Advertisers already weary of battling clutter and zapping have been following with dread the rise of new enemies in the commercial avoidance battle – personal video recorders (PVRs), video-on-demand (VOD) and time-shifted television viewing. Reports of studies from the U.S. that found PVR users skip more ads, combined with ReplayTV technology that automatically skips commercials, have added to their concerns.

But television viewing and commercial exposure could actually increase in a time-shifted environment where it’s the consumers – rather than the broadcasters – who set the agenda.

Ian MacLean, VP of the iTV Lab at Montreal-based Media Experts, says the 30-second commercial is not obsolete and in fact, PVRs will bring a positive effect to the advertising industry.

Personal video recorders are digital set-top boxes that allow viewers to record programming easily using an interactive program guide and, because they’re always recording, the devices even make instant replays of live programs possible. PVRs don’t record to tape but instead work like computers, saving recorded programs to a spacious 40-gigabyte hard drive, as in the case of Canada’s sole current PVR provider, Bell ExpressVu.

MacLean says several early PVR studies find overall television viewing by PVR owners actually rises, and not all viewing is time-shifted. Time sensitive programming such as news and award shows – along with water cooler shows like Survivor – are less vulnerable.

He has concluded that there are three key interdependent factors that are going to determine potential ad exposure in a post-PVR world: commercial skip rate; degree of increase in viewing (estimated at 15% to 20%); and the remaining amount of live viewing versus on-demand or time-shifted viewing in a household.

MacLean says that if the amount of live viewing exceeds the time-shifted viewing and the household is watching more television, the potential for commercial exposure increases. This is particularly true of light television viewers, a desirable and elusive demographic consisting of busy, higher-income managers and professionals who will be exposed to advertising they wouldn’t have seen without a PVR.

‘One of the beautiful things about PVRs,’ says MacLean, ‘is they [enable] people…to watch more of their favourite shows when they want to watch them.

‘It shifts the power from the network to the viewer. You’re no longer watching according to the tyranny of the network schedule but according to your schedule. Prime time is no longer a time of day. It’s now a state of mind.’

MacLean says the strategies for fighting time-shifting centre on compelling programming and compelling commercials.

‘There’s a reason people avoid commercials. Some of it has to do with an unwillingness to watch commercials for products and services that don’t resonate with the audience. They have no relevance.

‘If you want to buy a certain product, travel to a certain place, or want to know about The Rolling Stones’ latest tour, you might be willing to set your PVR to get some rich, emotion-packed digital sound and high-quality video on that event, service or product – richly produced long-form advertising. In the same way that PVRs help people find shows, they can also help marketers connect those shows to the right people.’

Right now, video-on-demand is a bigger factor than PVRs in time-shifting, says MacLean. This fall he estimates VOD will be in 900,000 cable homes, and that number will crest at one million when Videotron goes online next spring.

VOD movies have been the biggest digital driver up to this point, but the broadcast distributors are now looking at adding other types of programming.

MacLean says there are three types of VOD models: Transactional VOD is the purchase of a one-time event. Subscription VOD is where for a monthly fee, viewers can watch as much on-demand programming as they wish, something that is proving very successful in the U.S. with HBO shows such as The Sopranos and Sex and the City.

The third type is free VOD or ad-supported VOD, where on-demand programming would be sponsored or have ads inserted.

Stuart Morris, VP of marketing for Bell ExpressVu, says research the company has done with its PVR customers shows that when they watch what they want when they want it, viewers pay closer attention to the television, suggesting a higher level of involvement in the advertising as well.

In addition, ExpressVu found that only 3% of customers say skipping commercials is their favourite thing about a PVR. Most loved the ease of recording, the on-screen guide and no longer missing their favourite shows.

Morris says this means that advertisers can still get noticed by placing advertising directly in programming relevant to target consumers, or by using more creativity in traditional commercials.

Another option advertisers are looking at is producing long-form commercials that can be added to PVR menus at viewer request, as TiVo is doing in the U.S. These can include movie trailers, infomercials, or car ads for those in the market for a new vehicle.

Morris says this is all possible down the road, but PVR penetration in Canada isn’t far enough along to make it worthwhile right now.

‘Everyone understands the persuasiveness of television ads, but they are always cognizant in the time delay between the ad and when you ask someone to do something.

‘Clearly it’s a whole lot better to take them from the persuasiveness of an ad to a whole new step, whether that’s viewing a long-format message or pushing a button to get a brochure for a car, a sample of a product, or setting up the PVR to record an infomercial. Any of those things is a great advance for advertisers.’

Interactivity will also be a new and significant tool for producing engaging advertising that viewers choose to watch.

Rogers Cable for one has already licensed the Enhanced Broadcasting System and Response Network from Wink Communications in California. This means broadcasters such as CHUM Group, the Weather Network and Sportsnet, which are iTV enabled, can offer interactive programming and advertising to viewers. Right now, clicking on the iTV icon with a remote gives viewers access to news, sports and weather updates.

Mike Lee, VP of product development for Rogers Cable, says even more interactivity will likely show up as advertisers start integrating the use of this new technology into their marketing plans.

‘I think advertisers are genuinely excited about being able to talk to their customers. Wink is having quite a lot of success right now [in the U.S.] with just polling.

