TV Watchers: Micro-Managed Profit-Rats

From Advertising Age for November 6, 2008:

As Ratings Fall, Networks Take on Ad-Skipping

With DVR penetration knocking on 30%, much of America now views the ability to skip ads on TV as something approaching a birthright.

While they haven’t had much choice in the matter, the broadcast networks say they’re OK with this, that DVR users watch more TV and disproportionately more shows from ABC, NBC, Fox and CBS, which can’t be bad, right?

But the networks haven’t given up on the dream of a world of must-see advertising and are quietly attempting to take back that right — let’s call it a privilege — on the next generation of digital platforms. Already, the networks have effectively eliminated ad-skipping on broadband and have made that a prerequisite in deals with online distributors such as Hulu, Joost and Veoh, as well as ABC.com’s full-episode player.

ABC is even trying to export the model offline with its latest video-on-demand agreements with Cox Communications and Verizon’s Fios, which allow next-day, on-demand access to shows — with fast-forwarding disabled for the ads. More ABC VOD deals are in the offing, and the network says they’ll all be ad-skip-free.

Love that “let’s call it a privilege” remark! How dare “consumers” think they have a birthright.

But, never fear, you dear, sweet dividend collectors: It’ll take a while, but the necessary work to win back the little piece of lost ground will happen:

Since DVR penetration is likely to hit 50% in the next few years, the business model is looking like an endangered species, unless the networks can figure out how to insert a fresh ad into programming when it’s watched after the fact.

Interestingly, cable operators could hold the key to that hurdle. Cablevision won the right in federal court to introduce a network DVR. Since the content resides on Cablevision’s servers and not on a DVR hard drive, the company could, theoretically, insert a dynamic ad that would make a time-shifted viewer as valuable as a live viewer. Cablevision could also disable ad-skipping altogether, which Time Warner Cable does with its “Start Over” service…

Progress, in fact, is already being made among the rodents:

“We have to be very careful not to overstep our bounds,” said Chris Allen, director-video innovations at Starcom MediaVest. “People won’t accept five- or six-minute [advertising] pods you couldn’t fast-forward, but three or four ads over a one-hour show — they are fairly tolerant of it.”

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