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The Rise of DVRs

Ben Macklin
The Rise of DVRs Ben Macklin

Editor's Note: If you're looking for Amy Auerbach's article about the Sugarshots campaign, please click here.

Like many disruptive technologies, the impact of digital video recorders, or DVRs, was overestimated in the short term and perhaps underestimated in the longer term. DVR adoption has been relatively slow, considering the technology has been around since the late 1990s, but all indications suggest DVR technology will be a mainstream product/service by 2010.

Apart from the early standalone boxes from TiVo and Replay TV, DVR technology has already been integrated into cable and satellite TV set-top boxes, and in the future the technology will be integrated into game consoles, media center PCs, TV sets, DVD recorders/players and other devices.

Cable TV companies are also exploring embedding DVR technology within the network (at the head end), so cable TV subscribers will not necessarily need a specific DVR-capable set-top box in order to receive DVR functionality. This would enable cable companies to roll out DVR services much more quickly.

DVR users "skip" the majority of advertising they are exposed to and watch 50 percent or more of their TV out of scheduled times. This is the evidence presented from a variety of studies over the last few years. A study conducted by the Myers Group in June 2004, for example, showed 62 percent of DVR owners skipped or fast-forwarded through all or most commercials.

A study conducted by Lyra Research in 2004 showed that the longer the tenure of DVR ownership, the greater the percentage of ads skipped while watching time-shifted programs. In other words, as DVR users become comfortable with all the features of their device, they are more likely to use them.

TV viewers having been "zapping" commercials for some time through dexterous use of the remote control, but the significant increase in time-shifted TV viewing has major implications for traditional media buying, which tries to target particular audiences within particular times.

A study conducted by the American Advertising Federation (AAF) indicated that the perceptions of advertising professionals regarding the potential impact of DVR technology changed significantly between 2003 and 2004. In 2003, 13 percent of survey respondents indicated they saw DVR technology as spelling the end of the 30-second ad spot and dramatically transforming TV. A year later, 21 percent of respondents felt this. The majority of respondents felt that while DVR technology will spur significant growth in non-traditional ads, the 30-second ad spot will remain a key format.

It was not until DVR technology was included free into the set-top box of satellite TV providers like EchoStar and DirecTV that consumers began to embrace the concept. Greater awareness, understanding and availability of DVRs in the market will ensure DVRs continue to grow strongly over the next five years.

Company reports from the leading DVR providers indicate there were approximately 7.4 million DVR households in the US in early 2005, equating to about 6.5 percent of all US households. TiVo is the best-known DVR brand in the market, and with its partnership with DirecTV, it reported over 3.3 million subscribers (1.9 million of which are DirecTV) in the first quarter of 2005. EchoStar, with its own DVR service, has approximately 1.8 million DVR subscribers, according to Magna Global Research. Time Warner recently broke through the one million DVR subscriber barrier to lead all cable MSOs.

Currently, 50 percent of all DVR households in the US come from DBS subscribers, compared with 31.1 percent from cable and 18.9 percent from standalone boxes.

eMarketer assessed the potential growth of DVRs across cable, DBS and standalone/integrated products. Publicly available company data over the last year, in conjunction with comparative data from Magna Global Research, which monitors the DVR sector each quarter, enabled eMarketer to establish a baseline of DVR households at the end of 2004 of six million. This equates to approximately 5 percent of all households.

eMarketer estimates that the number of DVR households will grow to 47.4 million in 2009, as the majority of those who trade up to digital TV in the coming years will do so with DVR functionality. All cable MSOs are now driving their DVR services, which will have the effect of driving the entire sector.

eMarketer estimates that DBS households will continue to lead the DVR market over the next couple of years, but cable DVR services will grow rapidly from 2006 onward and eventually outnumber satellite DVR services, simply because of cable's much larger footprint. Recent reports from the leading cable set-top box manufacturers, Motorola and Scientific Atlanta, indicate that the majority of all set-top boxes they shipped in 2004/2005 were DVR-enabled.

