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DVR Analysis: Broadcasters Want to Have Their Cake and Eat It Too

15 Jan, 2013 By: Erik Gruenwedel

While Dish Network’s Hopper DVR with ad-skipping technology defends itself in court against media companies and broadcasters, the recent International Consumer Electronics Show in Las Vegas suggested devices enabling time-shifting of recorded content in high-definition are here to stay.

DVR pioneer TiVo showcased a unit capable of recording more than 2 Terabytes of content (about 500 hours of HD content or 2,000 hours of SD), while HP displayed a pocket-sized HD DVR. And up in the cloud, virtual lockers increasingly allow consumers the ability to store and access content via myriad devices.

Viewers are not only watching more TV, thanks to the DVR — they’re watching it on their own time schedules. Which means they are also skipping the ads. About 50% of all ads on recorded programming are skipped, according to a published report.

With cable, satellite and telco operators marketing the DVR as a value-add to subscribers, Nielsen now tracks TV viewership beyond the initial broadcast to include three- (C3) and seven-day (C7) periods thereafter. Nielsen Jan. 14 reported that 99% of all TV viewers watch a program within seven days of its initial broadcast.

Broadcasters say Nielsen’s time-shifting tracking helps them sell and retain advertisers during primetime programming. Nielsen even says a sizable percentage of time-shifters do watch the ads — a claim that’s undoubtedly at the center of the Dish litigation.

“This is a good thing for us,” CBS CEO Les Moonves told analysts last November. “It means that more people are watching our programming in the situations where there used to be scheduling conflicts.”

Richard Greenfield, analyst with BTIG Research in New York, believes media companies ultimately want to hamstring DVR playback with embedded ads viewers can’t skip. Greenfield cited verbiage from the 1984 U.S. Supreme Court Sony Betamax decision that would appear to give networks leverage to do just that, according to the majority opinion written by Justice John Paul Stevens.

In the landmark ruling, Stevens surmised that the dissent against allowing people to record TV programing had been “unable to prove that the practice has impaired the commercial value of their copyrights or has created any likelihood of future harm.”

Yet, in the Dish case, broadcasters (which include CBS, Fox, NBC and ABC) contend Hopper’s AutoHop does impair the commercial value of its content by allowing users to automatically skip commercials when recording primetime programming.

The dispute erupted further at the conclusion of CES when CBS acknowledged it forced subsidiary CNET to deny the Hopper from receiving the “Best of CES” award. CNET earlier during the trade show had lauded Hopper as a device that “borders on having almost everything you could possibly want.”

And last November, a federal judge in California denied a preliminary injunction request by Fox claiming AutoHop was no different that what DVR users can now do with a remote control — namely fast-forward through commercials, making it easier for viewers to skip TV ads, thereby raising the stakes and risks to broadcasters.

Indeed, CBS said it had 11 of the top-20 DVR lifted shows in the third quarter. During the C3 window many of its shows were watched by 3 million to 4 million additional viewers after primetime. The DVR data for these shows increased another 30% within seven days of initial broadcast.

“We will make it a priority to get paid for all of the viewing that is going on across our shows, including DVR viewing beyond C3,” Moonves said. “This represents a significant opportunity for us that is still in the very early stages.”

Greenfield said the irony here is that content creators need DVRs to enhance ratings and to introduce people to shows that they might not even have the time to try if they had to watch them live. Yet, the same DVR device helping ratings, and in turn increasing the show’s syndication value, is removing the advertising revenue source needed to support the creation of the television programming in the first place.

“In an ideal world, we suspect media executives would probably like DVRs to be legal to increase ratings/sampling, but without ad-skipping functionality,” Greenfield wrote in a Jan. 14 blog. “However, it’s hard to have your cake and eat it too, when ad-skipping has simply become a part of American culture for so many years.”

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