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.”

“Maintaining Control”: The Richistanis’ DVR Crisis

One of the advantages of bothering to read big business marketing’s professional literature is that it very efficiently disabuses you of sponsored illusions about the “freedom” part of the so-called “free market.”

Consider the alarm expressed over the spread of digital video recorders (DVRs) in this week’s issue of Advertising Age:

By letting viewers skip ads, that pesky DVR has already gnawed away at the system media conglomerates have used for decades to score billions of dollars in ad revenue. Now it’s primed to become a phenomenon on the order of a locust — with an ability to multiply rapidly and do even more significant damage.

The U.S. Court of Appeals for New York last week overturned a ruling that had blocked Cablevision — and by extension, other cable providers — from making use of a “network DVR” that would allow it to run a massive video-storing operation from a single location rather than installing individual DVRs in each subscriber’s home. Using the technology, consumers can record programs through their remote control without a new set-top box, conceivably turning every TV in the house into a machine that records TV shows — and can skip past the ads that support them.

“With the stroke of a pen, the U.S. Court of Appeals has opened the door to a massive increase in the penetration of DVR capabilities,” wrote Bernstein Research analyst Craig Moffett in an Aug. 4 research note. “In short order, effective DVR penetration could now jump to north of 60% of cable households (that is, all digital cable subscribers) with an even larger increase in DVR outlets per home,” Mr. Moffett added.

Ad Age makes no bones about what this gnawing locust infestation means: It is a threat to corporate capacities for “Maintaining Control” over prospective cutomers’ off-the-job activities:

By letting viewers skip ads, that pesky DVR has already gnawed away at the system media conglomerates have used for decades to score billions of dollars in ad revenue. Now it’s primed to become a phenomenon on the order of a locust — with an ability to multiply rapidly and do even more significant damage.

The U.S. Court of Appeals for New York last week overturned a ruling that had blocked Cablevision — and by extension, other cable providers — from making use of a “network DVR” that would allow it to run a massive video-storing operation from a single location rather than installing individual DVRs in each subscriber’s home. Using the technology, consumers can record programs through their remote control without a new set-top box, conceivably turning every TV in the house into a machine that records TV shows — and can skip past the ads that support them.

“With the stroke of a pen, the U.S. Court of Appeals has opened the door to a massive increase in the penetration of DVR capabilities,” wrote Bernstein Research analyst Craig Moffett in an Aug. 4 research note. “In short order, effective DVR penetration could now jump to north of 60% of cable households (that is, all digital cable subscribers) with an even larger increase in DVR outlets per home,” Mr. Moffett added.

All this, of course, means that the underlying purpose of commercial television — attracting eyeballs and eardrums to corporate capitalist behavior modification campaigns, a.k.a. “advertising” — is being undermined by a rare opening for democratic preference.

No bones are made about what must be done in response:

The media companies’ objection to Cablevision’s video-storage technology is that they believe it infringes on their exclusive rights to air and reproduce the content in question. Those companies that create the content want to maintain a level of control over when and how it is viewed, in order to be able to monetize it by selling advertising against it. The networks have been reluctant to make their content available for new-media venues such as streaming online until they have the ability to have some sort of control over getting consumers to watch ads.

The media conglomerates have tried everything to keep the paradigm-shifting DVR technology from worming its way further into consumer life. Walt Disney’s ABC has made hit shows like “Desperate Housewives” available for cable providers’ video-on-demand offerings, but only in exchange for the cable company disabling viewers’ ability to fast-forward. Time Warner Cable has introduced features that let viewers “start over” a favorite show but the trade-off is they must watch the ads that accompany it.

None of this has weaned consumers, now accustomed to watching shows as they wish, from their ad-skipping addiction. “They don’t want to watch commercials, but they won’t pay to not watch commercials,” said John Senior, a partner-media and entertainment practice at Oliver Wyman.

In other words, here comes another big business blitzkrieg: Expect massive new efforts to block, favorably redesign, and/or sidestep DVRs, plus a redoubling of already intense ongoing efforts to insert advertising elements even more deeply and widely into all media “content” on all “platforms,” especially including the thing that was once quaintly known as the “information superhighway.”