Media Analysis: Advertisers face up to PVR threat

Research released by media agency Starcom Motive - based on Sky+ usage in 500 homes - appears to confirm advertisers' fears. Not only are PVRs about to become mass-market, they are also beginning to have an effect on the way mainstream audiences watch TV, including the ads.

Sky+ growth

There are now 420,000 PVR-enabled Sky+ boxes in the UK, and anecdotal evidence suggests that this Christmas will bring a big boost in sales.

Starcom Motive's view is that the total PVR market, which includes any box that offers digital recording functionality, will reach 5m units in the UK by 2008, or 21% penetration, and 8m units (34% ) by 2012. If those numbers prove correct, Starcom believes that by 2010 audiences for commercials could drop by 9%.

Starcom Motive's findings reveal that 17% of Sky+ users find ways of skipping ads during live viewing, a figure that rises to 77% for recorded viewing. The agency's media director Nigel Foot believes clients and agencies need to wake up to PVRs. But he doesn't view their arrival as the death of TV marketing, citing 'real positives' in the research.

'Sky+ PVR users engage with shows rather than flicking through the electronic programme guide,' he says. But what use is an enthusiastic audience if it skips the ads? 'We found that people are not anti-advertising,' Foot continues. 'They take advantage of the opportunity to skip ads so that they can save time. They're critical of high-frequency ads, but show acceptance of sponsorship.'

As a result, Foot predicts that television sponsorship, currently worth about £100m a year in the UK, 'will become the most popular promotional format, with rates doubling within four years'. He adds: 'I would also expect an increase in less predictably scheduled breaks to discourage people from skipping commercials.'

Julian Smith, an online analyst at Jupiter Research, shares Foot's view.

'Television advertisers have to accept that consumer-controlled TV scheduling is coming,' he warns.

That said, Mark Wood, commercial director at Sky Media, stresses that Sky+ does not spell the death of spot ads.

Recent research backed by the satellite firm, shows that Sky+ viewers watch more TV than their Sky Digital counterparts (27 hours a week compared with 23), and the majority (62%) are still watching live broadcasts rather than recording them. He also maintains that 'ad recall in Sky+ homes is still strong and many people forget to skip the ads'.

Interactive options

At the same time, Sky is exploring the potential of Sky+ to deliver better-targeted, more compelling ads to counteract ad-skipping. 'The latest version of the Sky+ box has the capacity on its hard disk to accommodate interactive advertising options,' says Wood. 'For example, we could offer TV ads linked to text messages, short ads acting as gateways to longer ads that can be recorded and watched later, or ads that target viewers by postcode or viewing preference.' Woods claims that Sky is not being prescriptive about what Sky+ will do. 'We are showing advertisers what's possible and asking how it might work for them.'

Significantly, the improved functionality of the PVR boxes will be backed up by the launch of a 20,000-strong viewer panel that can provide detailed data about the viewing of niche digital channels on Sky Digital and Sky+.

Foot believes this combination of improved targeting and more detailed usage data will be 'a great opportunity to break the log-jam caused in TV by high creative and media costs'. In other words, smaller clients may be able to make TV a bigger part of their media mix.

BBC threat

For advertisers attempting to get to grips with the implications of PVRs for their businesses, one big unknown factor is what the BBC will do.

The Corporation's interest in the technology is evident from its provision of content to the Homechoice video-on-demand platform. Last week BBC director-general Mark Thompson revealed that the broadcaster is also trialling a service that would allow licence-holders to download the BBC schedule on a weekly basis so that they can choose when to watch their favourite shows.

Combine those two developments with the prospect of a PVR-enabled Freeview box, and it could be that the real challenge for advertisers is the migration of commercial viewers to BBC-on-demand.

DATA FILE - GROWTH OF PVRS

- Personalised video recording is currently available in the UK primarily through 420,000 Sky+ set-top boxes.

- PVR functionality could also be provided by a new version of the Pace/Freeview box, a cable box or an integrated DVD/PVR unit such as those being marketed by Philips and Panasonic.

- In early 2003 TiVo, a PVR brand based in the US, withdrew from the UK after disappointing sales. However, it may decide to relaunch in partnership with another brand.

- By 2010, Sky expects to have 2.5m Sky+ subscribers out of a 10m Sky Digital subscriber base.

- Starcom Motive forecasts that by 2010, there will be a total of 7m PVR-enabled boxes.