PVR is fast becoming a four-letter word in some advertising and media circles.
Personal video recorders from TiVo Inc. and ReplayTV Inc. proved to be a hot topic of discussion at two major conferences last month-the Cabletelevision Advertising Bureau's Cable Advertising Conference and the Association of National Advertisers'Television Forum.
In 1975, the retail debut of Sony Corp.'s videocassette recorder stirred similar unrest in the advertising and television sectors, as advertisers worried about consumers' taping TV programs and fast- forwarding commercials during playback, and TV networks fretted about the potential audience erosion due to time-shifting.
Ultimately, VCR sales didn't accelerate until movies became available for rental, and taping didn't have significant impact on ratings-proof that predicting the future can be difficult.
Use of the TiVo and ReplayTV devices in the future may well differ sharply from what's envisioned today. As J. Walter Thompson USA senior partner and director of media research David Marans told the ANA, America Online Inc. once said it wouldn't carry advertising, and now it does.
At this point, there are more questions than answers when it comes to the impact on commercials due to the devices.
At the CAB confab, for instance, Sanford C. Bernstein & Co. senior media analyst Tom Wolzien confronted TiVo vice president of programming and network relations Stacey Jolna about the possibility that "AOL TV," due this summer, could strip out cable networks'commercials and presumably resell the time itself.
According to the Wall Street analyst, "The technology shift suggests that the commercials of every program, every programmer and every agency in this room are at risk. As high-density storage becomes prevalent-that's TiVo, that's Replay-commercials can be loaded into those [storage disks] by somebody else, not you."
Wolzien added, "At the decision of the consumer, [the program is] played back covering up the commercials in your programs.[thereby] placing the entire economic basis of this industry at risk."
Cox Communications Inc. vice president of ad sales Billy Farina said MSOs are fretting about their local ad sales being "cannibalized" by these devices.
Jolna countered that TiVo "built our business from the start with an inclusive business model.We have no desire to bust nor intent to bust the $60 billion television economic model."
Brent Butterworth, editor in chief of Collaborative Media Inc.'s etown.com, a consumer-electronics-information Web site, gave the ANA a broader look at PVRs'retail sales outlook and possible uses and abuses.
Only 45,000 PVRs were sold last year, and 320,000 are projected to be sold this year. But he cited Cahners In-Stat (a sister company to Multichannel News) data indicating that as the manufacturers license the technology to major TV-set marketers and as PVRs become built into TV sets, 915,000 such devices could be sold in 2001 and 9.4 million in 2004.
In addition, he said, the retail price will fall, noting that ReplayTV's has dropped from $899 last spring to $499 now and that TiVo's is at $399 (plus a $10 monthly subscription fee) now from $499 last year.
Only about 10 percent of VCR owners tape programming, but Butterworth predicted that recording with the always-on PVR would be far more popular.
He said a ReplayTV owner can search its electronic program guide and click on a favorite title-recording every airing of The Simpsons or every program in which William Shatner appears.
But Marans wondered who could watch all of those Simpsons episodes, and he was also skeptical that PVR sales would prove that healthy. "I'm not sure TiVo and Replay are going to be that popular," he said.
Of greater concern to the several hundred in the ANA audience was what Butterworth called PVRs'potentially huge impact on advertising.
PVR owners can fast-forward or jump past commercials, he said, although that will put viewers several seconds into the subsequent program.
But Jolna, addressing the CAB's ad-agency-dominated audience, preferred to accentuate the technology's positive potential, including a scenario that resembles the one-to-one addressable-advertising plans being studied by some in the ad and cable fields-what some MSO executives have dubbed "video direct-mail."
For example, Jolna said, TiVo can enable advertisers to target their spots to specific viewers. "What if you could marry the right audience member with the right product?.What if you could target your ads? That's where we're headed with TiVo."
Embellishing before the ANA, Butterworth said advertisers could replace their own commercials and be charged on a CPM (cost per thousand homes) model.
For example, Ford Motor Co. could use TiVo to target a pickup commercial in Texan homes but a minivan spot in suburban New Jersey. Such targeting would resemble what Adlink, the Los Angeles interconnect, offers its clientele.
The PVR-with software that can be upgraded over the phone-could also allow marketers to target ads to viewers who are known, based on monitoring by TiVo, to watch lots of family-oriented programs or sports coverage, Butterworth said.
"There could even be a Budweiser channel," he quipped-programmed with sports, Comedy Central's The Man Show and other male-skewed shows and commercials.
Butterworth added that consumers could key onto commercials for specific auto models or other products they want and record all of those spots and infomercials.
The ANA's Q & A session demonstrated that PVRs did get some clients'competitive juices flowing.
One question was whether, say, Coca-Cola Co. could use PVRs to override PepsiCo Inc. spots with its own. Although Butterworth said this was technically feasible, he stressed that PVR manufacturers would not want to strip out commercials in such a way as to alienate the ad community.
For one thing, Grey Advertising Inc. is one of ReplayTV's investors. And more than one year ago, General Motors Corp. became the first charter advertiser to test TiVo technology for addressable and interactive advertising via GM Cyberworks, its new-media applications unit.
At that time, TiVo executives said GM could use TiVo to store five GM spots and, instead of a Geo spot that might run nationally on Fox's Ally McBeal, it could insert a spot for a Corvette, Cadillac Seville or Chevy Suburban to target viewers in upscale ZIP codes. With TiVo, viewers also could use their remote to get more information on GM cars, they added.
Similarly, Discovery Networks U.S. president Johnathan Rodgers told the CAB's 1,400 attendees that media companies like his have invested in the PVR makers in order to influence their business direction from the start.
As he put it, "One of the main reasons why we invested in TiVo and we got [Discovery Communications Inc. chairman] John Hendricks on the board was to protect the relationship between advertiser and television."
But even though News Corp. and The Walt Disney Co. have also invested in PVRs for similar reasons, some within those same companies are still carping aloud.
At an International Radio & Television Society panel last fall, WABC-TV president and general manager Thomas Kane and WNYW-TV vice president and general manager Michael Wach complained about those devices' zapping potential. Kane went so far as to call PVRs an "abuse of technology" that's harmful to the commercial-TV business.
A lot of TiVo and ReplayTV ad proposals may not fly, Butterworth told the ANA, since these devices are being developed and upgraded by "Silicon Valley guys" who love to see what the technology can do, but who are "not advertising-savvy."
One proposal that he felt would prove unpopular with consumers is for "transport ads" that would pop up whenever consumers pause programming.
ReplayTV has just implemented "Replay Zones"-a form of personalized viewing built around paid listings for various broadcast and cable networks that resembles the "favorites" menus PC owners keep for frequently visited Web sites.
Butterworth showed the ANA audience that Replay Zones now feature such networks as Cable News Network, Cartoon Network and NBC News, as well as several genres (such as movies, sitcoms and cooking).
Turner Broadcasting System Inc. president Steve Heyer told the CAB that advertisers seeking an integrated multimedia-marketing buy tied to Turner Network Television's Don Quixote, which aired this past Sunday (April 9), might consider, among other tie-in elements, a discussion with Isabella Rosellini within the Replay Zone. That also "might include a premium purchase of [an advertiser's] product," he added.
Down the road, PVRs might figure in TV-ratings measurement, Butterworth speculated.
Although Nielsen Media Research can't measure PVRs, he said, it's conceivable that these devices could become part of digital-cable set-top boxes and, once they reach critical mass, could then serve as an alternate source for audience ratings. "It's technologically possible to do that," he noted.