Big Media Hopes To Kill The Ad-Zapping DVR With Video On Demand

Big Media Hopes Kill The Ad-Zapping

After missing opportunities to make VOD a mainstream technology, TV networks are embracing it to capture tech-savvy viewers - and make them watch ads

When veteran tech executive Scott Maddux brought a digital video recorder into his home in 1999, the machine radically changed his boob-tube habits. At last, he could save shows to watch later and skip programs he wasn’t ready to see. ”I lived and breathed TiVo for a few years,” he recalled. “That was a transformative moment. It changed my relationship to the television.”

These days, Maddux still likes having a DVR, but it doesn’t dominate his TV-watching life the way it once did. The device “ has seen some diminishment in unique value,” said the 50-year-old San Francisco resident. In his house, his two children are agnostic consumers of TV programming – they think nothing of streaming something on Netflix, watching video on an Apple iPad, or, increasingly, searching out a show like “Bob’s Burgers” on a hub the family’s Comcast cable system offers for on-demand programming.

Compared with new technology introduced in recent months, he said, “the DVR is an antiquated box.”

Death Of A Wonder Gadget?

The wonder gadget that upended the TV business is slowly, inevitably, being upended itself – most noticeably by other technologies that give TV fans access to their favorite programs as they wish. With video on demand, consumers don’t need to shell out another 10 bucks to their cable operator for DVR service, or worry about start times or an overflowing cache of video. Even TiVo, the San Jose company whose quirkily-named recording device became the representative for the gizmo in its early days, has placed more emphasis on services other than playback. Just as Netflix rendered many DVDs nearly obsolete, so too has the modern rush of digital automation begun to turn the digital video recorder into a cultural artifact, something akin to a Rubik’s Cube or hula hoop.

Perhaps that’s unfair. After all, the TV business changed irrevocably in 2007 because of problems created by the DVR. People who had the device fast-forwarded past the ads that bring millions of dollars to CBS, NBCUniversal, Walt Disney, Viacom, 21st Century Fox, Time Warner, Discovery Communications and others. And they watched their favorite shows hours or even days after the shows aired, bringing down the ratings. To compromise, advertisers and TV networks altered the way they conducted business, with sponsors agreeing to pay for three days’ worth of viewing, not just live audience – but only if those later-day viewers didn’t zap past the commercials.The agreement was rare, complex and – in the TV business – seismic.

But now video on demand is capturing more of the networks’ attention – largely because it allows them to offer viewers the convenience of watching  favorite shows as they wish while disabling their ability to speed past the ads that pay for so much of it

According to Rentrak, consumers in 2012 spent an average of 8.5 hours a month watching VOD content, up from an average of five hours in the prior year.  Fox has been preparing to offer advertisers the chance to “swap” commercials that accompany video-on-demand selections, so that they are “current,” not stale. The idea could help the network gain money from sponsors leery of delayed viewing after the current three-day standard. CBS this season ran promos suggesting viewers use VOD if they missed episodes of its serialized drama “Hostages.” And many TV networks now include VOD views as a way to meet the audience guarantees they give advertisers.

If the DVR is fading away, its death will be slow and gradual. But it is coming. Media-research firm Magna Global predicts 48% of U.S. TV homes will have a DVR by the end of 2017, up from 41% at the end of 2012. Neither the introduction of Dish’s ad-blocking Hopper device or DirecTV’s Genie, which records five shows at once and can play back recordings in any room of the house with just one box, has helped boost desire, the firm said. Meantime, Magna expects 61% of U.S. homes to have access to video-on-demand via their cable, satellite or telco systems by the end of 2017, compared with 56% in 2013. Indeed, VOD’s reach has grown, said Magna, even though subscriber numbers for cable and other video distributors have remained stagnant.

Even if the DVR has given rise to a generation of TV-viewers accustomed to “ad zapping” and “when-you-want” watching, the younger demographic is growing more accustomed to programming that is available at the push of a button – if it isn’t on the air at present, it’s available at some point on Hulu or Netflix. Post-millenials won’t feel the need to cast a net to capture their favorite show; they will simply expect programs to be available from the electronic ether on a whim.

And that new tech has spurred cable companies and others to turn what was once a clunky VOD experience into a more user-friendly one. “The cable industry is embracing the concept of video on demand and advertiser-supported video on demand, because with the competition from the Netflixes of the world and online streaming, it is important that they too can deliver universal access for programs,” said David Poltrack, chief research officer of CBS Corp.

You might say VOD has come from behind and is gearing up to win the race. “It almost feels like the lazy man’s DVR,” said Steve Kalb, senior vice president and director of video investment at Boston ad agency Mullen.

