TV industry needs to push VOD over DVR, top analyst says

NBC's "Revolution" is on video-on-demand.

Media executives have been making a lot of noise lately about getting advertisers to pay for viewers who watch shows they have recorded four or more days after a program’s initial airing.

Currently, they pay for viewers who see a commercial within the first three days of it being recorded. But as the DVR reaches 50% penetration in the country and people stockpile shows, TV network executives want to extend the window of counting viewers to seven days. Of course, many viewers skip ads anyway, but Nielsen claims close to 50% of people using DVRs do watch a lot of commercials.

But Rich Greenfield, an outspoken media analyst with the firm BTIG, says the entire three-day-vs.-seven-day debate is a distraction and that the industry needs to focus more on driving consumers to use video-on-demand (VOD).

“The industry must find a way to put a dramatically larger perentage of content on-demand, with targeted advertising and a lower ad-load,” he wrote in report released Wednesday. “Nobody will use a DVR if they can get to whatever they want, when they want it, where they want it, especially if the ad load is lighter and the ads relevant.”


The networks are putting more content on video-on-demand. Most shows on VOD have either the same commercials that ran in the broadcast version or slightly fewer spots. The big difference between VOD and DVRs is, of course, that the fast-forward mechanism is typically deactivated for commercial content on VOD.

But the networks’ problem is that they have to be careful about how heavily they promote the VOD option. That’s because the local stations that carry network programming probably won’t be too thrilled if the networks are basically telling viewers they don’t need to watch their channels to catch all their favorite shows.

The networks currently collect a lot of money from affiliates in return for programming. If the affiliates think the networks are potentially driving viewers away from their own stations, they might wonder if they are getting their money’s worth.

Ultimately, the industry needs to adjust the business to viewers. VOD is a better option than the DVR, but viewers will only embrace it if their favorite shows are available within hours or a day after airing and the networks don’t load the shows up with commercials.

At the same time, the networks need to find some way to compensate their affiliates if the growth of VOD cuts into their bottom line. The local station is still the primary home for their content and should be used to drive people to these other platforms without destroying it at the same time.

No one said it would be easy.


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