming viewers are most likely to watch “live” (news programs, award shows, sporting events) tended to perform significantly better in retaining viewers during commercial breaks. Recorded programming, including sitcoms and dramas that draw high ratings in prime time, are less successful in retaining viewers during commercial breaks.
Dov Rubin, VP and general manager of NDS Americas, the U.S. arm of the United Kingdom-based supplier of open end-to-end digital systems and solutions, has the technology to halt PVR users from commercial skipping. “Our technology tags the commercial. It can be set so that the commercial cannot be skipped.”
Other options tag the commercial so that if a viewer does hit fast-forward, it will skip all but the last five seconds of the ad, or screen it with a 10-second compressed version.
These broadcaster-centric solutions are already in place in the U.K., said Mr. Rubin, and are available to U.S. broadcasters who adopt its XTV digital video recorder technology.
Enhanced TV is another advertising possibility. ETV allows viewers to access interactive content during TV programs that allow them to play along with game shows, or purchase products directly from commercials using the TV’s remote control, said the just-released Yankee Group study, which was authored by Aditya Kishore.
Laurie Koots, chief marketing officer of TBWA Worldwide, said, “All of the advertisers we work with are experimenting with ways to use the technology.”
Informational opportunities are the most likely route, she said. For example, Ms. Koots said, a consumer may be looking to book a vacation in the Caribbean and asks TiVo to record related travel programs. While watching a program, an icon alerts him to additional information. An OK button could be pushed that will set a number of things in motion, from TiVo downloading an advertisement about that destination to a hotel sending you a brochure in the mail.
Cable operators are set to reap the ad revenue rewards that enhanced TV on PVRs offer, more so than national broadcasters.
“NBC, CBS, they have no vested interest in the equipment that is used with the PVR. On the Comcast side, we are creating the set-top device and the remote that the viewers will be using,” said Charlie Thurston, Comcast president, ad sales. “By having the technology in the household we will be able to work with advertisers to get them whatever it takes … a logo, an icon, a `brought to you in part by’ message.
“There might be some opportunities to work with different business models to stem any erosion that could occur as a result of people zapping out the advertising,” said Mr. Wharton, “[But] with the number of these units out there up to this point, the impact is almost negligible.”