PVRs to hit 20% by '07

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TiVo's consumer-traction travails notwithstanding, advertisers and the TV industry should avoid complacency and craft new business models and marketing schemes going forward. That's the clear implication coming from last week's Yankee Group forecast on PVR penetration and its impact on the economics of TV advertising.

The study predicts U.S. household penetration of personal video recorders, as they become available through satellite providers and cable systems, will grow from the current 3.8% to 20% by 2007. The correlating impact on the U.S. TV advertising marketplace, according to the report, would be a significant 11%-or $5.5 billion-loss from the current $50 billion annual TV ad pie.

`TV 2.0'

Some said that while the Yankee predictions may not be completely accurate, the momentum is clearly on the PVR side. "It really doesn't matter whether [PVR penetration] is going to be 15% or 20% or even 50%," said Carat North America CEO David Verklin. "We have to take our heads out of the sand because TV 2.0 is upon us and we have to prepare" for the future.

Mr. Verklin predicted growth will be fueled in large part by News Corp. Chairman-CEO Rupert Murdoch's intention to position PVR features in the DirecTV satellite system he's acquiring.

But David Poltrack, exec-VP, research and planning at Viacom's CBS, is a skeptic. "Audience loss in a worst-case scenario would be around 15%. That's about 2% loss per year in commercial exposure from now until 2010. Since 1980, the loss of commercial exposure due to competition has been 2.7% a year and the networks haven't lost anything."

Omnicom Group Exec VP Bruce Redditt recommends the networks adapt by integrating clients into the programming process earlier. And if PVRs do take a huge bite out of TV ad revenue, Mr. Redditt doesn't believe that a subscription model is the answer. "Is the deficit-financing model for scripted shows the most efficient way? Aren't there some other models that should be brought forward?"

Fast Facts

3.8%: Current PVR penetration in U.S. households

20%: Projected penetration of PVRs in U.S. households by 2007

11%: Percentage of TV ad revenue to be lost as a result

$5.5 billion: Dollar amount of TV ad revenue to be lost as a result

Source: Yankee Group

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