Remote Power: Can PVRs Kill TV Spots?

Television commercials may become the casualty of personal video recorder (PVR) penetration, the Yankee Group finds, but the ad’s demise may not come until mid-to-late 2005 when more than 10 million subscribe to the digital technology.

PVRs — sometimes known as DVRs (digital video recorders) — are similar to VCRs (video cassette recorders) in the sense that they both record, rewind, stop, fast-forward and pause, but a PVR records to a hard drive instead of a tape. PVRs — like TiVo will search out your favorite programs to record — have higher functionality than VCRs, allowing you to pause a live broadcast, record more to disk, and use an interactive interface to customize the viewing experience.

Often, viewers eliminate TV commercials with a touch of a button, and ReplayTV, a PVR vendor, has created an “ad-skip” feature on their remote controls.

Adi Kishore, Yankee Group Media & Entertainment Strategies analyst, estimates that by 2007, nearly one-fifth of all U.S. homes will be able to fast-forward TV commercials, eventually disrupting the entire value chain for television. The report details the impact the PVR will have on the television advertising industry, noting that roughly $5.5 billion in revenue — or 11 percent of their TV ad budgets — will be lost by 2006 when more than 19 million U.S. homes own a device.

PVR Penetration in U.S. Households
2001 0.6 million
2002 1.8 million
2003 3.8 million
2004 7.8 million
2005 13 million
2006 19.1 million
Source: Yankee Group

The global PVR picture is also in focus, as In-Stat/MDR expects worldwide unit shipments to increase from 1.5 million in 2002 to over 11 million in 2005, with North America accounting for 80 percent through 2003. As demand grows in Europe and Asia, North America will drop to 55 percent in 2007. The DVD player/PVR combo unit will reach 2.5 million worldwide shipments by 2005.

Jupiter Research (a unit of this site’s corporate parent) found that PVR household penetration in the UK, Germany, and France is similar to the growth in the U.S. Only 2 percent of U.S. homes had PVRs in 2002, while the UK had 1 percent, and Germany and France both registered 0 percent.

PVR Penetration in the UK, Germany, and France
  UK Germany France
2002 1% 0% 0%
2003 2% 1% 1%
2004 4% 3% 2%
2005 7% 6% 6%
2006 14% 13% 11%
2007 28% 25% 20%
Source: Jupiter Research

If the PVR versus TV commercial war is based on popularity, there might be no contest. While viewers regularly skip over TV commercials, by channel surfing or leaving the room, PVR users record very high satisfaction rates with their devices. The Yankee Group found that 97 percent of TiVo users recommend the product to their friends, and 83 percent of respondents to an In-Stat/MDR survey were either extremely or very satisfied with their PVR service.

Yankee Group suggests that TV advertisers adopt alternative methods to the spot commercial, such as product placement, sponsored shows, and other media outlets. As consumers become more comfortable with the growing role of the home PC, enhanced TV applications — which allow viewers to access interactive content during a television program — become another option for advertisers.

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