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Top Executives Portray Technology as Serious Threat to Ad Revenue

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NEW YORK ( -- Although the broadcast networks publicly play down the impact of ad-skipping technologies, it was clear from a panel at last week's National
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News Corp.'s president, Peter Chernin, said his network is battling DVRs in three ways.
Cable & Telecommunications Association conference that TV moguls see the spread of digital video recorders as a serious threat to their ad base.

Speaking at the NCTA's annual show in San Francisco last week, News Corp.'s president and chief operating officer, Peter Chernin, said his company -- which is the parent of Fox Broadcasting -- had three ways of combating the ad-zapping problem. The first is "live sports, live news, live events," which, he said, viewers tend to skip less. "The CPMs [cost of an ad per thousand viewers] on sports, local news and events, and American Idol and things people want to watch live is only going to increase," he added.

The second strategy is to get consumers to pay directly for content, such as with video-on-demand services and DVDs.

Shift to branded entertainment
His third approach is that network ad departments work more closely with advertisers to provide them with branded entertainment sponsorship deals or product integrations. "We have to rethink the way we sell advertising," Mr. Chernin said. "When we put six to eight 30-second commercials back to back, we put up a sign saying 'Go away now.'"

He said the answer was shorter ads or maybe longer ads or greater promotion. Mr. Chernin said Ford Motor Co.'s commercial-free sponsorship of the season-premiere of the Fox series 24 was the most

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DVR distribution may have 'gone too far,' said NBC Universal's chairman, Bob Wright.
successful commercial in the automaker's history.

Ironically, News Corp.'s DirecTV satellite unit has been a huge driver of ad-skipping DVRs, a technology that's causing Fox Broadcasting to work much harder. "We better figure out a way to grow the opportunities faster than the disruptions hurt us," Mr. Chernin said.

Bob Wright, NBC Universal's chairman-CEO, freely admitted that the technology "doesn't help anyone of us, quite frankly. It's a technology driven by the fact that one particular distribution company decides to give them away for free, so everyone can have one. It doesn't do anything positive for those of us in the content business, [who are doing] the creating, the distributing, the packaging. It may be that we've gone too far with the distribution of DVRs."

'Disassembling networks'
Later, he softened his stance slightly, saying that viewers of TiVo, one of the pioneering DVR systems, tended to watch more TV. "We shouldn't judge TiVo or its descendants as all that harmful, but I think the concept of having [such devices so easily] available is kind of disassembling the networks. If you try to encourage people not to watch the advertising, then the program owners are losing the largest single support they have, and that isn't going

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DVRs have made the broadcast business 'more fragile,' said Walt Disney's CEO-in-waiting, Bob Iger.
to work in this system."

He added: "You've going to have to encourage people to watch with the advertising or pay to watch it without the ads; somehow, we have to think in those terms."

Perhaps indicating that broadcast assets have few growth prospects, Bob Iger, Walt Disney Co.'s CEO-in-waiting, said Disney had been conservative in acquiring assets in traditional broadcasting. "The broadcast business, because it relies on one revenue stream, is a more fragile and vulnerable business in a world that is changing dramatically through technology."

Billions of dollars
Mr. Iger said it was too early to judge the impact of DVRs. "How you support all of this programming is a big issue. Countless billions of dollars are being spent by broadcasters on programming that is supported by advertising. It is something that we have to be mindful of."

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