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Reports of TV’s Death by DVR May Be Exaggerated

Sep 3, 2008  •  Post A Comment

Maybe television’s doomsday—a time when there’s a commercial-eating digital video recorder in every home—is a bit further off than recent headlines suggested.
Last month, the U.S. Court of Appeals in New York reversed a ruling by a lower court that prevented Cablevision Systems from offering what is called a “networked DVR” to its subscribers. That means that instead of having to pay to put an expensive TiVo-like box into each subscribers home, cable operators can store shows on centralized servers for subscribers and pump them out to them when they’re ready to watch—for a fee that may be lower than leasing a DVR box with a hard drive.
While some analysts said the ruling could be a crushing blow for advertising-supported television, an executive at a leading media buying firm effectively says, “Not so fast.”
“While technology will be easily accessible to millions of households, we do not feel that the current lukewarm demand for DVRs will suddenly move consumers to absorb the additional monthly expense,” Shari Anne Brill, senior VP for programming at Carat, said in a recent report.
Ms. Brill cites Nielsen Co. data showing that about 26.4% of TV homes in the U.S. have a DVR. About 30% of those DVR homes have two or more of the gadgets.
“While forecasts call for DVR distribution to potentially increase to 100% of digital cable homes because of the court ruling, we believe these projections to be a bit overoptimistic,” Ms. Brill said.
Clearly a big, sudden increase in DVR use would be devastating for ad-supported television, particularly the broadcast networks. When shows are played back on DVRs, about 60% of the ads get skipped.
A report written by Bernstein Research just after the ruling was handed down was headlined “Network DVR Ruling has Seismic Implications Across the Media Landscape.”
In the report, Bernstein said: “With the stroke of a pen, the Appeals Court has opened the door to a massive increase in the penetration of DVR capabilities. Core among these is ad-skipping.”
Bernstein said it expected that the network DVR will become a key point in negotiations between content companies and cable operators, and wondered why media companies didn’t settle the case by offering to let the cable companies provide network DVR service in return for blocking ad skipping.
With the recent court ruling, “the leverage in those negotiations is now decidedly with the cable operators,” Bernstein said.
But Ms. Brill is unconvinced DVR penetration will mushroom even if cable companies roll out more network DVR services.
“Even though a centrally stored DVR service eliminates the cost of providing individual DVR hard drives to subscribers, the cable operators seemingly have no intention of passing along these savings to their customers,” she said.
And with the cost of gas and food rising, demand for DVRs is not a huge priority to subscribers who haven’t already acquired one.
“We continue to forecast that DVR penetration growth will remain slow and see no reason to believe that it will grow much beyond 40% by 2012,” Ms. Brill says.
In the Carat report, Ms. Brill notes that DVRs are not solely responsible for ad-skipping. She sites lengthy commercial pods and increase clutter levels as contributors.
“Therefore, this makes it all the more important that we continue to further develop program engagement metrics and also accelerate the use of DVRs as an additional enhanced advertising platform,” she says.

10 Comments

  1. More whistling in the dark. 35% is the “tipping point” for most things; Ms. Brill should read Malcolm Gladwell’s book.

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