| DVRs Are the Talk of Tinsel Town by Ken Pyle |
October , 2003 Issue |
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| Day two of the Digital Hollywood conference was jam-packed with more sessions than I had time to attend. There were sessions on HDTV, Content Protection and Gaming that I missed. Fortunately, I was still able to listen to a diverse group of speakers which included representatives from MovieLink, TIVO, Cartoon Network, Netflix and Microsoft. Sessions I attended looked at the set-top future, the migration of Internet-based video distribution from the PC to the TV and iTV [interactive television] success stories. The impending proliferation of DVRs and the importance of content portability to consumers were two things that I heard mentioned repeatedly by the speakers. Bill Neimeyer of Centrimedia indicated that the adoption of DVRs is at an inflection point. He cited the fact that Scientific Atlanta shipped more DVRs than any other supplier in the last year indicates that the cable industry is taking the DVR opportunity seriously and that it is going to grow as Comcast and other operators begin massive deployments of DVRs. Others at the conference echoed his views by suggesting that it will be the operators that drive the rollout of DVRs. The general consensus seemed to be that TIVO functionality will be more of a “feature” in products that perform multiple, but related tasks. Several of the speakers suggested that devices just being introduced that combine DVR functionality with DVD recording capability will help drive penetration of the DVR functionality. Jurgen Krehnke of Philips Semiconductors stated that the DVD Recorder has already become the most quickly adopted consumer electronic device in history (even faster than the DVD Player), selling 1.3 million units in its first year and projections for another 4.6 million units in 2003, its second year of production. Another point that was made is that it is difficult to convince consumers of the usefulness of the DVR feature, as most people think of it as a “digital VCR”. To really get the full affects and to modify consumers’ behavior, the consumer has to use the device for awhile. Once hooked, it was said that a consumer needs a, “12-step program to wean themselves from their DVR.” So, what many of the panelists envision are more deals like the one that DISHTV is providing to new customers, whereby they provide a “free” DVR in exchange for a 12 month service contract. As such, the majority of the panelists seemed to be concerned about the long-term viability of TIVO’s subscription model. As expected, Ted Malone of TIVO had a different opinion on there future. One of the reasons for this is that TIVO is basing their business on licensing revenue. They still believe a retail presence with their own brand is important, but this appears to be as much about product research for them as anything else. That is, they want to have their own customer base, so they can understand what features are important, as well as how customers are using the DVR devices. TIVO had some interesting data regarding their customers’ viewing habits. They are anticipating 1 million TIVO households by the end of 2003. In each household, there is an average of 2.2 users. They found that before TIVO, 70% of the television viewing was primetime programming. Now, 66% of the programming TIVOites watch is non-primetime programming, although it tends to be shifted to primetime. It was also suggested that the advertising model will have to change to adapt to the DVR. With the ability to skip commercials, DVRs radically impact the ability of networks to sell 30 second spots. As such and as evidenced by the reality show, Survivor, Richard Titus of Schematic, suggested that product placement will become more prevalent. That is, producers are trying to augment lean budgets by selling sponsorship opportunities within the actual program. Sponsored programming, harkening back to the 50s, was also suggested as another way to create a successful advertising model. Several times, it was mentioned that advertising itself can be compelling enough such that it essentially becomes entertainment content. For instance, TIVO said they reserve a portion of the DVR hard-drive for video advertisements. An example of a TIVO advertising success story, was their Austin Powers promotion, whereby 60% of their customers watched a 3 minute trailer plus a 3 minute music video promoting the latest Austin Powers movie. Another way to create advertising opportunities is to create “pop-up” ads during the fast-forward, pause and rewind features. That is, instead of showing a fast-forward button, a short 10 or 15 second advertisement could be shown. It wasn’t clear whether or not this could be full video or whether it would have to be an image only, but it was suggested that audio could accompany this advertisement. TIVO’s latest products will allow networking of multiple TIVOs. They appear to have addressed the security concerns of protecting content as it travels through a wired or wireless home network. In fact, one of there long-term goals appears to be the creation of a secure broadband distribution network for TIVO users that adheres to content-owners’ needs, but could be a powerful tool to drive advertising and, maybe, content subscription revenue. . Still, there was a great deal of skepticism from other panelists regarding the TIVO’s future. The outlook for DVRs is bright, but the fact that satellite and cable operators are really starting to push the DVR model, indicates to some that TIVO could be squeezed. Of course, TIVO counters that their model is based on licensing revenue, continued product innovation and advertising. Niemeyer asked his panelists what will be the most significant thing that will impact your company in the next 12 months. Some of the responses were: • "Integrated DVD recorder/TIVO functionality – Hi
Definition recorder next year" The interesting takeaway from the comments above is the expectation that HDTV will be an important feature in consumer electronices within the next 12 months. All displayed trademarks, logos and service marks are the property of their respective owners. © 2003 Viodi, LLC. All Rights Reserved |
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