PVR's: The End of A Beautiful Relationship? | SMLXL - Engagement Marketing and Communication principles from Alan Moore

PVR’s: The End of A Beautiful Relationship?

January 14th, 2005

A very good friend of mine Mike Smallwood – who sits on the SMLXL consulting board has done some thinking on the impact of PVR's in the UK. Much has already been written about the PVR, and much will continue as "Tivo to go" has been launched, which enables your Tivo to send download data to other devices, as Microsofts Media Centre (MMC) makes a bold claim to the living room and the battle for our shelves.
Once again Mike thanks for the thinking:

The Non-compliant Viewer: The commercial television industry has evolved around the principle that viewers are compliant recipients of programme content created, selected and scheduled by the channel provider.
In return for "free" access to this content viewers have been required to accept the embedded presence of increasing levels of advertising and cross promotional messages today it is not uncommon for non-programme content to account for 17 minutes of every clock hour.
In the days of limited choice and free-to- air services the pact between broadcaster and viewer held firm. However with the advent of multi-channel, pay TV this tacit agreement began to break down.
Faced with an expansion in choice from 4 channels to 200+ channels the viewer began to move away from their role as passive recipient towards self-selection and personal control. With the aid of the remote control they "learned" to surf the channels and zap the commercials.
While total time devoted to viewing television has remained remarkably constant the individual share of viewing to any single channel has declined dramatically. Today a typical viewer will have a repertoire of between 11-15 favourite services and whereas only 10 years ago prime time network drama could often expect an audience of in excess of 20m viewers today they struggle to secure 10m – still impressive but, a significant fall!

Bring On the PVR!
Just as the broadcast industry was beginning to learn to deal with the implications fragmentation had forced upon them by the advent of multi-channel they now face an even larger threat in the form of the PVR ? most famously represented in the UK by Sky+.
The PVR provides the newly assertive viewer with access to far greater control than anyone could have imagined only 5 years ago. Via a compute hard drive the PVR enables recording and storage of up to 20+ hours of content.
NB: storage capacity is forecast to continue rising inexorably with one pundit predicting a device capable of holding 7500 hours by 2010!)
Linked to an intelligent EPG (Electronic Programme Guide) the device can record individual programmes, entire series or shows featuring your favourite actor.
With a little further usage it is possible for the device to "learn" your favourite programme formats/stars and automatically record and store them for future review!
Most worrying for the current television funding model has been the opportunity for viewers to skip advertising content when "playing back" recorded content ? given the non-linear storage format it is possible to start recording a programme and then begin delayed viewing a little later. By using the skip function the viewer can fast forward through unwanted segments (invariably the ad breaks) and ultimately finish their viewing session in real time transmission ? see the movie in 2 hours not the scheduled 2 – hours including commercial breaks!
Unsurpsingly the implications of this shift in control have been met with howls of protest from members of both advertising and broadcasting industries as each foresee the decline of their "opportunities to see" and associated revenue models.
Most vocal amongst the protestors has been Jamie Kellner, CEO of Turner Broadcasting who in 2002 told a cable industry magazine that ad skipping?. Ad skipping. Its theft". Despite his protestations of an implicit contract for the viewer to watch the commercials as well as the programmes it seems that the viewer is no longer willing to comply!
While the ad-funded broadcasters have pursued a futile attempt to suppress the inclusion of "skip" functions in PVR's a new pact has been developing between equipment manufacturers, subscription funded broadcasters and the, newly engaged and active, viewer at home.
As a consequence PVR penetration in both the USA and UK had reached c5% of all homes by the end of 2005. In the UK most of this growth has been accounted for by Sky+ – with an installed base approaching 750,000 units this actually equates to a penetration in excess of 10% of all Sky homes.
While there are a wide range of forecasts available there is general consensus that penetration of PVR's will increase rapidly as consumers seek to replace out-moded VCR's – most pundits agree that overtime the PVR will secure near universal distribution – potentially by 2010.

