For years, the DVR has been unfairly portrayed as the enemy of TV advertising. When Tivo was invented, the television industry was caught completely unaware. There was a palatable shutter as the very foundation of the TV advertising revenue business model was under attack from a box consumers could buy online or in any electronics retailer nationwide.
The DVR is basically the next evolution in the VCR. Instead of using tapes to record your favorite TV series and movies for personal use, someone at Tivo got the brilliant idea to put a hard drive into a VCR box and record TV & movies that way. Of course, the trade off was that you couldn't just give a videotape to your friend to watch in their VCR, but who really did that in the 80's and 90's anyway? In fact, to solve the tradeoff problem, early Tivo's allowed recording to videotapes, but I digress once again....By putting a hard drive in a box and an easy menuing systems, BANG! You have a "renewable" VCR with no need to buy expensive, costly and messy piles of tapes. Tivo faced strong headwinds from a business perspective to answer the multi-billion dollar question that is largely the same businesses risks that Apple faces today, (only Apple currently does it better than any technology company currently), which is "How do you create consumer demand for a device no consumer is demanding?"
Tivo was a poorly mismanaged company that immediately came under attack from both the TV & Advertising industries. And like all small, undercapitalized technology companies, the majors attacked them with lawsuits. And to make matters worse for Tivo, the cable and satellite companies figured out how to build their own boxes to have the same DVR functionality of Tivo with none of those messy patent infringement claims. Tivo also sold its intellectual property to the cable companies for a fee, which they were then cut out of. The gospel according to Tivo with its ability to fast forward through commercials, pause, stop, replay would spell the end of the free, advertiser supported television in the United States. Or would it?
The VCR first hit mass consumer adoption in 1980 and within 10 years had gone global. In the United States VCR penetration was up to 95% in just 1 decade. DVR's went mass market in 2000 and now, 10 years later, it's only in 35% of American homes, and plateauing. What does this tell me? DVR's are a transitional technology. There's an opening for another device with 95% penetration. (Another blog on this later.....)
First, some myth busting: Big hint Advertising industry - no one was really watching your commercials before the DVR came along! Most consumers used the standard non-skippable television commercial as an excuse to grab a snack or a bite to eat, go to the restroom, make a phone call, run a quick errand, turn something off that was on, doing dishes, basically anything you could do quickly in the 2 minutes or more of commercial breaks, you did. That's what commercial breaks were for - feeling active while you were being lazy watching TV. So consumers were already "skipping" commercials.
Second, a little insight into consumer DVR habits. Studies have shown that consumers that have DVRs love them, but utilize them in largely the same way that they did before: an excuse to grab a snack or a bite to eat, go to the restroom, make a phone call, run a quick errand, turn something off that was on, doing dishes, only now, you could do it for longer. In fact, most consumers with DVRs now use them to run errands for longer than 2 minutes because they know they can just rewind what they missed. I would postulate that consumers with DVR are MORE exposed to commercials than they were before. Commercials are start/stop points in your TV viewing. As a consumer, when you want to come back to your TV program, you rewind back to the commercial to start your show, which is then your 2nd exposure to the commercial, because your first exposure is when you got up, you have already heard the brand at the start of the commercial. In fact, studies have shown that people with DVRs will watch commercials that appeal to them. If a man is shopping for a car or a woman for a phone, male or female, people will watch commercials that interest them. So the "ad avoidance" factor that everyone was worried about is largely irrelevant.
Leave it to Hollywood to figure out a way around the DVR commercial skipping problem. Consumers with HD televisions are already expecting to watch programming in the letterbox format. That leave a black blank space above and below the TV picture. And what better place to put the name of your movie and the opening date than in that blank space? So now, even if you fast forward past a Sex & City 2 TV commercial, you do see the name of the movie and the opening date, whether you fast forward through the entire commercial or not. Actually, as a viewer you see it in a much simpler form with a much more direct and simple message that you can visually process easier. See? DVR commercial skipping has been solved.
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