Higher DVR usage becomes a mixed blessing for TV industry
One of the most popular new shows of the fall television season is NBC’s “Revolution,” a drama about post-apocalyptic America.
But the real revolution is how people are watching it.
About 9.2 million viewers tuned in to a recent episode, a so-so performance. But that number jumped by nearly 5 million when the Nielsen ratings service added in the people who recorded the show and watched it later or saw it through video on demand or online.
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“Revolution” isn’t the only show whose popularity can no longer be measured solely by traditional TV ratings. Of the 18.1 million people who watched the season premiere of CBS’ new gangster drama “Vegas,” 3.3 million did it hours or days after the episode originally aired. It is not uncommon for more than half of the audience for Fox’s “Glee” to watch the show after it airs on Thursday nights. FX’s “Sons of Anarchy” doubled its audience for a recent episode thanks to the digital video recorder. Even ABC’s “Modern Family,” already one of the most-watched situation comedies on television, has gained as much as 30% of its audience from DVRs.
“This year is a tipping point for all of us to look at the world a different way,” said CBS Chief Executive Leslie Moonves.
Although the DVR is a blessing for couch potatoes, it is more of a mixed blessing for the television industry. The upside is that the DVR enables people to watch more television and gives executives another measuring stick to determine hits and flops instead of living and dying with overnight ratings.
The downside is that although DVRs enable viewers to catch shows they might otherwise miss, if someone is watching a recorded program it means they are not watching live TV. Networks still put great effort into designing lineups that will keep viewers tuned in to live TV. DVRs and other platforms have the potential to blow traditional viewing habits out of the water.
And if viewers are using their DVRs more to watch TV, it also means they can easily skip through commercials, which has many advertisers worried.
“I just don’t think we can put all our eggs in one basket anymore,” said Andy Donchin, an executive vice president with Carat, which buys commercial time for General Motors, Home Depot and other companies. “It’s time to see what other media platforms we can use to make up for the people who are not watching our commercials.”
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Network executives and Nielsen contend that not everyone using a DVR is skipping commercials. In May 2010, a Nielsen analysis showed that in homes with DVRs, average prime-time commercial viewership among adults 18 to 49 — the demographic most popular with advertisers — jumped 44% from the time ads first aired to three days later.
“The ratings tell us people watch commercials when they are doing playback,” said Pat McDonough, a senior vice president at Nielsen. According to McDonough, almost half of all spots are viewed in playback mode. That figure, she said, has increased from a few years ago.
Viewers often simply forget they are watching a recording, particularly if they are seeing a show the same day it was recorded, McDonough said. There are also more eye-catching advertisements, she added.
“The people making the commercials know how to get us to come off the fast-forward button, McDonough said.
According to Nielsen, 50.3 million of the nation’s 114.2 million homes with a television have a digital video recorder — nearly half of all homes with a television. Although DVR penetration is starting to slow, people are using the devices more. CBS research indicates that DVR usage has grown 6% so far this television season compared with the same period last season. DVRs are also getting more sophisticated and can record multiple shows at the same time.
Even if half of DVR users are routinely skipping ads, CBS’ Moonves counters the other half that are watching ads is the equivalent of found money.
“The DVR increases viewers and even assuming the 50% skipping commercials, the total number more than makes up for it,” he said.
The networks are also finding ways to make commercial skipping more of a hassle. In the past, a network show might have three commercial breaks of equal length. Now, many shows have four shorter breaks. Viewers who fast-forward often find themselves having to rewind and ultimately decide it’s easier just to watch an ad or two.
“They have been very clever in coming up with different things to try to break the consumer habit of skipping ads,” said Francois Lee, a senior vice president at MediaVest, which buys advertising time for Procter & Gamble, Microsoft and Wal-Mart.
Currently, networks are compensated by advertisers for commercials watched up to three days after the initial airing of a given show. However, as more consumers fill up their DVRs and take their time watching what they have recorded, TV executives want to extend that threshold by a few days.
“We want to be paid for every impression we deliver, and that’s a discussion we should be having,” said Ted Harbert, chairman of NBC Broadcasting.
That may be a tough sell to advertisers. Many commercials are timed to particular events such as a movie premiere or a new product launch, and advertisers may be reluctant to pay for anything beyond three days.
DVRs are primarily used on scripted fare. Sports programming and big award shows such as the Oscars are considered “DVR proof.”
Ultimately the TV industry would like to wean consumers off of DVRs in favor of the video-on-demand platform. The primary reason for that is because fast-forwarding is typically disabled on video on demand. As the networks make more of their shows available on video on demand — often just hours after their original airing — the hope is more consumers will be willing to endure commercials for the trade-off of not having to worry about constantly programming a DVR.
Video-on-demand can also solve the issue of timely commercials. Technology exists to replace old ads with fresh ones, a ploy the industry calls “dynamic ad insertion.”
“This is very expensive product to make and it will only continue to be made if we find a way to monetize it properly,” NBC’s Harbert said.
For programming executives, the DVR means shows that in the past would have gotten a quick hook because of low ratings can get a stay of execution as was the case this season with Fox’s “Fringe.”
“You have to take a longer view,” said Fox Entertainment Chairman Kevin Reilly. “We basically have quadrupled our data intake to get a read on how we are doing.”
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