November 16, 2005
Major Networks in DVR Denial

From Gizmodo:

CBS, ABC, NBC, Fox, UPN and the WB hold a rare joint press conference to inform advertisers that the DVR isn't death incarnate for conventional TV commercials. One of the tenuous linchpins of their argument: DVR users pay more attention to what's flashing on-screen, even if it's a commercial that's being fast-forwarded at 10 times normal speed, so if something catches their eye, they'll rewind back to see it.

Does anyone who's not drinking the networks' kool-aid believe this?

Let me be blunt: The conventional TV commercial is going the way of the dinosaur. We don't know what will replace it yet, but it's an open secret that even as the price of prime-time advertising goes up, its impact is dropping like a stone. Although there are only an estimated 8 million DVRs in homes and playback viewing is less than 5% of the total viewing audience (numbers via adweek), it's indisputable that DVR viewing is on the rise (to say nothing of other recent ad-free trends, like people BitTorrenting TV shows to watch on their computers and ABC's recent partnership with Apple).

The major networks appear to be in complete denial about the impending demise of the TV commercial. That's the first of the 5 stages of grief. Personally, I can't wait until we hit anger and bargaining.

Update: Ilya takes issue with some of my conclusions in comments. Come join the fun.



The full story is here.

My comments:

Networks are well aware of the problems posed by the DVR, but the issue is that other media (print, blogs) that have vested interests of their own in TV's downturn over-hype the DVR effect, which at this point is still far from dramatic. The bubble will not burst until an equally compelling advertising model emerges, and right now there is no such sustainable model on the horizon. The proof lies in the rising prices of TV time slots even as their effectiveness goes down, which demonstrates the lack of a viable alternative.

In the long term, the traditional TV ad model will indeed change, but it is in everyone's interest to figure out what it will be and actively participate in its creation. Advertisers need their cost-effective access to the large audiences just as media needs advertisers' money. Just as there are scenarios in which the 30" spot fades away, there are scenarios in which it stays alive and well. Last week, we saw three pod-vertising networks launch, and all of them rely on what in effect is the 30" spot for podcasts - untargeted, largely irrelevant ads preceding or interrupting a show.

There must be still enough people watching the ads, just as there are enough people clicking on spam, opening junk mail and glancing at billboards to keep all those models profitable.



I agree with most of your points, and perhaps the tone of my post was a tad hyperbolic. There is no single viable alternative to TV ads yet, but it's debatable whether the rising price of TV time slots as their effectiveness decreases stems from that as much as institutional inertia and the fact that no one's yet lost their job for recommending a TV buy, instead of a rational economic analysis that says TV ads are still worth it.

With regards to you point about it being in everyone's interest to preserve the 30 second TV ad, I think you overlooked one crucial group: The audience. What's the benefit to the audience of having ads forced down their throat? In TV, ad revenues have always helped support the programming, but as I understand it, the networks often leave a significant portion of a show's costs to its producers, even when ad revenues far exceed the cost of the show, rendering the whole "ads pay for the shows" argument problematic. In addition, the Gizmodo article I linked to references the Easter Egg code in Tivos which allows people to change the skip-to-hash button into a 30 second skip. I wouldn't argue that a significant portion of the TiVo-using population has taken advantage of it, but when you combine that code's existence w/ people who Bittorrent shows or watch them on DVD via Netflix, a growing segment of the audience is choosing (or at least capable) of watching TV without any ads at all.

This is getting long enough to be another post, so I'll stop here for a moment.


The future of television advertising is Ryan Seacrest interviewing Taylor Hicks to the backdrop of an animated, bubbling Coca Cola logo. You can't skip the ad because you'd miss the content.

Then again, that isn't the future... Nascar has been doing it forever.