©Alfred Poor's HDTV Almanac , September 12, 2007

DVRs Upset Traditional TV Business

by Alfred Poor

Most of us grew up hearing the often-repeated mantra, “But first, a word from our sponsors.” Commercial interruptions of broadcast television entertainment has been a fixture of the industry almost from the start. If you’re lucky, you’ll get to watch a soccer game that runs without commercials thanks to the sponsors whose logos appear next to the onscreen scoreboard the whole time.

But that has changed; you can watch just about any show you want without commercials, if you have a digital video recorder (DVR). Even better than the old VHS video tapes, it is easy to find the shows you want to watch and to skip over any parts you don’t want to watch, such as production credits, opening title sequences for series, and of course, commercials.

A new report from MultiMedia Intelligence points out just how much impact this may have. There were about 50 million DVRs in use last year, and that is projected to grow to more than 60 million this year. By 2011, the number is expected to more than double to about 130 million units. That’s 130 million TV sets where the viewer can skip over the commercials, and they probably will do so.

What does this mean for the $185 billion TV advertising industry? If viewers aren’t watching the commericals, then why would advertisers pay to air them? Subscription-based distribution such as cable and satellite generate a little direct revenue for the content providers, but it’s a drop in the bucket compared with the costs. Without advertisers, the cost of video would soar.

In the short term, this problem is exacerbated in the United States by the fact that the industry’s contract with the Writers Guild of America is up for renewal on October 31st, and speculation about a strike and possible production interruption is running high already.

The question of who will pay for your viewing content is going to become more difficult and more important in the next few years, especially as the Internet starts to play a larger role in delivering video content to viewers. Stay tuned….