TV sales house analyzes the trends in digital video recorders
Munich, June 15, 2005. Digital video recorders (DVRs) do not pose a serious threat to conventional commercial breaks and advertising-financed Free TV. Even if one in every ten German households owns a DVR by the year 2010, the amount of advertising watched per day will barely change, according to estimates from ProSiebenSat.1s sales arm, SevenOne Media. In this realistic scenario presented by SevenOne Media at a press conference held in Munich on Wednesday of this week, viewing habits will remain largely the same in the future, despite the possibility of using a DVR to shift the times at which programs are viewed and skip ads. The volume of advertising viewed per day will increase to 13.6 minutes by 2010 (2004: 13.3 minutes), while that skipped will climb to 4.0 minutes (2004: 3.3 minutes).
What is more, digital video recorders are going to spread much slower than predicted just a few short years ago. As of today, some 160,000 DVRs have been sold, which means that roughly 0.5 percent of German TV households use a DVR. In addition, viewers who already own a DVR use its time-shifting and ad-skipping features far less often than previously assumed, according to the results of a psychoanalytical study conducted by the Cologne-based research institute IFM. The study found that despite having a DVR the majority of users retain the television viewing habits they have learned and use the DVR merely as an enhanced VCR.
Due to its slow spread and low usage, the DVR is no advertising killer. On the contrary, it actually opens up new business models for Free TV in the area of electronic direct marketing. Because DVRs are return-channel-ready, Free TV providers will be in a position to offer their advertising customers interactive marketing solutions in the future. This includes personalized and regionally specific advertising or the on-demand broadcast of feature-length infomercials.
Forecasts on the spread of DVRs miss the mark by a mile
Viewers are not warming up to the new technology to the extent previously expected. This is one of the reasons that a variety of forecasts on the spread of DVRs need to be corrected. DVRs will not be in six percent of all German households in 2006, as the market research institute Jupiter suggested back in 2002. According to Jupiters latest forecast, only two percent of German households will have the devices.
Long-term forecasts on the spread of DVRs also had to be adjusted in the wake of the lower sales figures from last year. Jupiter now estimates that DVRs will be present in nine percent of German households by the year 2010. Just two short years ago, the market research institute predicted that figure would be 28 percent (see chart).
Scenarios on the spread of DVRs commercial viewing time not in danger
To prepare for future developments, SevenOne Media assessed the possible effects that various scenarios concerning the spread of DVRs would have on daily advertising viewing: If one in every ten households owns a DVR in 2010 (the realistic case), 4 minutes of advertising will be avoided per day versus 13.6 minutes that will be seen. In 2004, 3.3 minutes of advertising were avoided by zapping, while 13.3 minutes were viewed. Even in the worst case DVRs present in 30 percent of German households no significant changes are expected. In that case, a total of 4.9 minutes of advertising would be avoided through ad skipping, but 12.8 minutes would still be viewed. That corresponds to the levels seen in 2001.
Viewers are using DVRs like conventional VCRs
The reasons for the slow spread of DVRs are complex. The most prevalent reason is the fact that the DVR is not a completely new technology, like the cell phone was, which precludes a greater willingness to purchase it. It turns out that consumers often decide to purchase a DVR merely as a replacement for their conventional VHS recorders. Only 4.2 percent of potential buyers cite the possibility of skipping commercials as an incentive to purchase a DVR.
Psychoanalytical study on DVR usage tempers the euphoria
DVRs are not poised to revolutionize TV viewing habits in the future, either, according to the results of a psychoanalytical study conducted by the Cologne-based research institute IFM on behalf of SevenOne Media and RTLs sales house, IP Deutschland. The psychoanalytical interviews conducted with a total of 50 DVR users show that, in day-to-day reality, television viewers do not always want to be their own programming directors. After the initial fascination with freeing themselves from the preset programming structure and commercials, the vast majority of viewers return to their learned viewing habits after about two to three months. It turns out that many viewers feel overwhelmed by the wide range of choices available to them. They also soon miss the straightforward daily structure that regular television provides by having fixed times at which programs like the news or feature film presentations start. The goal of watching TV to reduce stress or relax also prevents a more fervent use of DVRs. At best, DVRs take on the role of a conventional VCR. In the end, ingrained TV viewing habits are stronger than the new technology. Most commercials are watched, because viewers find them entertaining, informative and stimulating. Only the advantage of time shifting is cited as positive from time to time, e.g. when a movie is about to start, but the kids are not yet in bed.
Free TV to expand its function as a beacon
On average, Germans watch 20 percent more TV than they did just ten years ago. Of particular note is the surge in television viewing among the so-called premium target groups (high school graduates, university students: up 24 percent; viewers with a net household income of EUR 3,000+ per month: up 29 percent).
The future of Free TV: Combining mass communication with direct marketing
Free TV will continue to play a leading role as an agenda setter in highly fragmented markets. This will result in opportunities to exploit the opportunities of DVR technology and develop completely new business models geared toward electronic direct marketing. In the US and UK, new interactive and personalized marketing forms involving television are already a reality. In the future, viewers will be able to respond to advertising themes directly and be presented with advertising tailored to their viewing habits and their preferences as consumers (personalized advertising). Free TV broadcasters will also be in a position to tap new markets through the use of regionally specific advertising. Thus, local companies will get the chance to advertise on television without risking substantial coverage waste. Free TV will have yet another new business field to tap in the anytime, on-demand broadcast of feature-length advertising (timeshifted advertising) such as industry films and company portraits.
Andrea Malgara, Managing Director for Marketing & Research at SevenOne Media: The situation with DVRs is the same as with the digitization of television overall: The opportunities outweigh the risks. The DVR is not all negative. Quite the opposite: It can also be a highly productive tool for advertising and create value. The return channel capacity of DVRs will encourage the development of completely new business models. The advertising industrys dream of seamlessly combining push and pull functions can come true. One of these days, we will be able to offer everything from mass marketing to direct marketing and even order options on one TV platform.
Andreas Kühner
Company spokesperson
Tel. +49 [0] 89/95 07-4132
Fax +49 [0] 89/95 07-4135
Andreas.Kuehner@sevenonemedia.de
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