• by Jonathan Bokor , September 18, 2006

When TiVo first introduced the DVR in the late '90s, many of us in the television business immediately understood the challenge it posed because we went out and got one--and we stopped watching commercials. Although some of the early panic was overblown, the pendulum has probably swung a bit too far in the other direction. A number of network research departments have put out reports projecting that the DVR will have a relatively small negative effect on audience viewing of commercials, and therefore ad revenues. Similarly, network executives have taken to downplaying the effect of the DVR on their businesses.

Quite simply, they're kidding themselves and their shareholders. Although TiVo initially stumbled in its efforts to market its amazing device, the company has quietly built a customer base of about 4.4 million. More important, cable MSOs and satellite operators, having figured out that high customer satisfaction with the product has led to lower churn and higher ARPU, have been aggressively marketing their own DVRs. It has now become quite evident that we are well on our way to the DVR becoming a ubiquitous consumer product within a decade or less. Although that sounds like a long time, the changes that the television industry will need to implement to counterbalance this trend are significant, and time is a-wasting.

To suggest that commercials need to become more entertaining and interesting in order to keep viewers from skipping, a proposed solution I have heard more than a few times, is facile and simply unrealistic. What have agency creatives been trying to do since the advent of the TV commercial? Make commercials that don't grab the viewer's attention? The quality of ad creative has increased markedly over the years, and further improvements are unlikely to make much more than a dent in the DVR problem.

Interactivity is a potential solution, and there are a number of examples of current interactive applications that point us in the right direction. The audience voting on shows like "American Idol," "Dancing With The Stars" and "Last Comic Standing" indicate that viewers feel invested enough in the programming to take immediate action, and are interested enough in the results to tune back in for results shows. But because the voting is not tabulated in real time during the show, viewers can still watch on a recorded basis, skip the commercials and still have their vote count. For that reason, these shows won't prevent commercial skipping in their current formulations. However, if voting was done in real time and results were announced at the end of the hour, then that could put a serious dent in time-shifted viewing. Part of the appeal in these shows and their associated voting is that the viewer actually impacts the show. In a small way, it allows the viewer to become the programmer.

By tweaking the format to force viewers to watch the show live in order to have their vote count, we start to get to the crux of the matter. DVR is a game changer in that it puts the viewer in control of whether or not they watch commercials in the context of traditional TV formats. So the solution to this problem is both simple and very complex --change the format! What programmers and producers have to think about is creating new TV formats that are optimized for live viewing. Shows with live voting are one type that might work well, but we need to get even more creative, and variants of traditional shows are not the only solution.

What about games? What's different about games, and what's instructive about them, is that they don't have a scheduled start time, end time or duration. They also require the viewer (or more accurately, the user) to continually make choices. As a result, they simply can't be recorded, so they render DVR worthless. While MSOs and satellite operators have begun experimenting with games, particularly Cablevision and Echostar, they have offered them almost exclusively on a subscription basis. But why not experiment with offering them on an advertiser-supported basis? By using their VOD infrastructure to insert commercials between game levels, MSOs could create a whole new class of un-skippable inventory. It's just one idea, but it gives you an indication of the type of thinking and experimentation we need in order to meet the DVR challenge before it's too late.