Global Perspective: The DVR Cliff

NEW YORK: Bruce Paisner, the president and CEO of the International Academy of Television Arts & Sciences, shares his thoughts on how broadcasters and advertisers must face the challenges of consumers' changing TV-viewing habits. 

My four-year-old grandson, Wyatt, came to visit us at the beach this summer. Normally, I would not cite him for anything, but he turns out to be an important statistic. Four years ago, his parents remodeled their house in D.C., and having disconnected the cable for that, never reconnected it. Wyatt grew up watching DVDs and Netflix. Our TV system at the beach is pretty basic cable, so when Wyatt became rambunctious I turned on a kids’ channel. He watched for a while, turned to my daughter and said, “Mommy I don’t like this program.” It was a commercial. Wyatt had never seen one.

So Wyatt is the tip of a looming iceberg, people—millions now—who seldom, if ever, watch TV commercials. One major ad agency estimates that almost 50 percent of all households now have DVRs, and at least one third of that group regularly watches prime time on a delayed basis, skipping most commercials. The damage is greatest among people with more income—the very people who buy the things that commercials sell. It is hard to believe that both the DVR population and the number of people who use it will not grow. And that’s just the beginning, because people increasingly have ways to watch “television” that do not involve broadcast or cable at all. So called “over-the-top video penetration” has passed 40 percent and is growing. Tablets are already in one in five U.S. homes and growing fast. Advertising does appear on these delivery systems, in some cases, but it’s more limited and a different experience. Eventually, if nothing is done, major advertisers will leave traditional television, which would be unfortunate on many counts, starting with the fact that advertising supports most TV program creation in the U.S., and more and more around the world. And this movement could happen suddenly—thus, the DVR “cliff”—if major advertisers come to grips with the fact that the demographic they seek is skipping their ads.

So what is to be done?

As with many problems, the first task is to recognize the problem, and the fact that it won’t go away. People who fast forward through commercials do hit the play button every once in a while, generally, according to research, when the ad is for an upcoming movie. The industry has to find ways to arrest the fast forward and get consumers to hit play. One senior network executive calls it “embracing the DVR experience.” This should be a priority, because the statistics show it is an escalating problem, and to some degree a solvable one. People will stop the fast forward to watch something that interests them. (My view is that, despite recent setbacks for broadcasters, the courts will not allow commercial skipping devices.) And individuals seldom get the transition from fast forward to play exactly. Which is why the commercial spots just after and just before the program have become so valuable. Increasingly, events—sports, news, major TV mini-series—have instantaneous value, partly because of the water-cooler effect. People watching event programming are much more likely to watch it live, commercials and all.

Secondly, commercials just need to be different. When watching is an option, not an obligation, people’s behavior changes, yet the content, storytelling and style of most commercials is not very different from years ago. People watch Super Bowl commercials because they’re well-made and entertaining. Regardless of expense—or with new ways to control expense—this once-a-year standard may have to become the new norm.

Thirdly, and paradoxically, we may find ourselves back in the early days of television, when products and sponsoring companies get placement in the titles of shows. This, other forms of branded entertainment, and the many varieties of so-called “product placement,” will become a lot more urgent as the real audience for the actual commercial spot declines.

And fourth, with the inexorable growth of “pay TV”—everything from Netflix to Hulu Prime—advertisers will have to find other ways to reach potential customers. One fertile area is the addressability of people who watch TV over the internet. As companies get better at identifying and tracking those viewers, they will learn to direct and pinpoint advertising messages. For 60 years, television has been almost too easy—produce a commercial and people watched it. Just as this new world of internet-delivered, pay-for-what-you-want era will require vast changes in business models and basic thinking from the TV industry, it will demand the same from the people who make and sell products.

That is the need and the challenge. If it is not met, the industry will find itself walking over a DVR cliff as steep as any fiscal cliff facing the industrialized countries.