Thanks to Americans' desire to have it their way, the digital video recorder business is booming. Consumers want to control what, when and even where they watch TV. The DVR, pioneered by TiVo and Replay more than half a decade ago, is making that possible.
Use of the DVR service and boxes, though relatively small, is growing due to the sudden interest from direct broadcast satellite and cable companies. DVR subscribers have jumped 156% from April 2004 to April 2005, reports In-Stat. The current sub count rests only at about nine million, but Yankee Group expects that number to grow to 25 million by 2007 and Forrester Research projects a 41% U.S. cable-satellite penetration by 2010.
The DVR market, locked in a do-it-yourself model that lacked convenience, is changing with DBS and cable involvement, says Mike Paxton, In-Stat analyst. Ease of use is key. "The public in general will ignore anything that's not self-explanatory," he says.
MARKET SEEKS MATURITY
Will TiVo continue to fly in the emerging competition from cable and DBS? TiVo, in second place with 35.7% of market to EchoStar's 36.8% share, plans to continue to sell its product at retail as well as through deals with service providers like DirecTV and Comcast Corp. (Some 1.9 million of TiVo subs have come through DirecTV's joint launch with TiVo in 2004 of its HD DVR product.) And while satellite providers dominate the subscriber base now, they've also been selling the service a lot longer than cable companies. "Cable and satellite companies directly bill three-fourths of the households in the U.S. and will likely be calling the shots and deciding what type of products and service to offer," Mr. Paxton says.
One of the most popular features of DVR viewing is also one of the most vexing for the ad industry-the fast-forwarding through commercials. DVR providers, especially TiVo, are experimenting with many ad-friendlier techniques. Mass-market adoption will bring changes in viewing habits, but it may not spell doom for the ad industry.
Marketers nevertheless want to be prepared. Ipsos has been hired by the Digital Media & Advertising Group to complete five tracks of research this year to find out how consumers use and interact with DVRs. Kimber Sterling, TiVo director-advertising and research sales, says attitudes have shifted in the ad industry from loss to opportunity. They're realizing the ad value of DVRs, he says, and contends that this "is the interactive TV model teased for 20 years now."