Missed Opportunities

It wasn’t supposed to be this way. In 2003 and 2004, whispers about a new “killer app” service called “Mystro” from a massive media conglomerate called AOL Time Warner began to surface. The technology would let viewers access their favorite programs as they saw fit and give media companies more control over how people accessed the content. But copyright issues prevented Mystro from dazzling. During an overlapping time frame, satellite-broadcaster DirecTV, then newly under the control of Rupert Murdoch and News Corp., began enticing potential subscribers by packaging DVR service into its offering – prompting cable distributors and others to follow suit.

“Had video on demand worked out, we would never have had DVRs, and we would not have had the issue of commercial skipping,” recalled Alan Wurtzel, president of research and media development at NBCUniversal.

No matter how its power grew, however, the industry it disrupted kept fighting back. TV networks might quietly bump their schedules so the last minute of a TV episode fell outside the time parameters of a recording. In 2005, execs from the nation’s six broadcast networks – this took place before UPN and the WB merged to form the CW – made a rare joint appearance in a press conference to convince advertisers DVR users were more rabid viewers of TV and would even rewind to watch a really great ad.

Advertisers, meanwhile, tried to co-opt the technology and make it work to their advantage. In 2006, KFC tested a novel spot that required DVR users to rewind their recording or even stop it to see a code,, which could later be entered at the chicken-chain’s web site to get a free “snacker” sandwich. General Electric and Coca-Cola’s Sprite would soon follow with variations on the theme. AOL and Fox tested a five-second “pod buster” that came on just as an ad break was about to end – presumably the exact moment when a fast-forwarder would resume regular speed and thus be forced to come face to face with the commercial.

“People were going to be blasting through advertising, and we wanted to try to slow them down,” recalled Tom Trenta, a marketing consultant who helped KFC devise what was then billed as an “anti-TiVo’ ad. In the end, advertisers abandoned the device, because, said Trenta, it had become “something to fight rather than to embrace.”

Even though the majority of DVR owners wer ignoring commercials, they still provided the TV networks with hard evidence their programs were more desirable than nearly anything else on the boob tube. More broadcast programming was being saved for later viewing than most other stuff.

Zapping The Zappers

With that in mind, ABC in 2008 allowed big cable operator Cox to distribute popular shows like “Ugly Betty” and “Grey’s Anatomy” on video on demand for the first time, a move that would draw more of the cabler’s subscribers to what was still an emerging technology. The only condition: Cox had to disable a viewer’s ability to skip past the ads. That idea has been implemented time and again, creating a situation where viewers must sacrifice their ability to ignore the commercials that provide so much revenue to the networks in exchange for the convenience of watching an episode of their favorite program whenever they choose.

Ad buyers like the new technology and what it might be able to deliver. Video-on-demand viewers are less prone to graze other networks and likely pay more attention to what’s in front of them, said Kris Magel, executive veep and director of national broadcast for media buyer Initiative. “They are less distracted and the ads are more powerful,” he said.

VOD has its controversies. TV networks don’t keep old episodes available forever – the better, perhaps, to monetize other methods for delivering content to fans. And if people hate to watch ads, or feel they are forced to watch too many of them, VOD won’t alleviate those concerns. But for TV networks, it may be the next best thing until the next best thing comes along.

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  1. axlotal says:

    I remember the original promise of subscription paid TV was that there would never be any commercials.
    Marketing people are pure evil dog-excrement.

  2. Terry Heaton says:

    In the network, you won’t force anybody to watch anything. Sorry, but with one-third of prime time given over to marketing, who has time to watch ads? Seriously? An hour a night? This is all about greed and nothing else, and it just won’t work, because people are empowered to do something about it in the network.

  3. duncan says:

    when they pay me – I’ll watch their ads.

  4. Yeah, quality of commercials is a big one, right up there with repeating the same one or two. But maybe even bigger (and more lucrative for advertisers) would be targeting the ads in the VOD content to the viewing audience. For example, I’m pretty sure everyone know that the audiences watching a major network sci-fi or “young hipster” comedy aren’t interested in medic alert bracelets, ambulance chasers, or other “daytime television” ads. Yet, there they are.

    I’d like to think that someone, somewhere is thinking about how much consumers hate when you give them something they really like (ie, DVR w/ffwd) and then take that feature away. But the actions make me think that user experience is not a priority. People like control, they want things on their own terms, when, where and how they like it. If you ignore that, you might eventually lose them.

    I’ll bet there are lots of people who would rather pay a monthly fee to skip commercials if that’s what it comes down to.

    Maybe they should think about new ways to engage consumers, rather than trying to recreate the way they’ve always done it. They could offer more two-screen experiences–live, VOD, even reruns/syndication–and give consumer incentives to do that. With two screens there’s a better opportunity to display ads on the extra screen while ffwd the VOD content.

