By MEG CARTER, campaignlive.co.uk, Friday, 10 November 2000 12:00AM
It's been billed as the advertising industry's worst nightmare. But will TiVo, the first in a new generation of personal video recorders (PVRs) promising viewers the chance to become their own schedulers, really give adland sleepless nights? Or will it herald a brave new world of TV advertising complete with unprecedented targeting, 'enhanced viewing' and advertiser-supplied TV?
By storing up to 40 hours of programmes on a hard drive (instead of tape), TiVo enables viewers to select what they want to watch from on-screen programme guides. It can also be set up to record a show's entire series or search and record by genre or even by an actor's name. More important for the ad industry, however, is the fact that viewers with the device have all their TV viewing routed through it. As live broadcasts are slightly delayed by this process, TiVo also offers viewers the opportunity to pause 'live' transmissions and fast-forward through TV ads and other bits they may not want or like.
TiVo was developed in the US. Its backers have joined forces with Sky to enter the UK market, where subscription revenues for the service will be split between the two companies. The UK version of the TiVo box, launched in October, is retailing for pounds 399 for the recorder, plus either a pounds 10 monthly subscription or a one-off payment of pounds 199 for the personalised service.
It is being sold through high-street electronics stores and marketed alongside BSkyB, although users need not be subscribers to Sky as the TiVo system also works with analogue TV as well as cable.
Hot on TiVo's heels will come XTV, a digital set-top box with the functionality of TiVo built-in, developed by Pace. Pace is developing XTV with NDS Broadcasting Solutions, a UK company listed on the US Nasdaq share index and 80 per cent-owned by News Corporation. TiVo's arch rival in the US, Replay TV, meanwhile, is also planning to enter the European market in the coming months. And unlike TiVo, Replay promises the chance not just to fast forward ads but to skip them altogether.
How viewers respond to these products remains to be seen. According to Forrester Research, US viewers using TiVo and Replay have forgotten or wilfully ignore TV schedules, preferring instead to watch what they've pre-recorded when they want - thus undermining the interests of TV networks and mass-market advertisers. More worryingly, an estimated 88 per cent of ads in programmes recorded by viewers on their TiVo or Replay boxes go unwatched.
These observations should be considered in the light of the fact that in the year since the two systems launched, just 53,000 US households have so far signed up to TiVo and just under 50,000 to Replay TV. Yet despite the US market's slow take-off, market analysts are predicting that both systems will have sold five to seven million boxes by the end of 2002 and that within a decade they will be in 90 million homes. Small wonder, then, that the BBC's director-general, Greg Dyke, warned at this year's Edinburgh International TV Festival that PVR technology jeopardises the entire economic structure of commercial TV.
But does it? There is as much confusion surrounding the potential of PVRs as there is uncertainty about how consumers will use them, Brian Sullivan, the director of new product development and sales at Sky TV, says. 'Sky relies heavily on advertising revenue,' he adds. 'The impact it will have on TV advertising and revenue is an issue for us and if we weren't happy with the implications, we would not have got involved.'
Yes, TiVo will fundamentally change the nature of TV advertising, Sullivan believes, but not overnight and not for the worse: 'TiVo's business model is based on three strands. The first two - customers buying the recorder and customers paying the TiVo subscription - will basically just achieve break-even, since the company is subsidising the boxes. What will make the difference for them is the third strand: revenue earned through working with advertisers and broadcasters - in the future, for example, by selling targeted ads using TiVo.'
TiVo, he stresses, has not been designed to skip the ads. It has no dedicated button to do so. While viewers will be able to fast forward through ad breaks in and around pre-recorded programmes, they will not be able to do so for 'live' programming, although TiVo's rival Replay does offer this function. In this sense, Sullivan argues, TiVo's impact on the ad break is little different from that of the traditional VCR, although he admits: 'There will be adjustments required in scheduling and creativity.'
Sky's involvement, Sullivan continues, comes down to its belief that such devices will be the technology through which all TV will eventually be delivered, which is why it is also developing XTV. The difference between the two is that while TiVo is a standalone box appropriate for all kinds of TV, XTV will be a digital-only solution built into a new generation of decoder boxes due to hit the market sometime next year.
