Ad Killers

Linda Hardesty

"I'll be back in a minute - pause the show," reads a Circuit City ad for TiVo Inc.'s personal video recorders.

Indeed, PVRs promise to make television more convenient for viewers. But for those in the television industry, the question is: Will PVRs destroy the traditional advertising revenue model?

Two main makers of the devices, TiVo Inc. of Sunnyvale, Calif., and Replay Networks Inc. of Mountain View, Calif., vehemently deny their products will be used by consumers to avoid commercials.

Steve Shannon, VP-marketing for Replay, said, "Killing ads is not our objective."

Stacy Jolna, VP-programming and network relations, TiVo, stressed: "We don't believe in ad-killing. We think that ad zapping buttons on remote controls is tantamount to declaring war on the $60 billion television industry."

Although Shannon and Jolna shun the words "ad killing," both TiVo and Replay's devices make it easy to skip ads.

Replay's device has a quick-skip button to zip past ads. But Shannon points out: "One thing to understand about us vs. TiVo: We have the quick-skip button, and they don't. But if you sit down and use the products side-by-side, there's really very little difference in the ability to skip over ads."

The TiVo remote control has a three-speed fast forward button that gives viewers the choice of skipping through commercials. The feature compensates for the viewer's reaction time when fast-forwarding to ensure they don't overshoot the start of their program.

"It's designed to skip commercials, too, even though they don't promote it," said Shannon.

Conflicting interests In fact, both companies seem caught in a web of conflicting interests.

On the one hand, consumers like the idea of adzapping, so the feature is a nice selling point.

On the other hand, major entertainment companies have invested in TiVo and Replay. TiVo's media partners include CBS Corp., Comcast Corp., Discovery Communications Inc., Showtime Networks Inc., DirecTV, Vulcan Ventures, and Walt Disney Co. And many of these same companies have also invested in Replay.

Some top execs of these companies have said they don't want personal video recorders to change the industry's basic ad model.

Complicating things further, some of the very same companies that have invested in TiVo and Replay have formed a coalition to require personal video recorder manufacturers to obtain licensing for their programming. The coalition has threatened litigation if necessary.

Perhaps all of these concerns will turn out to be a tempest in a teapot. When VCRs first became popular, television execs had some of these same worries about people skipping through ads. Many of those concerns turned out to be unwarranted.

David Poltrack, EVP-research and planning, CBS Television, said research on use of VCRs found that people, when asked, say they fast-forward through commercials. But in actuality, they don't fast-forward that often.

Couch potato-itis "The reason is basically inertia," said Poltrack. He said television watching is a relaxing, passive experience for most people. When commercials come on, they may not have the remote control handy. They may go to the kitchen to make a sandwich.

"The commercials that get zapped are those before and after the show," said Poltrack. "Certainly no one watches the commercials after the show ends if they are in VCR mode."

The CBS research concluded that viewers generally watch the ads in the middle of recorded shows. Often they're not conscious that the programming has been interrupted by ads. "The passive nature of the activity does not lend itself to the kind of vigilance needed to fast-forward through all the commercials," said Poltrack.

CBS' research department hasn't done any analytical studies on personal video recorders yet, but Poltrack and his colleagues have done some speculating. They suspect that with PVRs there will be a lot less surfing and incidental viewing. Right now, if you sit down to watch TV, you're likely to surf around until something strikes your fancy. With a PVR, you'll probably sit down and check what recorded shows are available to watch. Poltrack said this changed behavior may result in the big, popular shows getting watched more and upstarts getting watched less.

Charley Humbard, SVP/GM Discovery Digital Networks and Advanced Television, said, "I think the popular shows will get more popular, but I don't know why the new shows won't get watched." He pointed out that PVRs can be programmed to record genre-specific shows like travel shows or animal shows. A viewer just surfing around the dials may miss a new travel show, but if he has requested TiVo to record all travel shows, he won't miss it.

Questioning dayparts PVRs also raise the issue of dayparts. A tagline for a Replay ad says: "Primetime. Anytime."

Primetime could become increasingly irrelevant as more viewers watch recorded shows at their leisure. Programs in late night and other off-time periods may be viewed more, making them more desirable to advertisers.

"Our objective is to increase ad revenue for the television industry, not to decrease it," said Replay's Shannon. "He said people will watch more television as a result of the technology. If they don't skip the ads, then ad impressions may actually increase with the use of PVRs.

"Our whole notion here is that we are offering viewers more control over their television-watching," said TiVo's Jolna. "We actually believe that people want product information and not simply the ability to kill ads. For the most part consumers find advertising interesting."

Poltrack said people are less likely to skip ads if they're entertaining. "People do differentiate between commercials," he said.

Replay's Shannon summed it up: "The jury's out whether people will sit there and poke at the remote control."