Will Increased DVR Use Cut Into Advertiser Revenue?

This post is actually an application to the attsavings.com/scholarship, so it’s a break from my usual computer security content. The scholarship asks an interesting question:

In a presentation to advertisers, Ted Harbert, the chairman of NBC, expressed his distaste over using DVRs to skip commercials by saying, “This is an insult to our joint investment in programming, and I’m against it.”

Harbert is expressing an industry-wide phobia among broadcast networks, but what do you think?

The question of DVR and its effect on advertisers ability to make money is interesting, and really applies to quite a lot. Technology is fast paced, but adopting new business models tends to be slow. In the following post I’ll be discussing this specific relationship between DVR as a technology and advertising as a business model.

Will increased DVR use cut into TV advertising revenue?

DVR stands for Digital Video Recorder and, as the name suggests, it’s a technology used to record your favorite TV shows and then watch them later. You’re probably familiar with DVR devices, such as TiVo, which have made their ways into a very significant number of homes. The technology allows you to record your TV shows when you’re not around, and then watch at your convenience, with the ability to fast forward, rewind, or pause at any given time.

The issues that advertisers have with this is pretty clear – when you watch TV you get a commercial break, and those commercials are paid for by various companies. They make a lot of money using these commercials and DVR allows users to circumvent them easily.

But is the issue really DVR? Is that the one technology that advertisers should be worried about? With so many networks now hosting their content online through Hulu or their own services, it seems clear to me that users are always going to be able to control the content better than the advertisers can. Installing Adblock Plus is enough to remove the commercials in the vast majority of online broadcasting.

And what about Piracy? With pirated content the commercials are stripped right out of the videos. No fast forwarding necessary. Pirated content is usually available minutes after the TV show has aired, before the networks even have it on their sites, and it’s accessible by just about anyone.

And, most obviously, what about the remote? I don’t know anyone who doesn’t at the very least just mute their TV during commercials and then ignore it until the show is back, or they’ll just flip to another channel for a few minutes. How can that be controlled? It really can’t be.

All of these new ways of viewing content or avoiding commercials are not going to stop. Things are only going ot get worse for advertisers who rely on commercials. But, again, we still need  the money, so what to do?

Lately it seems like all that’s gotten done is a few innocent people have gotten in trouble for pirating. And while DVR is entirely legal, advertisers’ clearly aren’t happy about it.

But advertisers still need to make money, because all of this content has to get paid for somehow. What they need to do is evolve. The business model of commercials is broken once the users have any control over the content – you can try DRM, but anyone who’s read this blog should know that it’s just not going to do the trick. The content exists on a device that you own and you control, and it’s only ever a matter of work and time before you find a way to control any content that your device accesses.

Instead of trying to fight this technology they should be trying to work with it. Technology isn’t going to wait, they need to catch up. The answer, or at least one of the answers, is to move the advertisements into the shows. Instead of a coca-cola commercial for 30 seconds, have your main character stand near a vending machine, or order a coke at a diner. Get your products into the show, but don’t annoy anyone about it.

If you have a coca-cola commercial for 30 seconds, everyone’s just going to mute it. Or fast forward. Or change the channel. It doesn’t matter how they avoid it, but they will. You put a can of coke in the main characters hand when he’s delivering a speech or dodging bullets, or anything, and people are going to notice it, but they’re not going to try to avoid it at all.

And maybe that’s not solution, maybe the solution is to reformat the entire business model of entertainment, it’s difficult to say. What I can say, with absolute certainty, is that if you try to fight the progress of any technology that’s already out there, you will lose. This goes double for technologies that involve a user getting what they want in a convenient format.

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