Advertising in the DVR Age – The Strategic Response of Advertising Executives to DVR Viewership Reviews Findings from Approximately 200 U.S. Advertisers and Advertising Agencies

DUBLIN – Research and Markets has announced the addition of the “Advertising in the DVR Age – The Strategic Response of Advertising Executives to DVR Viewership” report to their offering.

Upfront negotiations in the $80 billion TV advertising market are closing up. For most advertising executives, though, an important question remains unanswered: “What is the value of the spots that will be DVRed and fast-forwarded?”

A new study, Advertising in the DVR Age, conducted by the DVR Research Institute provides some insights. The study includes responses from 200 top U.S. advertising executives to a series of questions on the impact of DVRs – now and in the future. The study will help to close an important knowledge gap. Despite the magnitude of the TV advertising market and the impact DVRs already have, the study shows that 75 percent of advertising executives don’t consider themselves to have relevant information about how DVRs are impacting advertising strategies.

Compounding the situation is that neither advertisers nor their agencies feel they have the information they need to make well-reasoned decisions about TV advertising strategy in the face of the DVR revolution.

Some argue that DVRs may contribute to higher TV consumption. In fact, industry observers expect a slight increase in TV consumption of about one percent over the next three years.

But, while the majority of advertising executives responding to this survey and nearly all of the industry observers expect TV consumption to be fairly flat – or slightly increasing – over the next three years, the question remains of how much of that consumption will be live and how much will be time-shifted? Most importantly, how will these shifts impact actual advertising expenditures?

Increased Time-Shifting Raises Concerns and Challenges

Both advertisers and ad agencies estimate, on average, that by the end of 2011 time-shifted TV watching will account for 46 percent of total TV watching time (compared to 33 percent at the end of 2008). In other words, advertising executives expect that, over a three year period, time-shifted watching will grow about 50 percent. About 30 percent of TV households currently own one or more DVRs. DVR households watch TV about 33 percent of the TV time in time-shifted mode. This means that, over the entire TV household population, 10 percent of TV watching is time-shifted. About 6 percent of the commercials are fast-forwarded. With total TV advertising in 2008 estimated at $80 billion, the value foregone from fast-forwarding of commercials currently reflects approximately $5 billion.

Similar logic can be used to project impacts by year-end 2011. With 49 percent of households expected to have a DVR in 2011, and 46 percent of TV watching in these households occurring in time-shifted mode, nearly a quarter (23 percent) of TV watching is expected to be time-shifted. Since people are estimated to skip 70 percent of the ads when they watch DVR content, 16 percent of all commercials are expected to be skipped by 2011. With advertising expenditures estimated at $85 billion by year-end 2011, fastforwarded commercials result in an opportunity loss of about $14 billion.

While fast-forwarded commercials represented “only” 6 percent of all TV commercials at the end of 2008, this percentage is likely to nearly triple by the end of 2011 with 16 percent of all the commercials expected to be fast-forwarded. A loss of 6 percent of all ad spending is somehow passing “under the radar.” It is difficult to imagine, however, that a loss of 16 percent will go unnoticed or unattended.

There is a lot of money on the table, a lot of outstanding questions and growing pressure on advertising executives to demonstrate value in this tightening economy. While challenges exist for the advertising industry, Advertising in the DVR Age suggests ways in which advertisers and agencies can respond to the impact of DVRs through strategy modifications that leverage opportunities while overcoming potential threats. Initially, though, an important question must be answered: “What am I getting for my money?” The response to, and implications of, this question will be explored in the next column which will discuss the impact of C3 ratings.

The DVR Research Institute is the leading research and consulting services company focused on DVRs and their impact on the effectiveness of (TV) advertising. It advises buyers and sellers of TV advertising on strategies to respond to the new DVR reality.

The publication addresses the crucial questions that are on the mind of many advertising executives and have generally not received an adequate answer, such as:

* Which creative strategies (informative vs. entertaining, bare bone vs. elaborate, etc.) yield commercials that are least likely to be skipped?
* Which dayparts (prime-time, day time, early fringe etc.) and program genres (news, drama, live sports, non-live sports etc.) are most affected by DVRs? How big is the difference in the impact that DVRs have across daypart and program genres?
* Which alternatives to the 30-second spot are most attractive: 15 second commercial, sponsorships, pop-up ads, product placements, interactive advertising etc.?
* What are the best practices in responding to the DVR phenomenon: re-shuffling TV advertising expenditures to other programs or day parts, re-allocating TV advertising expenditures to other advertising media (Internet, Mobile etc.) or other formats (Internet, mobile etc.)?
* How are DVRs influencing CPMs?

The publication includes 85 charts.

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