‘When [viewers] see a car commercial, just asking if [they’re] thinking about buying a car in the next six months. Just that data – and knowing that if you advertise on Friends, for example, 30% of the people who watch the commercial actually have the propensity to buy a new car in the next six months. That’s valuable because it allows you to better target your spending going forward.’

But the really exciting stuff is still to come, says Lee, and Rogers will continue to adapt its interactive capabilities as it gains users. ‘As with any new technology, like the Internet, it’s going to take some time. People don’t change overnight. We understand that and we’re committed to investing both the money to put in the platforms as well as the time to educate advertisers.’

The issue of privacy

Digital providers play it safe in anticipation of CRTC guidelines

Interactivity, the very attribute that makes digital television so attractive to advertisers, broadcasters and viewers, also conjures up some very touchy issues. These issues – privacy and security – loom large even as marketers’ thoughts turn to developing a two-way dialogue with customers while gathering viewer and consumer data.

Digital enables a two-way connection so customers can order up pay-per-view (PPV) and video-on-demand (VOD) or record the programs they most want to watch.

It also opens the door to interactivity within programming and advertising. Although penetration of PVRs and digital set-top boxes is still on the low side in Canada, interest in the endless marketing possibilities of this two-way communication in terms of interactive commercials, polls, promotions and contests is beginning to build.

Digital set-top boxes already have the ability to monitor a household’s viewing and interactive activities – but they don’t do it. Canada’s privacy laws and the privacy standards set internally by each of the country’s cable and DTH distributors put the privacy of the customer above all other considerations. Right now only PPV orders are captured for billing purposes.

The CRTC began an inquiry on interactivity last November and the release of guidelines for the industry is imminent. Until the CRTC paper is on the table, it is not likely that interactivity will develop beyond a one-way relationship, such as a viewer clicking on an onscreen iTV icon to get weather and news briefs.

In the meantime, privacy is protected by other government legislation including the Personal Information Protection and Electronic Documents Act (PIPEDA), which went into effect in January 2001 with final implementation in January 2004 when it extends to all commercial activities in Canada. It applies to all personal information gathered in the course of commercial activities.

Simply put, ‘no private-sector organization can collect, use or disclose personal information without your consent’ and then only for the purpose for which the consent was given.

In the U.S, interactivity is farther along in its development. The industry has set privacy and security standards for companies involved in these television enhancements. Wink Communications of California follows privacy guidelines similar to the Canadian legislation and, for security, encrypts customer and credit card information.

Canada’s current sole PVR model, by Bell ExpressVu, is currently not configured to capture any data aside from PPV transactions – and in the future, VOD requests.

The problem with PVRs

How do you measure time-shifted viewing?

One of the big concerns that advertisers and their agencies have about time-shifted viewing is the challenge it poses when it comes to audience measurement: Is the viewing measured when the PVR records or when the viewer finally watches the programming?

There are roughly 30,000 personal video recorders (PVRs) in Canada right now. That number will continue to grow through both ExpressVu and other broadcast distributors that are expected to introduce similar technology. The relatively small penetration of the appliances to date has meant that PVR audience measurement hasn’t been much of an issue in Canada yet. Any PVR use so far has been captured, like VCR viewing, when the show is taped.

But PVR use won’t be negligible for long. In the United States, Forrester Research is predicting there will be three million PVRs in American homes by the end of this year, and 46.2 million by 2007. Fortunately, a measurement solution is already being developed in the U.S., so advertisers hope that by the time PVRs are plentiful in Canada, advertisers and broadcasters will have access to reliable PVR viewing data.

New York-based Nielsen Media Research has been working with a number of American technology companies for the past few years to develop software to capture PVR viewing, and it currently has a test up and running with 20 TiVo PVR households.

Because PVRs are hard drives integrated into a digital set-top box, NMR is able to measure not only when the program is recorded but also when it is watched. And therein lies the rub.

Viewing can be captured, says Anne Elliot, New York-based VP of marketing communications for Nielsen Media Research, but the big question is, ‘What gets reported and how does it get reported?

‘Currently with traditional VCRs, we credit the viewing at the time we know somebody is recording a program. The assumption is that if you’ve recorded it, you’re likely going to watch it,’ she says.

‘I happen to have TiVo. I recorded the season and series finale of X-Files back in May and haven’t watched it yet. If I watch it tonight for example, and in that program there were commercials for movies opening over the summer, does anybody care if I watched it in October?’

The parameters around when viewing should be credited and how viewing behaviour and patterns change with PVRs are just some of the areas being studied with the test and discussed with NMR clients, says Elliot. Other possibilities include a separate report of what movie trailers or long-form commercials are ordered up and watched by PVR viewers.

Additionally, because PVRs are digital technology, fast-forwarding through traditional ads doesn’t blur the picture, so the ads aren’t totally obliterated.

‘What we’re grappling with at the same time as our clients, is how can we help them best understand all this,’ says Elliot. ‘There may be new ways and challenges for advertisers and creative teams to retain a logo or maintain the product visually so that even if you fast-forward, you still see it.

‘[PVRs and time-shifted viewing] may also begin to impact the way that advertisers and program producers do their negotiations.’

Currently, NMR’s PVR measurement solution consists of software that is downloaded into the set-top box the same way the broadcast distributor sends its enhancements. Variations of the NMR software could actually be used with any digital set-top box and not only capture true program viewing – including zipping and zapping – but also commercial exposure.

Elliot says the company should be closer to knowing how PVR viewing will be reported early in the new year.