PVRs are set-top boxes that allow consumers to digitally record and store their favorite TV shows for viewing later. Bullish estimates on household adoption of the devices have sent agencies and marketers scrambling to get in on the action.
In 1999, PVR household penetration was less than 100,000 units, according to Forrester Research, a research consultancy that tracks emerging technologies. Forrester projects that number will climb to 800,000 by yearend, increasing to 3.6 million in 2001 and reaching a whopping 53 million by 2005.
The penetration will be driven largely by satellite TV companies such as DirectTV and Echostar Communications, and by cable providers which have begun to incorporate the personal TV services and hard drives into their own set-top boxes.
And with the increasing popularity of PVRs, loaded with subscription services from the two leaders in the segment, ReplayTV and TiVo, broadcast networks are examining how they should be selling ads, and ad agencies are rethinking how they place marketing messages for their clients. Some clients, in fact, have already signed deals directly with TiVo and ReplayTV.
MORE TARGETED ADS
PVRs essentially allow consumers to watch TV programs whenever they want to, thus forcing marketers to rethink ad delivery strategies to devise more targeted, more compelling offers.
Because the PVR stores a viewer's programming preferences, it yields information about that viewer and his or her household. The theory is advertisers then can target offers more effectively to reach particular audiences.
Major media companies and advertising agencies, recognizing a paradigm shift in the making, are already investors in both TiVo and ReplayTV. Tivo's backers include CBS Corp., NBC and Walt Disney Co., while ReplayTV is backed by Grey Global Group, Interpublic Group of Cos. and Omnicom Group.
Multimillion-dollar ad campaigns are already running for TiVo and ReplayTV, with a push in the works for Microsoft Corp.'s forthcoming Ultimate TV. Goodby, Silverstein & Partners, San Francisco, handles TiVo; Publicis & Hal Riney, San Francisco, has ReplayTV; and FCB Worldwide, San Francisco, has Ultimate TV.
`AN INSANE AMOUNT'
"You will see an insane amount of brand advertising, especially for TiVo, and probably for Microsoft Ultimate TV, because what's going to happen in the next 12 months is the concept of video recording will be associated in the minds of consumers with a brand name," said Josh Bernoff, principal analyst, Forrester. Sony Electronics and Philips Electronics-branded PVRs are marketed with the TiVo service, while Matsushita Electric Industrial Corp.'s Panasonic brand is partnered with Replay. Mr. Bernoff projects that 500,000 PVRs will be sold in the fourth quarter. If his aggressive estimates prove true, marketers had better speed up their plans for the new medium. A few are already on their way.
ReplayTV recently announced Universal Pictures and Coca-Cola Co. have signed on to become the first advertisers on ReplayTV. Coca-Cola's two year-plus deal gives it title sponsorship of editorial on Replay Zones (programming categories that allow consumers to identify different genres to record), banner ads and other promotional vehicles. ReplayTV executives are betting the Coca-Cola deal will spur other marketers to line up.
"We think this is going to be a very popular technology with consumers in the future, and this partnership with ReplayTV primarily will allow us to learn what the public likes about the service and how our brands can add to the positive enjoyment and experience of this technology," said Chuck Fruit, Coca-Cola's VP-director for media and marketing assets.
Mr. Fruit said the deal would allow the world's largest soft drink marketer to learn how consumers use the technology (including fast forward, pause and replay features) and whether they set up their own channels.
"There are lots of functions in this technology, and one goal is to learn which are most appropriate," he said. Ads for Coca-Cola Classic and likely other brands will break in early October.
ReplayTV will allow Coca-Cola to target its promotions and commercials, Mr. Fruit said. "This technology gives consumers much more choice and control over what they watch," he said. "It will be possible for us to help deliver specific interest [ads] channeled for the consumer. It opens up a number of opportunities to develop promotions." Opt-in mechanisms for sweepstakes and promotions, couponing, loyalty programs and unique e-commerce opportunities are just a few of the possibilities.
Michael Teicher, senior VP-advertising sales for ReplayTV, said the Coca-Cola deal validates the concept of personalized TV.
"We strongly believe ReplayTV is a perfect complement to broadband advertising on traditional TV because our system will allow for the right ads to hit the right people at the right time," he said.
While the soft-drink giant has exclusivity in some ReplayTV areas, competitors can advertise on others. "This represents an opportunity for Coca-Cola to take a front-row seat at a paradigm shift that is occurring in the television and advertising business," Mr. Teicher said.
TiVo this year inked a deal with iFilm, which will provide exclusive movie content to subscribers of its Personal TV Service. TiVo executives were not available for comment by press time.
But TiVo has been aggressively courting broadcasters, agencies and marketers for more than a year. Both companies have said more deals with marketers are in the works. Just last week, TiVo introduced TiVo Direct, a new feature that will enable its advertising partners to deliver exclusive content to subscribers. Among the advertisers who will sponsor half-hour shows on the service are Showtime, the PGA Tour and Starz Encore.
Forward-thinking agencies are helping to educate and advise their clients. "Essentially, our entry point with clients isn't about PVRs specifically, it's more about how we see media changing in the next five to 10 years," said Tim Hanlon, director, emerging contacts, Starcom Worldwide, Chicago. "There are a lot of traditional clients that are addicted to television, and anything that changes the paradigm of television immediately becomes a concern."
Mitchell Oscar, senior-VP, director of media futures at Universal McCann, New York, said the panic among agencies and marketers can be allayed by studying consumer behavior and understanding how people use PVRs. "Unless the advertising community supports these initiatives, they won't develop properly or intelligently. . . . We have to study and understand, that's what we're attempting to do."