    For that matter, why aren’t networks giving us any incentives at all to watch ads? [“Because we know you’ll watch anyway, so why should we care?” — TV Exec] People today value their personal time more than anything (don’t make me get all YOLO on this post). Maybe networks need a type of loyalty program, and for every ad I watch I get points that I can use for future on-demand purchases, web store, etc. Now that would be innovative. But that would, once again, require thinking about the consumer user experience, which you don’t have to when you’re forcing people to do something.

    Are networks partnering with behavioral experts outside of the entertainment industry to see what motivates people, and how they can leverage that type of information to apply to their business?

    In the end, networks/providers/services can force all the ads they want in VOD, and then high-five because they think they won. But assuming someone doesn’t use another method to skip ads already, and they decide to watch network VOD content, that’s always going to be the time when they grab their closest device and check email, FB, google, imdb, or whatever. Networks can force the ad, but that doesn’t mean anyone actually sees it.

  5. Chris Hock says:

    Nice article Brian. One additional reason why VOD is primed to overtake the DVR: technology is finally in place for VOD to deliver better experiences to consumers and advertisers. Dynamic ad insertion technology for VOD, such as that from my company, BlackArrow, is now deployed across a critical mass of households and in use by leading operators and networks. It enables ads that are not “current” to be swapped out, can deliver ads that are more relevant to viewers, and has “frequency controls” to prevent viewers from seeing the same ad over and over. The result is a better experience for the consumer through less ads but more relevant ads, better ad inventory and reporting for advertisers, and more revenue to programmers and operators.

  6. Great article — including the sad truth that industry forces are partly to blame for the stagnation of DVR technology. Witness TiVo’s current experience with the Comcast Xfinity Cable Card — it’s *awful*. I’ve been in the TV technology business for many years — even developed the first-ever interactive video clip game on DIRECTV’s DVR Plus. Right before commercial launch, the HR-20 DVR set-top had so many devastating unrelated problems that the launch was cancelled.

    There’s a reason that DISH and DIRECTV are the only pay TV providers with a decent DVR product. The cable companies never had DVR on their list of top priorities, even at the height of the DVR boom. (For years I tried to get access to the “record API” — without success — even when Comcast was trying to market their remote record features. Now they are more widely available and @seeIT was recently launched as a Twitter play, but this is likely too little too late.)

    Still — as a fan of the tech, I have hope for the DVR. Four reasons:

    First, for those of us that are use to the great “trick-play” features of DVR — Fast Forward, Rewind, Skip — even Netflix doesn’t compare. If your kids interrupt you while watching a Netflix movie, it’s kind of a pain to find the spot where you left off. Trick play is a bit of a blind spot for OTT.

    Second — these ‘VOD lock-down’ features are right on the border between annoying and offensive. It’s one thing to prevent users from skipping commercials, it’s quite another if you are preventing them from finishing a show they started at another time; or from watching the ending of a reality show; or the big dunk of the game; or the 2nd interview on Charlie Rose. No surprise that cable companies aren’t considering the maddening unintended consequences here, and surely capitalism is vibrant enough to take advantage — if not right now, perhaps in a year or two.

    Third, there’s Aereo — which is (slowly) teaching us that if we simply put an antenna on our roof, we can use DVR computer software or boxes like Simple.TV to get a great DVR experience that no one can ever take away.

    Finally, as mentioned above, there’s DISH and DIRECTV. They have a direct competitive interest in the technology, so they are continuing to innovate on it. While it’s true that the DVR has probably lost its long-term run as a “mass consumer” technology — the history of digital media is the history of fragmentation — fragmenting audiences, fragmenting devices, and fragmenting TV bundles. In that world — DVR will find a permanent home as a critical part of the video watching experience for those of us that simply don’t have the time or patience to watch TV at regular speed — it just feels like slo-mo.

    • My cable cards from Comcast work perfectly with my two TiVos, not awful at all.

      • Today’s TiVo set-top is slower, klunkier, buggier and harder to navigate than the original experience more than a decade ago. Of course, just yesterday TiVo announced it is getting out of the hardware biz entirely — no surprise, they were no longer good at it. And just FYI — the entire ‘compatible cable card’ and ‘buy your own box at Best Buy’ idea that we passed a law in congress for is all but dead now with TiVo’s announcement. I hope your boxes continue to work for a long time because you’ll find it increasingly difficult to get any support.

  7. Alan Wolk says:

    Excellent analysis Brian. This makes perfect sense if– and it’s a big if– networks manage to keep the number of spots viewers are forced to watch on VOD to a manageable amount. (And if someone doesn’t invent a device that lets you skip VOD commercials…)

    Another argument for VOD replacing DVR: given that (TiVo aside) there aren’t any independent DVR manufacturers, it would be easy enough for the MVPDs to eliminate DVR functionality from the set top box… especially given that many of them would like to get rid of the set top box altogether.

    There are still issues to be worked out, especially whether studios and networks give up full season VOD rights for the current season to the MVPDs and for how much and how Netflix reacts to that, but I can easily see this scenario playing out over the next several years.

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