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TV Advertising revenue under attack from DVRs
Tivo started a revolution
It seems that the popularity of DVRs (Digital Video Recorders) and dropping hard drive prices have put television and film producers into the hot seat. Advertising and DVDs are the main revenue stream for television and film producers and they are blaming the popularity of DVRs as one of the main reasons for the decline in their advertising revenue stream.
DVR users highlight their ability to skip or fast forward past commercials as one of the biggest reasons that they like this technology. This, of course, troubles television networks who depend on ad revenue as their main source of income. Advertisers claim that fewer people are seeing their commercials because DVR users skip or fast forward over them. Frankly, this comes as no surprise because most people don’t like to watch commercials.
Tivo has found a new market in selling spots that are downloaded to the DVR itself. Users have the ability to view these commercial spots and Tivo then has the ability to report exact viewing numbers, which is something that TV networks can’t do because their numbers are based primarily on estimates.
Still, it has been tough going for Tivo to be aggressive enough in the advertising space to gain customers who are do not have a full understanding of the Tivo direct delivery method. In addition, advertisers also are spreading their money out by exploring other advertising mediums such as the Internet, which has seen a growth in mainstream non-tech related advertising.
The DVR market is growing and is estimated to about 30 million units in the U.S. currently and expected to grow to almost 52 million units by 2010. While Tivo continues to be the most well known name in this market space, cable and satellite providers offer their own units from a variety of other vendors.
Tivo is moving to gain additional market share by introducing new HD units that are CableCard ready that target cable customers who want more advanced DVR features than the typical DVR offered by the cable company.
Tivo is also moving to reclaim some of the satellite market by again working with DirecTV to bring updates to DirecTV Tivo units. Many DirecTV customers have expressed a serious dissatisfaction with DirecTV DVR units after being spoiled with the ease of use of the previous generation of DirecTV Tivo DVRs. Many DirecTV customers have rebelled against giving up their Tivo based units.
However, many DirecTV customers may soon have little choice but to give up their Tivo based DirecTV DVRs as the older generation of units does not support the new MPEG4 technology that DirecTV is moving to on the new satellites that have been recently launched. That is, unless DirecTV introduces a new DirecTV Tivo unit that supports the new compression technology and 5 LNB dishes.
Regardless of the other technologies in the market place, because of the low cost of hard drives, large hard disks that can store hundreds of hours of standard definition programming are becoming more common place in DVRs. While previous generation of DVR units came with 40GB or 80GB hard drives, newer units are coming with 160GB or 250GB, and even 300GB in some cases.
While the larger hard drives are necessary to record high definition programming, because of the additional space required to capture the high resolution picture, it offers an excellent way for users to archive many hours of standard definition programming and being able to replay it in the future. With the smaller hard drives, users had to constantly delete programming to make room for more, but with the larger hard drives this is no longer the case.
Many companies have been trying to break into the DVR market space as the advanced technology that can be offered by these devices, coupled with the high user adoption rate; this appears to be an important platform for digital video as well as advertising in the future. Trying to capture the viewer’s attention continues to be a difficult task and is not being lost on DVR developers who are looking at innovative ways of being able to delivery advertising on demand that is coupled with the DVR experience that users enjoy.
Movie studios are also starting to feel the heat from DVRs and they believe that it will start to affect DVD sales, as well. Some studios are looking at ways or technology to deliver movies on demand to DVR units over the Internet for a fee. Tivo has already started development of this with their partnership with Amazon UnBoxed, which is a movie delivery to DVR service.
DVRs could be the future destination for delivery of electronic services of all types and you can look for additional players to attempt to find a niche in this market space. The bigger end cost could be passed on to the consumer in the form of higher satellite and cable bills as programming costs will increase and ad revenue decreases. This is something that will not be settled right away, but look for this fight to get very interesting over the next year or so.
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