TiVo Is A Four-Letter Word

Some inventions have a far-reaching impact on society; others just pretend they do. It looks like TiVo (along with the various other, less effectively branded digital video recorders such as ReplayTV) belongs in the former category. Seriously.

It’s not the light bulb or the airplane but DVRs that may have a profound effect on the entire TV industry. According to the makers of TiVo, there are more than a million users of the device today and that number is growing fast. Add to that another million using other DVRs and the numerous cable and satellite providers offering this technology, and you’re talking about a burgeoning phenomenon--a “TiVolution,” say some.

And is that so surprising? Who wouldn’t want the ability to record and store dozens of hours of television without having to deal with tape? Who wouldn’t want to pause the live broadcast of the Super Bowl to take a much-needed bathroom break? Who wouldn’t want to be able to skip through every commercial at the push of a button?

It’s that last feature that has the industry on edge. Some DVR companies come right out and boast about their 30-second skip feature. TiVo offers no such feature officially, but for some time a simple hack has been readily accessible to skip forward in 30-second increments. The fact is that DVR users--a demographic that also happens to be the big-spending, gadget-loving early adopters most coveted by advertisers--are exercising their option to avoid commercials. That’s not so good for ad agencies and their clients, who may have to seek out other means of hawking products. It’s potentially worse for commercial broadcasters.

So Now What?

So what’s the industry to do? How will advertisers use television when DVRs realize a significant market penetration? You name an idea and it’s been written on a whiteboard somewhere. How about commercials that don’t run 30 seconds? Maybe a 23-second spot would be followed by one with a 47-second duration. At least viewers would catch pieces of commercials and maybe they’d become frustrated with the skip feature altogether and just submit. This might be a nightmare for a lot of salespeople, but it beats unemployment.

Maybe commercials could run on the screen simultaneously with the show the way promos are now routinely squeezed in alongside end titles. Maybe the answer lies in a return to the single-sponsor model of TV’s early days, when I Love Lucy and Philip Morris were inextricably entwined. Perhaps product placement within shows will become the norm. Producers have made attempts at seamless product integration already, but for some, shows like The Restaurant spelled out in bold relief the limitations of such an approach.

Eric Hirshberg, managing partner and executive creative director at Deutsch advertising in L.A., says of The Restaurant, “It was sort of a crude blueprint of what [the product placement option] could look like and whatever you thought of the entertainment value of that show. I think everybody will agree that the product placement was fairly clunky and got in the way of the realism of the drama. Maybe that’s the future or maybe not, but I think there’s a very small section of the marketing universe for a show built [on] product placement that way.”

Some PVR companies, not surprisingly TiVo among them, are positioning their devices to networks and advertisers in a positive light. In some cases, they claim, the devices might not kill traditional advertising at all. “The 30-second spot is challenged in some programming more than others,” said Kimber Sterling, TiVo’s director of advertising and research sales. The company’s TiVo Commercial Viewing Report measures such things using data pulled from subscribers’ TiVo boxes during those required update calls in to TiVo headquarters.

“There are certain types of programs--sports, news, and event programming--that tend to be viewed in ‘live’ mode,” said Sterling, “and this is where the 30-second spot may live on forever. But there are others that tend to be viewed in recorded mode. It’s during sitcoms and dramas--particularly the higher rated ones--where we see a lot of skipping.”

But skipping isn’t as dire as some think, said Sterling. TiVo, with its ability to anonymously gather data about subscriber preferences, can offer marketing advantages straight broadcast TV cannot. Take the TiVo Showcase for instance. Here, an advertiser can load an extended ad or promo onto subscribers’ hard drives and try to entice them to click and watch it as they would a program they’d recorded.


Such companies as Universal Studios, New Line Cinema, General Motors, Nissan, and Coca-Cola have already gone the Showcase route. Coke, for example, provided a custom half-hour entertainment “show” called Sound Check just to TiVo subscribers. The “show,” created in partnership with Universal Music Group’s Interscope label, includes music videos, behind-the-scenes segments, and interviews, all prominently sponsored by Coke.

Last October 2-15, TiVo users were given the option of watching a Cadillac promotional video about the SRX SUV. This was a trial run-through of the Showcase approach on the part of Cadillac, its Detroit ad agency chemistri, and the car company’s media planning arm, GM Planworks. In this case, TiVo subscribers were offered the chance to learn more about the vehicle by watching a promotional film. The experiment was seen as a success.

Of the 800,000 households that had
TiVo at the time, 132,000, or 17%, visited the showcase, said Bill Waldman, Cadillac advertising manager. “They spent an average of two minutes and 35 seconds viewing the program and 5% of visitors then went to our website and requested a brochure. We felt those were very good results. You wouldn’t get that many people spending that much time looking at a piece of direct mail.”

So Cadillac was not only able to get its message out in a DVR-specific way, it was also able to gather important data about how many people watched, and for how long and where they lost interest. Perhaps DVRs may limit the usefulness of shotgun-style advertising, but at the same time, some say, they can offer enough information about subscriber tastes that an even more effective, precision-rifle approach will help advertisers segment the market in all sorts of new ways.

Silicon Valley startup Avtrex is banking on this. The OEM software provider, which contributed to a product introduced at CES called the Prismiq Media Player Recorder, is interested in selling products to DVR companies that help everybody take advantage of this kind of customer feedback. CEO Steve Francis expects to see the traditional commercial model give way to a system where DVR users are given some kind of incentive to choose from a menu of commercials and to watch a certain amount in order to gain access to desired programming—say a full 18-minute sitcom devoid of interruption. The model is similar to that of Salon.com, which gives visitors the option of paying for content or watching pop-up ads instead.

“We asked ourselves what happens to the traditional model if people aren’t watching commercials,” said Francis. “I bought my ReplayTV two years ago and I skip through most of the commercials. But there is a set of advertisements I miss—products I’m personally interested in. I like to go to movies and see movie trailers. I like to watch new shows on TV and I’d like to learn about those. There’s an array of products and services that are of value to me. I would watch those.

“So I could use [DVR] technology to skip content that’s not of interest while still having access to content that is. I could choose which commercials I wanted to watch and that seems the obvious way to provide a new value proposition. I watch commercials, but I choose what interests me. And advertisers can get a better idea about viewers’ tastes and interests.”

Sounds pretty good for viewers and advertisers but Hirshberg detects a flaw in the viewer’s choice model of advertising. “One of the primary functions of the 30-second commercial,” he says, “is awareness-building. That means before I saw the commercial I was unaware [of the product]. The idea that we’re just going to sell people what they want to be sold doesn’t take into account that part of our job is to sell things that people didn’t know they were interested in.”

Obviously, there’s still a lot to be worked out. Burtch Drake, president of the American Association of Advertising Agencies (AAAA), in New York, admits that DVR technology likely will change the landscape for his members. But today, he notes, DVRs have yet to reach a significant enough penetration for them to treat any of this as an immediate concern. There’s time to cogitate and experiment. When 25% of households have DVRs, he said, “then people will start to pay serious attention.”

But even if that happens, he’s not ready to write off the current paradigm. “Just because people are time-shifting programs,” he said, “it doesn’t mean they’re going to skip through the commercials. Look at the commercials during the Super Bowl. People want to see them. If the commercials are good enough, people will stick with them. If not, it’s no different than people who go get a snack or flip through a magazine during the break. It’s not the end of the world.”