The TiVo Roadshow Rolls Through

Last week saw the first official presentations on the upcoming TiVo offerings, with Australasian CEO Robbee Minicola and NZ Launch Manager Steve Browning unveiling some of the detail around the forthcoming service.

Although TiVo won’t start operating in New Zealand until Christmas this year (actual launch date not yet specified, but we’re picking early November to tap into the pre-Christmas gift-buying season), the company and its one-third shareholder TVNZ are keen to drum up support for the TiVo from the advertising industry. That might seem a forlorn hope, given that TiVo and its ilk are viewed in some sectors of advertising as industry-destroyers and home-wreckers — but clearly TVNZ et al. don’t have the same point of view.

So why would TVNZ invest in the TiVo?

About 6% of TV commercials in the U.S. are fast-forwarded because of Personal Video Recorders (PVRs) like TiVo, resulting in about US$5 billion of what some consider wasted spending. By the end of 2011, about 16% of commercials will be skipped. On the face of it, TVNZ should feel threatened by the technology of devices like TiVo, with the potential to undermine the continuing viability of free-to-air advertising-supported television. Why cozy up to a device that reduces the effectiveness of your medium?

In our view, there are three primary reasons why TVNZ’s part-ownership of TiVo is not only smart business but is in fact essential to TVNZ’s long-term existence:

1. PVRs are here to stay

Currently some 37.3% of US households have PVRs, according to the DVR Research Institute, a figure that’s expected to rise to 48.6% (representing 50 million US households) by 2011. In other words, within two years nearly half of the American population will be enhancing its television viewing experience via the personal video recorder.

In NZ, we’re still in the early-majority phase. Sky is on target to achieve sales of 80,000 units of its MySky HDi PVR by the end of its current financial year (June 30) — and let’s not forget it sold 40,000+ units of the original MySky box. Some of the original MySky owners have upgraded to the new box, whilst others have opted to go MultiRoom, adding the new MySky HDi whilst retaining the original. All in all, we’d estimate that perhaps as many as 125,000 MySky PVRs will be in place by the time TiVo launches. By the end of 2011 we could be looking at total PVR penetration of 15-20% (or, according to some more bullish projections, 20-25%). Two years further on (if the US experience is any guide) that number will have doubled. By 2016, don’t be surprised to find half of New Zealand watching television via PVR.

In that context, it’s compulsory for free-to-air television to offer a PVR — otherwise the MySky box would be the only game in town. Yes, technology providers such as Topfield were already offering their own PVRs — but integration with a broadcaster really makes a significant difference to the viability of any PVR.

2. Integration & The Long Tail

It’s perfectly reasonable to view a Personal Video Recorder as just a smarter way to record and watch television — but the potential is far, far greater than that. If you’re a Desperate Housewives fan with a PVR, for example, you’ll quickly seize on the opportunity to record every episode of the programme, to watch at a time of your choosing. But what if your PVR could also dip into the archives of Desperate Housewives programmes, and enable you to watch every episode of this super-soap, all the way back to Series 1 Episode 1? What if the PVR also delivered added extras such as shows on “The Making Of Desperate Housewives”, “Desperate Housewives Behind The Scenes” — in other words, all the long-tail content you could possibly desire related to your favourite programme?

That’s the potential behind TiVo (and, for that matter, the ‘i’ part of MySky HDi) — a search-and-display device linked through broadband internet to theoretically limitless archives of television programming. The BBC is already on record as planning to make all its decades of programming available for replay via the internet. Some of those shows are available for download already, at least in the UK — and other global broadcasters are similarly making their content available, across various platforms (eg NBC and Hulu.com).

Visit Hulu.com and you’ll receive this message:

Sorry, currently our video library can only be streamed from within the United States. Hulu is committed to making its content available worldwide. To do so, we must work through a number of legal and business issues, including obtaining international streaming rights. Know that we are working to make this happen and will continue to do so.

Now put yourself in TVNZ’s shoes. Do nothing, ignore this newfangled PVR nonsense and watch your audience slip away to services that do offer PVRs. Worse, watch your high-rated content dwindle as global programme-makers start to build a relationship directly with your customers, offering more and more of your most popular shows via internet, PVR, PlayStation or XBox. It might start off as just archive content but it wouldn’t end there.

Or (again thinking as TVNZ) should you buy into TiVo, easily the world’s best-known PVR brand, and use it as your vehicle to deliver both first-run content (via broadcast) and in due course much-loved archive materials (via broadband), directly to your viewers’ TV sets?

No-brainer.

3. It’s stlll about the advertising

You’d be forgiven for thinking that advertising is doomed in a PVR world. And you’re almost right — irrelevant advertising is nearly past its “use by” date. But — and it’s a big ‘But’ — relevant advertising is about to come into its own.

Consumers are conflicted — they want to watch television without ads, but they don’t want to pay.

Actually, they don’t want to watch irrelevant ads. They’ll happily view ads that are entertaining (younger audiences), informative (older audiences) or ads about products or services that match their interests. Enter “addressable” advertising.

