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TV AD-SKIPPING LOSSES TO HIT $27 BILLION OVER FIVE YEARS

New Research Suggests Greater DVR Impact Than Previously Thought

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NEW YORK (AdAge.com) -- Ad skipping and on demand viewing could cost the TV industry $27 billion in lost ad revenue over the next five years, according to new research released today by Accenture.


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audio bug Accenture Report Summary

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The New York-headquartered management and technology consultancy reports that 70% of ads are already being skipped by viewers with digital video recorders; that trend will only get worse as DVR penetration grows from the current 8% of homes with DVRs to a projected 40% by 2009.

Accenture is the global research firm formerly known as Andersen Consulting.

Top network execs
The report's release comes just a week after top broadcast network executives told the annual Cable & Telecommunications Association conference that DVRs pose a serious threat to their ad base. Previously, network executives publicly played down the potential impact of the ad-skipping technology.

Accenture's research suggests that the impact of DVRs, video on demand and interactive TV will have a much greater effect on the linear TV business than anyone previously thought. The report says such changes in viewing behavior will exert downward pressure on CPMs (or costs-per-thousand viewers, the metric by which agencies buy TV audiences).

At the same time advertisers will have a tougher time reaching a mass audience, though more and more marketers, such as McDonald's Corp., have multiple messages aimed at multiple niches.

Measurement demands
"Advertisers are demanding greater accountability, therefore greater measurement, On Demand will be able to provide that," according to the report. "This will create considerable challenges for the growth of linear TV advertising."

Accenture's research predicts TV ad revenue growth of only 3% by 2009, compared to other industry analysts predicting 6% to 10% growth by 2009. "A difference of potentially $27 billion in TV ad growth," said the report, which puts TV ad revenue in 2004 at about $60 billion.

New strategies
The major media companies, however, might argue they are already exploring ways of working with advertisers in the on-demand universe. NBC Universal's Sci Fi Channel is one of many channels experimenting with video on demand in partnership with its advertisers. The broadcast networks have also worked hard to sell advertisers on product integration, weaving them into the fabric of TV shows.

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