Attack of the Zappers: The DVR Boom, and Their Commercial-Skipping Features, Have Advertisers Looking at New Tactics
By David Wethe, Fort Worth Star-Telegram, Texas
Jun. 25–TiVo has become both a lifesaver and a vice for Bill Kula and his family.
That well-known brand of digital video recorder is so loved by his two daughters, ages 3 and 6, that they don’t want to watch anything else.
“We’re a bit of a slave to the DVR in that our children will only have their hair dried sitting in our master bedroom where the DVR resides,” said Kula, an executive for Verizon Communications who lives in Plano. “The master bedroom has become Grand Central Station for personal hygiene for our kids as well as watching television.”
North Texans like the Kulas have embraced their TiVos — and other DVR brands — like few others around the country. Indeed, the Dallas-Fort Worth television market has the second-highest percentage of DVR households in the nation, according to the latest figures from Nielsen Media Research. Austin ranks first.
For viewers, DVRs represent a simpler way to record programs than the old videocassette recorder.
Easier recording means more shows being played back later and more viewers zipping through commercials without watching them.
For advertisers, though, this love affair is just the latest source of headaches in an industry already suffering from fractured audiences.
“The advertising industry in total has been shaken more violently in the past 10 years than at any time in its history,” said Scott Dally, who runs Dally Inc., an advertising, marketing and branding company in Fort Worth. “The last 10 years are what brought you the Internet, YouTube and DVR.”
Area TV and advertising executives say there are a number of reasons so many DVRs are popping up around North Texas. This is a young, tech-friendly market; it’s a conservative area where parents want to screen what their children watch; and the region has become a strong market for satellite operators — who fueled the DVR boom — and a relatively weak market for cable companies, who have been slower to embrace them.
But if you think DVRs are directly hurting local TV advertising rates, think again.
Arguing for lower rates
Television stations are finding ways to support their ad rates by analyzing how viewers use their DVRs.
NBC, for example, has done national research that indicates that 100 percent of DVR recordings are played back within seven days, said Brian Hocker, vice president of programming for KXAS/Channel 5.
Nielsen tracks which shows are watched on DVRs and when — live, the next day or within seven days.
Steve Mauldin, president and general manager of KTVT/Channel 11, said that is important information.
“It’s given us credit for the additional viewing,” he said. “It also is relative and important to our advertisers because they’re finding out just how many people did view their messages.”
So far, the growth of DVRs has done little to hurt advertising rates in North Texas.
TV stations raise their rates almost every year, advertising executives said.
“Stations are not going to change their pricing structure,” said Jim Gaither, director of broadcast for the Richards Group advertising agency in Dallas. “They’ve got a business model that they’ve got to continue to make money on.”
And that moneymaking machine has done well so far.
In the Dallas-Fort Worth market, advertisers spent $629 million on TV ads in 2006, according to TNS Media Intelligence.
That’s a 16 percent increase from a year earlier.
National growth was 5 percent in the same period, to $65 billion.
Still, DVRs enable viewers to tune out commercials.
AT&T recently announced that its DVR will allow users to zip past a 30-second commercial with the touch of a button.
Other DVRs allow you to fly by commercials at lightning speed.
“We know somewhere around 60 percent of people using DVRs do zap commercials while they’re watching their DVR playbacks,” Gaither said.
Hocker concedes that “some of that is happening.”
But there is something else occurring that may help advertisers.
‘Advertiser friendly’
At least on a subliminal level, viewers are paying attention to what’s on the screen even as they race through the commercials, Hocker said.
“Sometimes people will stop, go back and play again to watch that last spot just to make sure they get the opening of the show,” he said.
Advertisers know from the Nielsen numbers that the first and last ads in a commercial break are the most watched, Gaither said.
Therefore, advertisers are discovering that as long as eyeballs remain on the screen, there’s another way to sell that advertising space, even if the message is not audible.
TiVo has developed technology for advertisers that can place a company’s logo on the screen when the commercial is fast-forwarded.
“It’s basically a brand impression,” said Jim Denney, vice president of product marketing for TiVo. “It doesn’t slow down your ability to get through the commercial.”
It’s an example of how TiVo is trying to be more “advertiser friendly.”
The Alviso, Calif., company, which helped open the DVR market in 1999 and sold its units through satellite provider DirecTV from 2000 to 2006, even has its own advertising department selling space on its system.
One unusual place is at the end of a recording.
For example, after you’ve watched a recorded episode of the Fox show 24, you’ll be asked if you want to delete it.
In that dialog box, you could also be asked whether you want to buy a boxed set of the series, or whether you want more information on one of the show’s key sponsors, such as Ford Motor Co.
Gaither said his firm is looking at new ways to connect with viewers even as a commercial goes whizzing by on the screen.
“Something needs to happen because we’re losing that opportunity of one to two seconds of forwarding through our commercial,” he said. “We still want to get something out of it.”
Loving the DVR
Advertisers might as well get used to fighting and clawing for any time they can get.
Nielsen counts 19 million households with DVRs across 210 U.S. television markets.
In North Texas, it’s 631,300 households.
Forrester Research says the national number grew from 1 million in 2001 to 13 million in 2005, according to a March report.
By 2011, that number is expected to grow to 65 million “largely due to growth in DVRs built into cable and satellite set-top boxes.”
Executives for local service providers, including Charter Communications and Verizon, see them as a key to growth.
In Fort Worth, Charter is offering free DVR service for a year when a customer signs up for certain cable packages.
The service, which includes DVR rental, normally costs $14.99 a month.
In the past, demand for DVRs was so great that Charter had a hard time keeping them in stock, spokesman Kevin Allen said.
DirecTV, which considers North Texas one of its better markets, has also handed out free DVRs as a way to test consumer response.
Nationally, about 25 percent of its 16 million subscribers have a DVR, said John Suranyi, president of sales and service.
“We would like everybody to have a DVR because we think it changes the way people watch TV,” he said.
Suranyi said DVRs have made his TV watching more convenient because he travels so much.
And that’s one reason Verizon’s Kula thinks the DVR has caught on so well in North Texas.
Because of Dallas/Fort Worth Airport, the region has many residents who travel regularly, including airline employees and regional sales managers.
When they get back home, they’re able to catch up on their shows using DVRs, he said.
“You’ve got a lot of people here who are watching recorded content,” he said.
Kula, who works in Verizon’s corporate communications department, doesn’t live in the area where his company is rolling out its FiOS digital video and Internet service. The new national service, which started two years ago in Keller, is designed to compete with cable and satellite providers.
It, too, is seeing a boom in demand for DVRs, Kula said.
Most of the 100,000 local FiOS TV customers are ordering the digital recorder box with their service, he said.
The company offers two types of DVRs, including one that lets you watch a recorded show in different rooms.
Now, Kula said, if only Verizon could push its service out east to where he lives, he would be a happy man.
“If we were in Verizon territory, we would order the multiroom DVR,” Kula said. “That would liberate us within our own home to be able to tend to parental duties, including drying our daughters’ hair in their room or another room and not just in the master bedroom.”
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David Wethe, 817-685-3803 dwethe@star-telegram.com
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