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PVRs Could Push Advertisers to Pull the Plug

25 Nov, 2002 By: Hive News

Three-quarters of national advertisers say they will reduce spending on television as a result of ad-skipping on personal video recorders (PVRs), based on a recent email survey of national advertisers conducted by Forrester Research, Inc. and the Association of National Advertisers (ANA).

Among those who would cut spending, 75 percent would cut their budget for commercials by at least 21 percent and 26 percent said they would chop more than 40 percent off of their budgets.

"As PVRs' penetration nears 2 million households, advertiser concern is mounting," said Josh Bernoff, principal analyst at Forrester. "Advertisers say they will cut TV spending across the board, on national, local, and cable advertising, in the next five years as PVRs reach 30 million households."

In the same survey, 68 percent agreed with the statement "My ad agency is ill-equipped to help me with the ad-skipping problem," but only 12 percent thought it was a good idea to lobby Congress to limit consumers' ability to skip commercials.

"Advertisers have been dealing with 'ad-skipping' in one form or another for years," said Barbara Bacci Mirque, SVP, ANA. "However, the survey results provide them guidance about the challenges and opportunities posed by technologically enabled ad-skipping."

Two-thirds of advertisers responding said they would increase spending on program sponsorships and 46 percent would spend more on product placement, two formats unaffected by ad-skipping. Advertisers also said they would spend more on other media; the top four candidates for increased spending were magazines, loyalty programs, email marketing and Web ads.

Anew Forrester Report called Will Ad-Skipping Kill Television? includes the survey results and lays out the logic behind on-demand TV and its effect on TV viewing.

According to the report, 49 percent of consumers will have some form of on-demand TV -- PVRs or cable video on-demand (VOD) -- by 2007. As a result, consumers will watch 28 percent of their television on demand instead of on the networks' schedules -- up from 3.5 percent this year. On-demand viewing will lead to ad avoidance -- Forrester projects a reduction of 19 percent in ad viewing in the next five years.

"But ad-skipping won't destroy the TV business," said Bernoff. "New ad revenues for commercials in VOD will nearly make up the shortfall, and we also expect consumers to pay $6 billion for new services like subscription video on-demand in 2007."

The report also includes recommendations on how media companies can fight ad-skipping.

"Networks must tie ads closer to programs, and advertisers must transform their commercials to lure in the ad-skipper," said Bernoff. "We also recommend that advertisers concentrate ad buys with fewer networks to get first shot at sparse product placement and sponsorship spots and that they set aside 5 percent of their media budget for non-standard formats like interactive program guide panels, interactive commercials and ads on PVR menus -- none of which are susceptible to ad-skipping."

The study garnered responses from 112 marketers in more than a dozen different vertical industries. Most had the title director of advertising or VP of advertising. This report marks Forrester's second collaboration with the ANA, following up on an earlier study on marketing automation.

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