NEW MEDIA: SPOTLIGHT ON PERSONAL VIDEO RECORDERS - How the ad industry has learnt to stop worrying and love TiVo. Personal video recorders are unlikely to cause the death of ads

When TiVo, the first personal video recorder available on the UK market, launched 18 months ago, the fear across the advertising business was palpable. Like small town hicks whispering about a creature in the swamp, agency people gave TiVo monstrous features - a switch that would enable viewers to programme out ads was rumoured to be its most hideous deformity.

But, as with all the best scare stories, much of the horror was grounded in myth. TiVo, and the more recently launched Sky +, is proving to have a more complex relationship with advertising than first appeared to be the case.

TiVo and Sky + may actually benefit advertisers that are developing interactive ads and longer format programming. Recent data released by TiVo even suggests that users of the technology still want to watch traditional TV advertising. Viewers who taped the Super Bowl replayed Pepsi's Britney Spears ad more times than any other portion of the game.

Now seems an apposite time to assess the impact of PVRs in the UK as TiVo has just announced findings on its users' viewing habits and Sky revealed in its annual results that it now has 25,000 Sky + users.

Take-up of PVR technology in the UK is still woefully slow. TiVo won't reveal its UK subscriber figures, presumably because they are so low, but observers suggest they are running at around 10,000. Globally it has 380,000 subscribers. Sky +, which launched last September, also has yet to make significant inroads into the Sky Digital subscriber base.

However, this will change. Not least because Sky + is central to Sky's strategy of increasing average revenue per subscriber to £400 by 2005.

It currently stands at £341. Sky +, which like TiVo automatically records programmes according to viewers' preferences and can also pause live programming while running through the Sky Digital EPG, has a high entry level price.

The set-top box costs £300 and subscription costs £10 a month. TiVo, which is also backed by Sky but works across other platforms such as cable, costs the same.

However, digital TV experts expect use of PVRs to become widespread.

Research from Informa Media forecasts that 40 per cent of digital satellite homes will have a PVR by 2010. Marcus Vinton, the chief creative officer at Spring TV, says: "Sky's targets won't be achieved through its commerce but through video on demand. A sizeable part of the public is happy to pay between £15 and £30 a month for bespoke content on demand."

The vision at TiVo and Sky, which also develops marketing on behalf of TiVo (recent press and cinema ads were created by Bates UK), is that Sky + will be the natural choice for Sky Digital subscribers with TiVo the PVR for cable, analogue and digital terrestrial viewers.

Recent TiVo research predicts that PVRs will eventually spell the end of primetime television because close to 70 per cent of PVR viewers watch recorded programmes rather than "live

television. Matthew George, the product marketing manager for TiVo, says: "When somebody uses TiVo the only programmes they watch live are major news events or live sport. The typical user will check the news then go to the 'now playing' TiVo screen to watch their pre-recorded selections."

So what effect does this behaviour have on viewing of advertising? "It's a myth that TiVo boxes have a magic button that zaps out advertising but in recorded programming viewers will fast forward through ads just like with a VCR but if people make good ads then viewers will watch them."

Andy Tilley, the managing partner at Unity, says: "We will end up with advertising that people select themselves. Advertising will become a selection of messages with greater relevance to consumers rather than passive advertising."

Also, TiVo and Sky + may open new avenues for interactive advertisers.

George says that in the US advertisers including BMW have developed longer format programming that viewers can download from the TiVo box. Similar advertising in the UK is likely to follow. George says: "TiVo stops the broadcast stream so you can click and watch an interactive ad and then go back to the programme."

Sky is also likely to work with advertisers on interactive advertising through the Sky + box. A Sky spokesman says: "We don't see PVRs as a threat to advertising. Looking ahead there are opportunities for advertisers. Once you have the hard disk storage facility of a PVR, then you can use it for things other than programming: interactive advertising, targeted advertising."

Vinton supports the suggestion that PVRs will provide advertisers will some interesting options: "Advertising won't disappear but consumption of TV is becoming fragmented. Even the best advertising in the world will find it harder to cut through the noise. Advertisers are faced with the choice of spending three times as much to be as effective or in investing in longer format programming."

TiVo and Sky also argue that the introduction of PVRs will lead to greater levels of insight into viewing habits, providing useful information for advertisers. Andrew Cresci, the vice-president of TiVo Europe, says: "Detailed analysis provides invaluable data for the industry, as it not only shows how many consumers watched an ad but details the exact part of programmes that they watched and how many times it was replayed."

Despite the current low levels of penetration of PVRs, Vinton says: "I do think that TiVo is a good tool; however, it has had very little marketing in the UK. Digital boxes that offer a 'one-stop watch' approach (Sky +) provide a far more compelling and less complicated purchase decision.

The 'whatever-whenever' factor is changing television consumption in a very real and consumer friendly way."