In the US, the major cable television operators have recently entered a joint venture called Canoe Ventures. Canoe CEO David Verklin has said the venture expects in the near future to provide viewing metrics for 32 million U.S. cable households, representing about 57 million set-top boxes. Detailed audience measurement metrics, in Verklin’s view, are crucial to Canoe’s aims to sell interactive-TV services and deliver ads that are “addressable” to individual set-tops. PVRs provide that addressable opportunity in New Zealand. They’re linked to the central hub via broadband (and, at least in TiVo’s case, are constantly connected), so operators can know where consumers are.

If consumers actually login to the system, broadcasters can send ads that are hyper-local and hyper-relevant based on location, demographics, behavioural characteristics and a wide range of other metrics. Along with the requested programme, what ads do you send to the 30-44 female who lives in Hawkes Bay and loves CSI? Something a lot different to the ads you send to the 18-24 year old male who lives in West Auckland and never misses Top Gear.

True, we’re still only at the early stages in terms of this scenario — but that’s the long game opportunity. So TVNZ’s investment in TiVo will potentially protect the future of television advertising in New Zealand.

Enough about the future. What about TiVo today?

Some of the things you should know about TiVo and what will be on offer when the service launches in New Zealand:

  • It’s a Personal Video Recorder (like the MySky). In fact, TiVo effectively invented the PVR industry. TiVo Inc. started in the US in 1997 and (in association with Philips) shipped the first hardware ten years ago, on March 31, 1999 – a day which has become a holiday for TiVo employees in subsequent years. TiVo in New Zealand will be operated by licensee Hybrid Television Services, one-third owned by TVNZ and two-thirds by Australia’s Seven Media Group.
  • The TiVo media device in New Zealand will be compatible with Freeview HD broadcasting, capable of receiving all free-to-air digital terrestrial channels including TV One, TV2, TV3 & TV3+1, C4, Maori Television, TVNZ6, TVNZ7, TVNZ Sport Extra, Parliament TV, tvCentral, Chinese TV 8, Radio New Zealand National, Radio New Zealand Concert, BASE FM and other Freeview HD channels as they launch. The device as it is currently constituted will NOT receive or record any Sky channels; nor will it receive Freeview satellite signals or over the air (analogue) broadcasts.
  • The TiVo includes two Digital Terrestrial Television (DTT) tuners, enabling you to receive Freeview signals without a separate Freeview box. However you will probably need a UHF aerial and will definitely need to be within range of a DTT transmission — it’s estimated that around 75% of the country should be able to receive a DTT signal.
  • TiVo NZ’s corporate objective is to be in 150,000 homes within five years.

Capabilities of the TiVo device

The TiVo device to be launched in New Zealand will (as noted above) include two HD tuners, enabling you to record two channels at once or to watch one and record another. The TiVo comes standard with 160Gb storage capacity, with the ability to hook up an Expander Drive with an additional 1 Terabyte (1000 Gb) of storage.

The TiVo can also be networked with other devices through additional Home Networking components, enabling content to be shared across multiple TiVos or personal computers (subject to any Digital Rights Management restrictions). The TiVo also enables PC-based content to be viewed on connected televisions. All in all, the TiVo delivers a much more open architecture than the closed MySky environment.

TiVo Television Recording Options

The TiVo offers a number of TV recording options including:

  • Season Pass (MySky equivalent: Series Link)
    Allows users to record an entire TV series in a single click.
  • Trick Play (MySky equivalent: Live Pause)
    Pause live television to deal with life then pick up where you left off when you are ready.
  • WishList searches (not available on MySky)
    Allows viewers to automatically record every programme containing their favourite actor or director.
  • TiVo Suggestions (not available on MySky)
    The TiVo learns what you like and dislike based on what you record and “thumbs up” or “thumbs down” (two buttons on your remote). Armed with this information, your TiVo media device will scour the Electronic Programme Guide and identify programs it thinks you might like, based on your viewing preferences.

Not Just TV

As we’ve already seen, the TiVo will have an always-on broadband connection, enabling it to deliver content directly to individual set-top boxes (in addition to any content recorded off-air).

Beyond broadcast programming, TiVo is expecting to provide several types of broadband-delivered video content in the first instance:

  • Recent-release content available on demand, potentially including back episodes of current series and pay-per-view movie titles. TiVo expect to offer about 100 recent-release movies at a time (currently in Standard Definition, i.e. DVD-quality).
  • Transactional services such as pizza-ordering, shopping and whatever else advertisers dream up.
  • Information services: eg educational videos, world clock, horoscopes, weather.
  • Games: There are some great game consoles out there (eg Playstation 3, Wii, Xbox 360) – but not everyone has one. So TiVo offer a free Games Pack that’s family-friendly.

As you might imagine, receiving video content downloaded via the internet chews up bandwidth pretty quickly. TiVo are in discussion with (yet to be named) internet service providers about the possibility of “all-you-can-eat” download packages linked to TiVo. This will be an important component of the TiVo offering, so expect it to be a significantly promoted part of the finished package.

The broadband-delivered content will mostly be advertiser-sponsored or supported, providing opportunities (as the TiVo customer database grows) for highly-targeted, environmentally-relevant commercial messages.

