• by David Goetzl  @dgoetzl, June 15, 2006

While advertiser resistance to paying for DVR viewers is the principal reason that upfront deals are being made on a "live only" basis, another factor may be an acknowledgment by major media companies that the DVR revolution is unstoppable and business models need to evolve accordingly.

In other words, why fight to hold onto a reality that's changing--it's time to get ahead of the curve?

"It's coming, whether we like it or not," said Peter Chernin, President-COO of News Corp., at an investor conference this week. And, he said, his company's entertainment business "is going to have to learn how to with" DVR predominance.

Chernin laid out a four-point plan for how News Corp.'s multitude of properties affected by DVRs and ad-skipping--from the Fox network to local stations to the FX cable outlet--can adapt and prosper. The strategy includes an emphasis on news and sports programming, considered largely DVR-proof; attracting more product placement and sponsorship dollars; experimenting with new ad models; and enticing advertisers to purchase integrated packages that include both television and Internet properties such as MySpace.

Other top media executives--CBS Chairman-CEO Leslie Moonves and Disney CFO Tom Staggs, who both spoke after Chernin at the conference--said the anticipated growth of DVR usage has some obvious downsides, but their companies will be able to adjust and thrive.

Moonves said that DVR users watch more television, opening up a wider audience for advertisers to reach with DVR-proof ad models. And the increased consumption of CBS shows has a financial upside, implying that the network could parlay that into revenue from cable MSOs or via a pay-per-view model. "More people are watching television; they're watching our shows and we're going to get paid for it one way or the other, so we're looking at it once again as an advantage, not as a detriment to us," he said.

Like Chernin, he suggested that new forms of commercials that deliver a message despite DVR fast-forwarding and a heightened focus on product placement can both help CBS continue to attract marketers' dollars.

Disney's Staggs sounded a similar tune, arguing that DVR users watching more television is a positive, and trumpeting the opportunity to actually deliver more effective advertising--perhaps through better targeting. "(DVRs) offer an opportunity to be innovative and create deeper and more direct advertising opportunities and leads, if we're clever about it, if we work with the advertisers to make sure we're creating advertising that draws people in," he said.

At News Corp., Chernin said the company is focusing heavily on bulking up its news and sports properties--from adding more local news at its stations to investing in the Fox News Channel to continuing to offer the NFL--since people prefer watching those genres live. As a result, the company plans to charge advertisers more for news and sports, he said, and sports CPMs should grow at a rate that is double that of entertainment programs.

"To the degree that there is some potential degradation in CPMs for entertainment (due to ad-skipping), you're likely to see a corollary increase in CPMs in live news and live sports programming," he said.

Other moves to combat DVRs at News Corp., Chernin said, include spreading the product placement/sponsorship model on "American Idol" to other programs; trying new ad models such as shorter spots and fewer pods; and using advertisers' interest in Internet properties to entice them to buy television as well in bundled packages.

"People like to use DVRs to skip commercials, and we better get smart about how to deal with it," he said.

On one level, DVRs are even more of a mixed blessing for News Corp. than a Disney or CBS, since the company is profiting from selling DVR service to its DirecTV user base.