Standalone DVRs, such as those offered by TiVo, are unlikely to ever reach a mass market, but integrated devices such as game consoles, PCs or DVD recorders with DVR technology are likely to garner significant market share. Microsoft and Sony are due to launch their new game consoles with integrated DVR technology in the next 18 months, which will ensure many households have DVRs, whether they want them or not.

Ben Macklin is a senior analyst at eMarketer. This article is drawn from his new report, "US Digital TV: Think Outside the Box"

Diagram your campaign touchpoints
Campaigns were once very linear (or, at least, people thought so). The reader clicked on a banner, went to a landing page, then clicked on the button to be shot down the conversion path. Today, you can barely fit all the campaign touchpoints on a single-page diagram.

A good diagram of all your campaign touchpoints is like stepping back and taking a 10,000-foot view of whatever you're working on. It should not only take into account all the potential places someone could interface with your campaign, but also help you identify any places you've overlooked.

Outlining those touchpoints will also help your client see how your campaign idea can more fully integrate into the brand's existing marketing plans. And that can make your campaign appear all the more relevant and valuable.

It can also help generate interest from other people within the company. And the more people in the company who rally behind your idea, the more likely you are to get buy-in.

A campaign flow from several years ago. It was simpler times than now, but you get the idea.

Emphasize the benefits of being first to market
Being an early adopter can be a lonely and unrewarding experience. Just ask the guy who bought the first fax machine. But digital marketing is one area where you'll find a number of great examples for why you should always try to be first. In short, it generates a lot of buzz and gives you the earliest access to valuable data that know one else has.

Consider Tony Hsieh, CEO of Zappos. He started using Twitter in June 2007 -- well before most people. And waaaaaay before most CEOs.


Tony Hsieh, CEO of Zappos and early Twitter adopter

Now, Mr. Hsieh wasn't saying anything outrageous or extreme on Twitter by today's standards. Yet his tweeting became huge news. A CEO, keeper of the company's most guarded secrets, was regularly opening up his mind via the same channel on which people were telling everyone what they just had for dinner or who they just ran into at the dry cleaners. His 140 character tweets generated pages of text about him in return. Not to mention, he ended up with more than 1.6 million followers.

Now consider the CEO who starts using Twitter today. Is it going to generate the same press it did for Zappos' CEO back in the day? Not as likely. It's not that CEOs today shouldn't tweet. But they have to realize it doesn't have the same news impact.

There are many more examples. Squarespace's iPhone giveaway on Twitter that made the brand's name the No. 1 trending topic on Twitter that week. General Electric's Smart Grid augmented reality app and even American Apparel's Second Life store seemed to have generated more PR value that what the projects cost to develop.

The beautiful thing about technology is it's always presenting us with this opportunity in some new form. We just need to grab it. (Or convince the client to grab it.)

Minimize client-side man-hour requirements
One of the most consistent comments I hear from companies is in regard to the challenge of getting projects through their internal IT department. And granted, it can't be easy to run the IT department, manage your own site with a lean staff (isn't every company running lean these days?), and then have marketing people coming in with all sorts of new projects they'd like to have live before the next banner impression is served.

If there are ways you can reduce a client's IT requirements, they're worth exploring. From setting up your own subdomain for handling site maintenance, to using open source solutions that will hopefully reduce initial setup and ongoing maintenance requirements, it's important to keep the client-side IT department in mind.

And even if IT time requirements aren't the difference between whether or not your project sells, it could have a big impact on how smooth it runs, or if it goes live in a timely manner. And as we all know in marketing, timing means a lot.

Try an agile approach to project development
If you're not familiar with agile project development, it might be easier to first review the waterfall approach to project development. Everyone's probably seen a waterfall project plan.

