• by David Goetzl  @dgoetzl, September 9, 2010

Let's say a WLUV runs a spot touting a weekend sale at John's Chevy during the live broadcast of "Grey's Anatomy." Loads of viewers recording the episode via DVR don't watch it until three days later, when the sale is done and the ad's oomph is reduced.

Of course, many will just skip the ad. But what if John's Chevy could insert a more relevant new spot? Maybe more people would watch. At least the automaker wouldn't look sleepy.

BlackArrow and NDS Group, which provide advanced advertising technology, have co-developed a system allowing for DVR ad-substitution. The pair are jointly unveiling an early version at an international conference in Amsterdam this week.

If the system gains wide deployment, WLUV could make a bundled sale with the Chevy dealer, including the ad in the live broadcast along with insertion opportunities thereafter. While a WLUV would do it locally, a network such as ABC could do it nationally.

Still, even if the system is proven effective, a station or network seemingly would have to cut deals with cable, satellite and telco TV providers that control the DVRs to make it work. Another possibility is an agreement with TiVo, where updated ads could be delivered through its stand-alone boxes, although that would only cover a limited number of homes.

Because of the difficulty in cutting agreements with multiple operators in multiple markets, the system is more likely to take hold in the short term on a local level. So a WLUV could work with just the operators in its market.

A representative for BlackArrow said there is no timetable for a rollout and no clients have purchased the system yet.

But the potential benefits of real-time DVR updating are significant for both programmers and advertisers -- not to mention operators seeking a cut. Even if the creative is more germane, advertisers are still working with devices helping ad-skipping only increase.

The DVR ad-substitution product is the first developed jointly by BlackArrow and NDS since an April announcement of a "strategic alliance" in the advanced TV arena. Their aim is to co-develop new interactive and addressable advertising opportunities.

NDS, partly owned by News Corp., is also a backer of the venture-capital-supported BlackArrow, participating in a $20 million series C round of funding in the spring.

The DVR system is in line with BlackArrow's work so far in the VOD space. In March, Fox Cable Networks began using BlackArrow technology in a test of real-time ad insertion in VOD programming, allowing for updated creative.

The trial -- which was scheduled to run through this month -- involved networks such as FX, National Geographic Channel and Speed. Corporate sibling, studio 20th Century Fox, was an advertiser.

A need to insert new pre-roll and other ads in episodes stored for long periods on a VOD menu is important for movie companies as they look to promote the next new release.

Separately, on the operator side, BlackArrow has deals with Comcast and Bresnan Communications to experiment with serving updated VOD ads in certain markets. The Fox Cable test took advantage of a relationship with one of them, although which of these has not been disclosed.