Eating Their Own Lunch
For the traditionalists in the industry the actions of Sky could appear crazy, why promote a technology which enables viewers to control the output so carefully created by your schedulers?
On closer inspection their actions are actually well considered. Firstly we should remember that fundamentally Sky is a subscription based business ? only 10% of their income derives from advertising/sponsorship sources. While not an insignificant source of revenue this is not at the core of their business model.
Secondly, and more importantly, I suspect Sky recognised that the rising popularity of PVR technology was inevitable, as consequence they have taken the strategic decision to embrace the product and work with it. In this way they have a greater chance of shaping and controlling developments.
On 5th January 2005 The Guardian newspaper reported that Sky have patented technology which enables viewers to exclude all advertising from content recorded on Sky+.
While not yet intended for implementation Sky have ensured that they remain in control of future developments?
Essentially I believe that while they acknowledge the potential of PVR`s to disrupt many elements of the existing broadcast business model Sky also see potential for the technology to be revenue generative. In order to ensure that they have the opportunity to exploit these revenues in the future they are moving proactively now.

Does This Mean End For Spot Advertising?
I would suspect not. While new technology has enabled the viewer to take greater control of their viewing there will always remain occasions when we all wish to act as passive recipients and allow the network scheduler to make choices on our behalf. The continuing success of major sporting events, the rising popularity of Pop Idol, Big Brother et al will ensure that the commercial break is unlikely to disappear.
However the number of major viewing occasions when this occurs has already reduced ? and will continue to do so. As these shared moments decline it is likely that they will command an ever greater premium as advertising opportunities and that the included advertising content be both relevant and entertaining think of the Superbowl in the US.
Despite these words of reassurance I am equally certain that advertisers will need to radically alter their approach to the use of the medium in a number of ways:

1. Farewell OTS Hello Engaged Viewer : Long touted as a prime objective for advertising engagement Opportunity to See will continue to lose currency as a measure of success. In the old world while an individual viewer may have been exposed to 30+ OTS in a typical viewing session if 29 of those exposures where for irrelevant /inappropriate products then those messages were wasted.
In our new world of viewer control it will become increasingly important for advertising to move beyond exposure and embrace engagement. For this to occur will require ever greater focus on the targeting and placement of relevant and engaging commercials

2. Embedded Product Placement: Oft touted as a solution to the decline of the spot advertisement product placement will have a role to play but cannot be the sole panacea to marketers communication issues. Executed well with relevant associations product placement offers an opportunity to engage with consumers – conversely inappropriate activity will only increase skipping/zapping behaviour!

3. Long Form Executions Via Click Through: Currently associated with the internet click through access will migrate to PVR enabled TV commercials. By utilising capacity within the PVR hard drive advertisers will be able to direct consumers to view longer form executions of linear broadcast activity- either from editorial or short form advertising content.
The success of BMWfilms.com in providing access to a range of mini-movies via the internet represents an interesting and challenging model for transference to TV.

Look To the Positives!
To date most media pundits have seen the PVR as a threat to traditional commercial models. And yet while we are at a relatively early stage of development it is already possible to make the case for this technology making a positive development to the communications industry. Research conducted in the USA during 2003 by Media Kitchen found that:
Homes with PVR's spend more time in total watching TV
PVR owners declare themselves to be more satisfied with the overall viewing experience
Consumers are able to access content which they perceive as relevant to them ? advertising and programmes
The PVR has given the consumer the opportunity to screen and potentially view, TV ads before they decide to skip forward – whereas previously they were zapped with the remote.

In Conclusion
There can be no doubt that the PVR represents a disruptive technology. Equally unquestionable is that, just like the PC or the Internet beforehand this technology will come to be embraced by consumer and marketer alike and WILL provide opportunities to enhance communication and engagement
For the nay Sayers standing on the sidelines I'm afraid the game really is up. The PVR onslaught can only gather speed and will inexorably destroy old fashioned business models. In its wake it will force the creation of new mechanisms to reach relevant, engaged consumers.
Those companies already committed to working with this new technology will reap the rewards of an entirely new marketing vehicle just like Caxton's printing press, radio in the 1920's, commercial TV in the 50`s or the internet in the late 1990's.
PVR's will prove to be more than an irritating disruption, they will come to represent the launch pad for a wholly new platform for engaging advertising and marketing activity.
All that is required is that the communications industry adapts to keep pace!

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