• by Joe Mandese  @mp_joemandese, March 22, 2005

A year after it began tracking and forecasting the growth of on-demand television technologies, the most recent report from a major ad agency shows how volatile that marketplace actually is. In April 2004, when it issued its first in a series of periodic tracking reports, Magna Global USA projected that penetration of one of those technologies--digital video recorders (DVR)-- would reach 12.8 million units by the end of this year. By September 2004, Magna had lowered that projection to 10.1 million units. By the end of 2004, it revised that projection up to about 11.0 million units. On Monday, it released its most recent update, which now projects that DVR penetration will reach 11.6 million units.

The erratic nature of Magna's estimates has nothing to do with the agency's model for forecasting, but instead with the information that cable, satellite, and other interactive TV operators have reported to the public.

Magna's most recent revision, says Vice President-Director of Industry Analysis Brian Wieser, is primarily the "result of Comcast's newly stated ambition to install more than one million DVRs this year."

Based on Magna's projections, DVR penetration will be in nearly 11 percent of U.S. TV homes by the time Nielsen begins reporting ratings for DVR households in January 2006. At that level, there could be a marked shift in average ratings when Nielsen incorporates DVRs into its sample.

The Magna report also provides updated projections for video on demand (VOD) and the so-called "network DVR," a DVR-like service provided by cable operators from their head-end that enables their digital set-top device to function like a DVR in a subscriber's home.

But one of the most noteworthy on-demand television developments highlighted in the Magna report isn't really about TV so much as it is about another video distribution medium: the Internet.

"The Internet bypass increasingly is resembling an interstate of its own," notes the Magna report, referring to the growing phenomenon of first-run TV shows that are being made available as online downloads, such as Showtime's "Fat Actress," NBC's "The Office," and Bravo's "Queer Eye for the Straight Girl."

"We expect this trend to continue and accelerate, as programmers and online services alike utilize the promotional platform that the Internet offers," concludes Magna. "Concurrently, as the viability of distributing content online is increasingly economical, we expect such programming to be made more widely available on an ongoing basis."