DVRS: A $27B REVENUE KILLER

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Ad skipping and on-demand viewing could cost the TV industry $27 billion in lost ad revenue over the next five years, according to Accenture, the global research firm formerly known as Anderson Consulting. The 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 (which includes TiVo, Echostar and DirecTV devices) to a projected 40% by 2009. In all U.S. households, not just those with DVRs, 2% of TVads are skipped, and Accenture expects that number to rise to 22% by 2009.

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. Accenture 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," reads its report, released last week. Accenture totals TV ad revenue in 2004 at about $60 billion.

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.

"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." Read more: AdAge.com QwikFIND aaq48r

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