XTV is not being positioned as something to break the chain between broadcaster and consumer, or advertiser and consumer, but as a technology that all parties can use to enhance their use of TV, NDS's director of new business, David Richardson, insists. 'No-one can predict the effects. All we are providing is the platform,' he says.
And while XTV technology promises viewers unprecedented control over what they watch, it also promises broadcasters and advertisers unprecedented data on who is watching, what they are watching, when and how.
'It opens an opportunity for advertisers to better target their ads - for example, deliver particular ads to particular households,' Rahul Chakkara, NDS's director of interactive advertising, says. 'And you could store ads in the system to be seen by viewers at a later date.'
Given the barrage of claims for a new technology only weeks old in the UK market, it is hardly surprising that British agencies are reserving judgment. Alison Hoade, the head of planning at Lowe Lintas, questions the extent to which TiVo and systems like it will take off. 'The real gap in the consumer market is not yet clear: in a sense, it's more an answer looking for a question,' Hoade says. TGI, meanwhile, shows that the majority of British viewers prefer to watch live TV, and that many never watch the programmes they video.
'The tendency towards narrowcasting has increased interest in common experiences - just look at the success of Big Brother,' Hoade adds. 'TiVo and systems like it will distance people from the collective experience.'
The McCann-Erickson chairman and chief executive, Ben Langdon, meanwhile, points to new opportunities for better tracking and targeting of consumers.
But, he counters: 'While the prospect of changing copy according to different households exists, there has to be a big question mark over the cost effectiveness of doing so.'
For agencies only trading on 30-second TV ads, PVRs undoubtedly do pose a threat to agency revenue, he adds, 'but only for those agencies who have ignored sponsorship, advertiser-funded production, product placement, interactive advertising and pay-per-view'.
For the time being, the ad industry is hedging its bets, but that's not a position that it can afford to take for long.
HOW PVRS COULD CHANGE TV ADVERTISING
Doomsayers warn that the net advertising effect of personal video recorder (PVR) technology is that ads will need to become as entertaining as programmes or the programmes will contain the ads.
There is an element of truth in this and even Sky TV's director of new product development and sales, Brian Sullivan, concedes that advertising will have to change. However, he believes TiVo offers more opportunities than threats to the advertising community, stressing the unprecedented degree of targeting that TiVo promises.
The system relies on data tags attached to all programming and advertising.
As a result, it will enable detailed tracking of what is being watched, by whom and when. And it will enable advertisers to exchange mass-market commercials for niche ads targeting those viewers watching.
'Unilever, for example, might choose to swap a mainstream ad with one targeting 18- to 25-year-old males in certain households where the profile is right and it knows they are viewing,' he says. 'By ensuring a particular audience sees the most appropriate message, surely you are boosting their likelihood to watch.'
Another likely effect is the introduction of incentives to watch - rather than fast forward - the ad breaks. Subscription fees might be waived for those willing to have the fast-forward function disabled for ads.
'As intrusiveness becomes a growing issue and ad avoidance an increased priority, ensuring brand messages get closer to content will be important,' Jez Groom, the director of Starcom IP, adds.
Lowe Lintas' head of planning, Alison Hoade, identifies a number of other potential spin-off benefits. 'PVR technology will reinforce the role that advertising plays in supporting commercial channels, if people are given the choice of paying more to fast forward ads and less for the technology and the ads,' she says. The greatest shift is likely to be away from ads between programmes to ads contained within them.
'PVR technology will provide a major boost for advertiser-funded programming and sponsorship, as it will increase the premium on advertising messages embedded within programming,' Andrew McCall, the managing director of the TV development specialist Inside Broadcast, predicts.
'Advertiser-supported programming has so far been regarded by many as a bit of a gamble. Increasingly, however, it will be the safer option - relying on the programme break alone will be riskier,' he adds. 'It will also be a reminder that the advertising climate exists to set up advertisers' own channels - or strands within existing channels.'
Product placement, however, is not widely viewed as a tactic with significant potential for broadcast TV. 'While it is accepted in film, this is not the case for TV audiences,' McCall says.
This article was first published on campaignlive.co.uk