Diagram of waterfall production process

Waterfall was all about trying to account for every conceivable detail that the project would run into, from start to finish. And that's great in theory, as you want projects run as tightly as possible. But companies ranging from IBM to Microsoft have also found that it's nearly impossible to predict all the potential issues or feature requirements months or years in advance. And so they've adopted a process called agile development.

Agile emphasizes getting the first version of the project up quickly, in a working state, and then adding features going forward, based on observations of how people are using it.

Now, most marketing campaign assets don't demand anywhere near the time or complexity that companies like Microsoft deal with in getting a new OS or product to market. But marketers need to start thinking more like they're launching companies and less like they're launching campaigns. And as the industry moves toward marketing solutions that place long-term value over short-term spikes, the types of solutions we pursue will change. And an agile approach starts to make more sense.

Make the big idea a series of little ideas
This industry certainly still needs big ideas. But perhaps the biggest idea is to produce more ideas and see what takes hold. At first glance, this sounds anathema to a high-brow creative mindset -- the idea that you should be 100 percent confident in the single best idea you can come up with, and put everything you have behind it.

That works in theory, but not always in reality. It's not unlike how large companies with massive resources will often get trumped by a few guys who strike upon a winning combo of relatively simple technology, strong brand identity, and good user experience (think YouTube, Digg, Facebook, and Twitter).

I'm not saying you don't need big ideas. In fact, you need more of them. And then take advantage of the constant drop in production costs to bring a higher number of projects to fruition. And as far as selling work goes, it's easier to get buy-in on a project with a smaller budget.

From the clients' perspective? They will more than likely feel they're getting more for their money, they'll be present across a greater span of customer touchpoints, and they'll be more informed as they see how their brands play out in different media channels and experiences.

On top of that, you'll likely end up with more work produced and a bigger portfolio. Social media offers companies a lot of opportunities to plug into existing platforms and technologies and get campaigns up quickly and cost effectively. Consider recent campaigns like Tasti D Lite's promotion on Foursquare and Twitter.

Also consider FCUK's Chatroulette promotion.

Outline the learnings and insights you'll gain
I'll make an assumption up front that most innovative campaigns these days have a strong social media component. Even if the concept or content lives on the brand's site, social media will factor in somewhere in the distribution.

That said, social media is well-poised for a big leap forward in insights gained from data analysis. Much of this new data will address the more emotional side of the business -- like customer insights and commenter sentiment. My belief is that the better you understand communication tactics, the better you can interpret communication metrics. So if you're close to the strategic or creative process, you should have the inside track on delivering the real insights from this data.

This should lead to fresh new perspectives for assessing online campaigns. And just like the first people to use banner and search metrics gained enormous advantage over their less-aware competitors, so will the brands that learn how to interpret this information and feed it back into their marketing process. (You can probably hear the echo of tip 2 regarding being first to market in this section.)

Example of a company asking its Facebook fans a question where the collective answers can provide insights for future messaging and promotions.

Follow your instincts
From data to open-source technologies to social media tools, things are progressing faster than ever. Just consider how many new social media apps and technologies have been introduced in the past year. Considering we haven't seen any real pullback in social media activity, we can expect investor interest to continue; thus, the innovation curve should continue upward. More change ahead.

Flipping through award books won't pave a reliable path to your next great idea. The more you know about where the market has been and what the recent changes involve, the better your judgement will be. The gap between past campaigns and current realities has never been greater.

So while it's imperative to absorb what's going on and the technologies that enable that action, remember what investment firms repeat over and over about their market assessments: Past performance is not an indication of future results.

At the end of the day, your instincts and judgement will be your best guide.

Selling great work is nothing close to easy. Yet it's imperative for this business. I only hope that anyone reading this article has found some nugget that will at some point help them push their best work through. This industry needs it, and every innovative campaign that any one of us sells makes it a little easier for everyone else to get their best work produced.

Doug Schumacher is president and creative director at Basement Inc.

On Twitter? Follow Schumacher at @MemeRunner. Follow iMedia Connection at @iMediaTweet.


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