DVR Commercial Skipping: Like Rocks On a Pond?

Ars Technica reports: TV ad execs aren't sure what to make of digital video recorders like TiVo. On the one hand, they're clearly bad for business because they make it easier to skip commercials, but consumers love them, and no TV ad exec worth his Armani suit is going to stand between Americans and their TiVos. And the issue gets even more complicated by the fact that no one can agree on basics--are DVRs disemboweling the TV ad market or making it happy-fun-sparkle? Are half of all DVR users still watching 30-second ads, or does nearly every TiVo owner on earth skip them like rocks on a pond? It depends on whom you ask.

If you ask ABC, network execs will tell you that DVR-using homes actually see more total commercials than homes without the devices. According to one ABC exec, speaking recently at a television conference in New York that we attended, fewer people skip commercials than used to. Plus, DVR owners watch more TV overall. In the past, Nielsen data showed that "fans" of a particular show could only see about two out of every four new episodes of a show due to schedule conflicts, etc. Thanks to the magic of the DVR, that number has risen to 2.7. Even when users skip half the commercials, they're almost watching enough extra TV to compensate.

Garth Ancier, the head of BBC Worldwide America (bio), has a message for people who think this way: Wake up! Ancier remains a big backer of new technology like the BBC iPlayer and streaming services like Hulu, but he argues that TV execs need to face up to the "huge issue" posed by the DVR.

While other networks publicly estimate that only 50 percent of DVR users skip the ads, Ancier doesn't buy it. His own numbers suggest that 50 percent of BBC American watchers are dialing up shows on their DVRs, and a full 97 percent of them are skipping the ads. To Ancier, this suggests that on-demand services with nonskippable ads (like Hulu, or cable's video-on-demand system) may be the way forward.

The revenue problem that this poses will only get worse as DVR usage increases, a point made candidly by TiVo CEO Tom Rogers. Rogers recently noted that DVR use was expected to double or triple in the next few years and that "the majority of television ads in those homes simply won't be seen. It's going to be incredibly painful for advertisers, for the whole television industry, if they don't comprehend the urgency of that."

TiVo doesn't just want to antagonize the TV business, though; it wants to save it. That was the message of TiVo's Mark Risis, who also spoke at the New York conference.

It wasn't TiVo who killed the 30-second spot, said Risis--the company just showed the limitations of the format. TiVo stands ready to capitalize on those limitations by offering nontraditional commercials that run when people fast-forward or use TiVo's program guide. And the company is busy "thinking of new ways the 30-second commercial can function."

One way it can function is by moving inside the show as a product placement--a hugely popular recent practice most obvious on reality shows.

But networks can also turn the entire network into an ad; amazingly, people will still watch. A QVC exec at the conference said that business at the home shopping network is booming, and QVC keeps things that way by measuring audience response in six-second increments. Producers, speaking into the earpieces of the hosts hawking jewelry, coins, computer, or replica swords, can use the data in realtime to suggest that they "do that again!" when viewers respond well. The DVR? Not a big issue.

But for everyone else, the explosion of living room DVRs is a serious challenge. And new services, such as Cablevision's recently approved network DVR, will only accelerate its adoption.

Also on Ars Technica:

• Geek porn: the "enterprise-level DVR" is TV's panopticon
• TiVo prepping a "mass appeal" HD DVR priced below Series 3
• Milestone: TiVo software certified for use on Comcast DVRs
• DVR love spreading: 20 percent of US homes now in on the action