How much?

No details yet on the final cost of the TiVo, but the official word is that it will be on a par with Australia’s TiVo, adjusted for exchange rates and freight costs. The current pricetag for TiVo in Australia is A$699 for the base unit, with additional costs for various add-ons such as Home Networking; however this may not be the pricing that applies when TiVo launches in New Zealand.

In the US, the TiVo box cost is lower but TiVo charges an ongoing subscription fee for access to the Electronic Programme Guide; this won’t be the case in New Zealand (or Australia), so the local operators will be looking to advertisers in particular to provide ongoing revenues to support the service. We expect to see dedicated TiVo adsales specialists emerge as the launch date looms large.

Capturing the numbers

Because TiVo units are in continuous communication with the mothership, they act in effect as peoplemeters on steroids, sampling the entire user base (at least in terms of household TV usage). TiVo in the US collects and publishes a wide variety of information on its users, providing ratings data to broadcasters and advertisers in two flavours (both with rather significant sample sizes).

TiVo’s flagship Stop||Watch product starts with an anonymous sample of 100,000 nationally distributed TiVo DVR subscribers. It combines second-by-second viewing behavior with commercial occurrence data, offering Program Ratings, Spot Ratings, and Commercial Viewership Index (Commercial Rention) for both live viewing and Time-Shifted Viewing out to 14 days from program airing. All this data is available nationally in the US (and TiVo has in the last couple of weeks announced plans to provide local viewing data for ten key American markets).

Then there’s the TiVo Power||Watch panel, with a mere 20,000 subscribers. With this panel, all the features and metrics of Stop||Watch are available, with the addition of household demographics. This gives clients the benefits of understanding how viewership varies by demographics, geography, TiVo tenure and more. Furthermore, since the panel is owned by TiVo, clients have the opportunity to ask proprietary questions and build their own custom segments.

No word yet on which (if any) of this data will be published in New Zealand, but you can bet the data will be collected and pored over by TVNZ, providing them with a significant commercial advantage in tomorrow’s TV environment.

What about MySky HDi?

As we noted when the MySky HDi launched in mid-2008, the ‘i’ in the name stands for interactive, and the box was always intended to provide a gateway to the home via the internet. The interactive components were officially announced as due to make their appearance from July 2009, though the ever-glacial pace of New Zealand “broadband” would potentially have delayed Sky’s preferred timing.

Given the impending arrival of TiVo, with its heavy emphasis on broadband connectivity, allow us to predict that Sky will indeed launch its ‘i’ initiative in the second half of 2009, though perhaps not with streaming content (which was its preferred delivery method). The most obvious content to offer in the first instance: an expanded selection of Pay Per View movies.

We’ll speculate further that Sky will quickly provide its Fatso/DVD Unlimited customers with downloads of their chosen movie titles direct to their MySky HDi (There’s plenty of global precedent for this move: six weeks ago US video chain Blockbuster announced a partnership with TiVo USA to deliver Blockbuster’s digital movie library over the Internet to TiVo PVRs; and in late April TiVo announced a similar partnership with Amazon.com to supply purchased HD movies direct to PVR).

Where to from here?

PVRs are here to stay so we’d better look to developing strategies that recognise the realities of a PVR world. We’ve explored above the exciting possibilities of more and more relevant and targeted advertising; but we also need to consider the ramifications of today’s TV advertising model in tomorrow’s world.

Over the years we’ve been party to many discussions about the best positions in commercial breaks; now we need to broaden our minds to consider what else could be done to improve the prominence of our advertising.

Should we consider some of the alternatives now being developed?

Last December, according to the New York Times, TiVo USA began offering ads that appear as a small piece of text when viewers pause a show. Advertisers can choose the specific show or genre they want their pause ad to appear on — Mercedes-Benz USA used it to promote a new car during football games earlier this year. TiVo also offers ads that appear when viewers fast-forward through shows. Advertisers that run regular 30- or 60-second spots can buy these, and when the viewer presses fast-forward, a static box appears. One for Tourism Australia shows a photograph of a girl on a beach with the text, exclaiming, “Don’t tell me I just skipped the Australia ad!” TiVo viewers are instructed to press the Thumbs Up button to see the ad and get more information.

Do we need to psychoanalyse our ads?

In a live study of 55 US national ads, TiVo and Innerscope found that TV viewers are 25 percent more likely to fast-forward through ads with low emotional engagement than those with high emotional engagement. The data clearly suggest that ads that are more emotionally engaging are more likely to be viewed in their entirety even in a time-shifted environment. The findings, presented in March at the Advertising Research Foundation’s Annual Conference, show that sustaining viewers requires an understanding of their emotional engagement with an ad.

And, in the end it may come down to this: should we vet the other commercials that appear in the break, in case our ads, surrounded by poor advertising from others, become collateral damage?

This article first appeared in the May 2009 edition of the Media Counsel’s Marketing Manifesto newsletter. If you’d like to subscribe to this free newsletter, please send an email with SUBSCRIBE in the subject line to mailto:newsletter@mediacounsel.co.nz?subject=subscribe

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s