The Endangered DVR: VOD Could Make It Obsolete

Networks Hope Increased Content Choices Make Video on Demand an Attractive, Ad-friendly Substitute

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After a decade of zapping past commercials using a digital video recorder, consumers may be gearing up to fast-forward past the device.

It won't happen tomorrow or even next year. But media companies and ad buyers say they are preparing for a day in the not-too-distant future when TV viewers exchange their ability to skip ads for the convenience of getting their favorite programming on any device at any time.

Just as Facebook leapfrogged MySpace, the DVR is finding itself outmuscled by new developments in technology, namely video on demand. VOD is expected to gain favor as the consumer's preferred way to watch TV and other video entertainment.

"Video on demand is going to play a major role in how people consume video going forward," said Alan Wurtzel, president-media and research development at NBC Universal.

For TV execs such as Mr. Wurtzel, that would be great news, as the DVR remains a destructive force for advertisers and media outlets, the latest evidence of that being TV networks' full-on legal assault against Dish Network's "Hopper" device that allows viewers to automatically skip ads on all TV programs they record.

But DVR adoption in U.S. homes has begun to plateau, and it's already been surpassed by VOD use. Consumer behavior is shifting, too, as cable and satellite distributors have broadened their VOD offerings -- and started to promote them. These days, subscribers can get movies, how-to videos and -- perhaps most important -- current episodes of programs from CBS, NBC, ABC, Fox, FX and AMC on demand; they no longer need a DVR to watch most of their favorite sitcoms and dramas when they wish. This behavior is further encouraged by the streaming-video subscription services, including Netflix, Amazon and Hulu Plus , available via internet-connected TVs. Younger consumers may never know a day when they had to "set" their TV to record a particular show.

Already, VOD viewership of CBS programs "is a relatively significant amount and it is growing," said David Poltrack, chief research officer of CBS Corp. Even TiVo, which sparked the DVR revolution, has moved into new areas, such as video search, said Tara Maitra, senior VP-general manager of content and media sales for TiVo.

"The reality is consumers don't really care" how they get access to programming, she said, so long as they can do it on their terms.

TV networks have good reason to push video on demand. In exchange for the opportunity to show TV's most highly rated programs on demand, cable companies and other distributors have in some cases agreed to disable a viewer's ability to fast-forward. In other words, TV viewers can't escape the ads when they watch via VOD. Some networks have already begun to tally VOD viewership in the schedules they devise for advertisers.

"We like VOD," said NBC's Mr. Wurtzel. "Not only can you control in some instances commercial skipping, but you can also control how long [a program] stays available and when it goes down." In the case of DVR viewing, "we have no control over the content."

"Fast-forwarding of ads will likely decline," predicted Michael Bologna, managing partner and director-emerging communications at Group M, the large ad-buying arm of WPP. To get their shows for free and as they wish, unavoidable ads could be the price consumers must pay.

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