National Post, September 3, 2002
They’re known as digital video recorders or as personal video recorders, and they’re beginning to change the way people watch television just as radically as the VCR changed viewing habits when it came on the scene in the 1970s.
But DVRs also threaten to change advertising, too.
They possess that threat because they give people the option to skip or avoid commercials with relative ease. One DVR maker is being sued over this, while the other is designing special programming that works like targeted advertising, but offers viewers entertainment along with the sales pitch.
TiVo and ReplayTV are the main DVR makes. Both are available in the United States; TiVo is also available in Britain. Direct-broadcast satellite services offer limited DVRs built into their set-top decoder/channel-selector boxes.
Both work essentially the same way, downloading programming information through a phone line and a toll-free number in the middle of the night from Tribune Media Services’ Zap2It, the division that compiles programming data across the continent that it provides for print TV listings and onscreen program guides.
That access costs DVR users a one-time fee of US$250. Find the show you want to record through an onscreen menu, and the TiVo will record it on to a hard drive — its latest model will hold 60 hours. It will record your favourite show every time it’s broadcast. It can also record shows a user is likely to enjoy based on viewing patterns.
Users say the device fundamentally changes the way they watch television. They don’t channel surf, they can pause live TV, skip back and see something again, or skip ahead at extremely high speed. It’s this last feature that makes advertisers fearful, especially after a study meant to measure the effectiveness of automotive advertising by CNW Marketing Research of Oregon this summer stumbled upon the statistic that DVR users skip commercials more than 72 percent of the time — more than people watching regular TV or those using VCRs. They do watch beer and drug advertising, however.
TiVo’s rival, SonicBlue’s ReplayTV 4500, can record up to 320 hours of programming, support a broadband Internet connection for retrieving data and sending programs from one unit to another. The 4500 also allows viewers to delete commercials as it plays back. Every sitcom is 21 minutes long; every one-hour drama unfolds in 42 minutes, and viewers see no commercials. In ReplayTV tests, the 4500 removed 96 percent of the advertising from typical network programming. That makes advertisers even more nervous than the TiVo skipping feature.
Solutions proposed for that problem include making commercials in odd lengths — 40 seconds, for example — that would confound the machine’s assumption that TV ads are half-a-minute long.
Broadcasting executives say product placement is not an option — it couldn’t work on the scale needed to supplant traditional advertising.
Litigation is a more immediate remedy. Broadcasters are suing ReplayTV’s manufacturer, SonicBlue. The plaintiffs are alleging copyright infringement because of the program-sharing feature, saying it makes ReplayTV the video equivalent of the Napster file-sharing service, sued out of existence by the Recording Industry Association of America.
Turner Broadcasting boss Jamie Kellner, inveighing against the DVR, said people who watch TV without watching the commercials are stealing.
The Electronic Frontier Foundation is helping with a counter suit on behalf of ReplayTV users who maintain they can trade shows and skip commercials with impunity. They want a judge to rule that they have those rights officially.
ReplayTV and SonicBlue officials could not be reached for comment, despite repeated attempts.
Even with the rave reviews in the United States, fewer than a million DVR units have been sold. But one company is betting it will become more popular. At the beginning of August, TV ratings company Nielsen Media Research announced that it can now measure what TiVo boxes are recording in its metered homes.
“Our software for program measurement is resident but dormant in the TiVo box,” explained Nielsen vice-president Anne Elliot. “It’s not activated until the user gives us permission, but it can be turned on remotely if they say yes.”
And while that might make advertisers and networks feel relieved, it actually creates new problems. “How do you count those ratings?” Elliot said. “We’re measuring when the device is recording. The assumption is that the recording is being watched or will be. So how does that change the ratings?
If few people are watching a show but a lot of people are recording it, what does that mean for scheduling? And if I record a show with a movie ad in it, don’t watch the show until two weeks later then go see the movie, how do you count that as an advertiser?”
So far, there’s only one Canadian digital video recorder. Bell ExpressVu’s satellite service offers viewers the option of getting a 5100-series set-top box, which includes the decoder and channel-changer/receiver for its programming, with a built-in digital recorder. That option costs about $474 on top of the $200 or so the more basic box-and-dish hardware costs. Compare that with TiVo’s US$399 suggested retail price or US$400 for the ReplayTV 4500, and another US$ 250 for the listing subscription in each case.
ExpressVu’s machine, which it calls a personal video recorder, was introduced a year ago, and the satellite company’s Ron MacInnes said it’s been a boon to him as a viewer and a key marketing tool to get people to choose satellite over cable. “People who use these things become sales people for you — they’re that excited. I have one of these things and it’s completely changed the way I watch television.” He said no Canadian advertisers or media buyers have expressed concern about the device.
Canadian cable users are not going to have the DVR option any time soon. Tribune Media’s Zap2It covers Canadian cable systems, but local cable companies would have to co-operate for DVRs to work.
Neither Rogers nor Shaw does. And they don’t plan to.
“We looked into it when they were first introduced,” Rogers’ Taanta Gupta said. “But we’d have to build the unit into our set-top box, and the cost to the consumer would have been between $600 and $800. We thought consumers would find that too expensive.”
She said Rogers is going with video-on-demand instead. Viewers pay $3.95 for 24 hours of access to a movie stored on a central server. Their remote control works on the movie as it would on a videotape or DVD, allowing them to pause, fastforward and rewind it.
The two U.S. manufacturers have gone in different directions over the advertising issue.
A TiVo employee, who spoke on condition of anonymity, said the firm considered the ReplayTV commercial-deletion option for its latest model, but decided against it. TiVo has been trying to find ways to make the device a vehicle for advertising, coining the term “advertainment” to describe the hybrid. “One of our most successful efforts was what we did for Austin Powers In Goldmember,” said TiVo executive producer Jim Monroe.
“We offered subscribers the chance to see the entire theatrical trailer and clips from the movie. Mike Myers really likes his TiVo, so we also had clips from an interview with him where he talked about how he uses his and what he likes about the machine.”
TiVo has similar deals with Sony and Real Networks, the Internet audio and video player company, putting together “advertainment” packages as long as 10 minutes.
“This is different and worth more” than standard 30-second commercials, Mr. Monroe said. “People are actively choosing to see this content. You know it’s getting to every member of your target audience. It’s easier to measure, and you know they’re paying attention.”
“TV as we know it is going to die in the next five years,” said Jim Nail, senior analyst at Forrester Research. “Instead of being on a network schedule, it’s going to become demand-driven. Consumers will be able to watch what they want when they want it, and this will clearly change how they relate to advertisers. Does anyone care about 420,000 subscribers? Probably not. Should companies begin to think about what an advertisement is? Yes.”