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Zap! Every Day More Viewers Are Skipping Through Commercials

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Personal video recorders (PVR's), such as TiVo, let TV viewers easily record programming and fast-forward through commercials. PVR's will be in 30 million homes (30% of U.S. homes) in the next 5 years, up from 3 million homes today, which represents an annual growth rate of 59%. The rapid growth in PVR's is in part due to the fact that many cable operators and satellite providers are giving PVR's away for free. And this trend should continue, since DIRECTV's subscription cancellation rate is reduced by two thirds for subscribers with PVR's.

PVR Users Skip Through 70% of the Ads

More than 50% of people surveyed with a PVR say that skipping commercials is their favorite feature. Viewers watch 20% to 30% more television once they get a PVR, but they use it to skip through 70% of the ads. This trend could have a profound impact on DRTV response rates. A combination of rising media rates, lower ratings and increased zapping through ads will potentially hurt ROI for both short form and infomercial campaigns. Some might rationalize that PVR's will not affect infomercial viewing, since they are only designed to zap through :30 commercials. However, when consumers have more control over when and what they watch on TV, there will be less channel surfing, a primary way consumers end up watching an infomercial.

Empowered Media Users

The way media is consumed is shifting from couch potatoes passively receiving whatever the networks broadcast, to empowered media users controlling and shaping the content, thanks to TiVo, iPod and the Internet, according to Business Week. Nielsen recently began tracking the viewing habits of TiVo users, a sign that advertisers and the networks are concerned about PVR usage. PVR usage is highest among 18-49 year-olds, which is the key audience that sets ad rates for much of television programming.

Countering Ad Zapping

The biggest challenge is going to be grabbing the attention of viewers, who are getting used to having more control over what they watch. TiVo currently is offering several options designed to prevent viewers from zapping through commercials, such as screen space on its programming guide page and hard drive space for pre-recorded ads that offer sweepstakes and other incentives to entice viewers to watch them. In addition, TiVo has created a feature called Showcase, which allows advertisers to store a long-form ad for on-demand viewing. TiVo also plans to unveil a new feature called video-to-video, which will bring web-like, interactive advertisements to TV. Testing and utilizing the best of these features may provide DRTV advertisers options to counteract the ad skipping trend.

Future Trends in Advertising

The future of advertising seems to be heading towards:
1) A convergence of TV watching and the web, where consumers will be able to order directly off their TV by clicking icons.
2) A blurring of the lines between advertising and programming.
3) Consumers having greater control over access to programming and commercials.

The current advertising model is not going to hold up forever based on ad viewership trends. Perhaps, in the future, consumers will be required to watch a certain number of ads in order to receive TV for free. PVR's can track this type of activity. This type of arrangement has been offered by some Internet service providers, who provide free service in return for the consumer being exposed to advertising.

Even though the number of viewers using PVR's now is relatively small, this is a good time to start formulating strategies to respond to the growing ad zapping trend. If the ad industry and people associated with the industry do not address the issue soon, we could end up in a position similar to what happened with the recording industry, which has seen their business decimated by downloading.

Peter Koeppel, President
Koeppel Direct

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