Just wait and see ...

Ads: The advent of commercial-zapping technology has advertisers worried - and looking at new ways to snag consumers other than 30-second spots.

May 27, 2004|By Sam Diaz | Sam Diaz,KNIGHT RIDDER/TRIBUNE

It's more than just this season's passing of Friends, Frasier and The Practice that has the television industry worried about what we'll be watching in seasons to come.

Television is going through yet another major transformation, and this time it isn't the arrival of color TV, cable TV or even reality shows that's to blame. This time, it's Silicon Valley technology that's stirring things up.

Digital video recorders and video-on-demand systems, expected to hit mainstream markets this year, will give a new generation of viewers greater control over what, when and how they watch television. In anticipation, advertising executives, as well as the folks at Nielsen Media Research, already are starting to alter the way they do business to accommodate the changes that could come sooner rather than later.

"Essentially, we are in a stage of total potential chaos," said Michael Kassan, a Los Angeles media and entertainment consultant.

If DVRs' ad-skipping technology goes mainstream, then television viewers become armed with another tool to help them avoid commercials. If fewer people are watching those commercials, advertisers might be inclined to bail out of the TV market and take their dollars elsewhere. That in turn could affect programming if networks can't generate enough revenue to produce quality shows.

DVRs' rise looms large

A recent survey conducted by Forrester Research found that nearly 75 percent of advertisers said they likely will cut spending on television advertising when DVRs are in 30 million households.

Today, there are fewer than 5 million DVRs in households nationwide. But such is their popularity that San Jose, Calif.-based TiVo has managed to sign more than a million subscribers over the past few years, mostly on word-of-mouth marketing. Even more have signed up for DVR service through Dish Network.

Consumers' infatuation with the DVR has made advertisers realize that the 30-second commercial could start to be a bad investment.

The ad-zapping DVR creates a new challenge for people who've been on this ride before, said Cotton Stevenson, a creative director with Elsewhere Advertising and Communications in San Francisco.

"Ad skipping is always a problem, always has been," said Stevenson, who recalls when the remote control - and its ability to easily switch channels during a commercial - first hit the scene.

"Even during the '50s and '60s, when ad-skipping meant getting up to fix a sandwich during the commercial, it was a problem," he said.

The number of DVRs is expected to reach the 30 million mark over the next five years. But that rate of adoption could skyrocket if cable TV powerhouses such as Comcast and Time Warner follow through on plans to offer a DVR in their set-top boxes over the next year.

Satellite providers - with about 23 million combined subscribers - wouldn't hit that mark even if every satellite household had a DVR. But cable TV, with an estimated 68 million subscribers, has a greater reach and could take the DVR from a niche product to the mainstream.

Already, advertisers are looking at creative ways to put their brands and products into the public eye. Product placement is one way. For instance, customers on The Restaurant pay their tabs with American Express cards. Sponsorships - much as the cigarette companies sponsored TV shows in the 1950s - are another.

In the Forrester report, 86 percent of those surveyed believe that new forms of TV ads will evolve to be as effective as or more effective than the 30-second ad.

Consider the different forms of advertising on American Idol. AT&T Wireless, Coca-Cola and Ford are obvious sponsors and have been effective at getting their names out there with and without 30-second spots.

The AT&T Wireless logo appears on the screen alongside the instructions on how to vote for the singers. Coca-Cola glasses are strategically placed in front of the judges. And the singers who have become overnight celebrities are starring in the Ford commercials that appear to be part of the show.

Learning what, how we watch

The Forrester survey reported that 91 percent of respondents said the TV industry will need new ways of measuring how audiences watch.

Nielsen Media Research started using People Meters - electronic devices that connect to the television to record the viewing habits - in Boston two years ago. The company will introduce the devices in San Francisco, Los Angeles, Chicago and New York markets later this year.

"It's a much more accurate picture and really helps the market place overall," said Jack Loftus, a vice president with Nielsen in New York.

Earlier this year, TiVo hired Nielsen to anonymously measure how often its subscribers pause and rewind, when they play back and whether they stop and watch any of the commercials.

Nielsen also wants to monitor other DVR services and provide new information to an advertising industry that's trying to understand high-tech TV viewers.

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