More evidence of the large and growing holes in the TV advertising dike passed with little fanfare a ways back. I continue to be surprised at the relative lack of coverage (that is, other than mine) of what appears to be a huge story in media: the rapid and inexorable infiltration of the world’s living rooms by DVRs and the implications for TV – today’s workhorse branding medium.
This latest data (not as fresh as I’d like, as I’ve been a little busy) is from a Comcast-sponsored poll, so should potentially be taken with a grain of salt. However, even with salt, it presents a pretty stark picture. Some highlights:
• Time-shifted TV has more than doubled in the past year alone
• >40% of Americans now make plans to record their favorite shows for later viewing
• 74% of viewers have watched prime-time TV using video on demand, DVRs or the Internet
Estimates vary, but some sources report up to 2/3 of viewers skip commercials in recorded programming. Combining that figure with the usage stats above means that more than 20% of TV commercials will be skipped this season. Not only that, but researchers believe that commercial skipping increases as users become more familiar with the technology; that 2/3 will likely increase.
These data have fairly dramatic implications for the mid- to long-term value of the TV ad model.
Perhaps this story hasn’t gotten much attention because the Nielsen “C3 ratings” – launched in 2007 and designed to take into account both time-shifting and commercial skipping – didn’t look much different initially. What seemed a little strange (at least to me) is that they still don’t look much different – most shows actually fare better under C3 than the “live” ratings.
This was counter-intuitive until I actually did the math. Because C3 includes both time-shifting (incremental to live ratings) and skipping (decremental), C3 will always be equal to or greater than live ratings because skipping cannot be greater than time shifting by definition. However, this can (and does) occur even as the size of the audience viewing TV advertising shrinks dramatically.
Consider the (highly simplified1) example below:
In rough terms, a show watched by an audience of 20M people goes from a C3 rating of 6.7 pre-DVR, to a C3 rating of 3.3 in 10 years under perfectly realistic assumptions flowing from DVR penetration projections and usage research cited and linked above. Total viewership of the programming, including time shifting (Live +7), can stay the same or even increase, but ratings for the commercials themselves (C3) plummet under any reasonable scenario.
So DVRs will cut the effective reach of commercial TV advertising in half, absent some dramatic changes in consumer behavior, TV advertising models or DVR devices themselves. This represents nearly $40 billion in advertising spend simply being “skipped”, i.e. wasted, or a doubling of cost per GRP which amounts to the same thing.
That seems like a newsworthy headline. I wonder why I haven’t seen it before today.
Incidentally, that $40B in TV money coming into play makes me especially excited that Brand.net offers the best and most scalable web-wide media forecasting, buying and delivery management platform available today, with cutting-edge tools for agencies to drive measurable, profitable offline sales with online advertising.
1 In the interest of simplicity, this commentary and analysis ignores some edge cases related to different measurement methodologies between live ratings, which measure viewership of content and C3 which measures viewership of commercial pods only. These simplifications do not materially affect the conclusion.