Will Tech Change the Upfront?

DVRs and TV-on-demand are quickly reshaping commercial boundaries

With media buyers and ad sellers gearing up to fight over where to put thousands of 30-second spots for the fall, the issue of DVRs and on-demand viewing is in the back of most minds at the moment—but not so far back as they were a year ago.

“A number of agencies and advertisers are thinking about new TV touch points as they get ready to do their traditional upfront expenditure placements and negotiations,” says Tim Hanlon, VP/director of emerging contacts for Starcom MediaVest Group.

“It only stands to reason that the linear environment for television—which is what upfronts are all about—is fundamentally changing. What I would call non-linear, such as on-demand or DVR or pure interactive types of opportunities, are increasingly creeping into these conversations.”

Analysts, like those who compiled a new report for Accenture, say TiVo-like DVRs, video-on-demand (VOD) and interactive television will have a much more deleterious impact on the traditional—or “linear”—business of buying and selling airtime on TV than even the most pessimistic types have previously thought.

For one thing, in fairly short order, on-demand viewing will exert downward pressure on ratings, especially as those measurements achieve greater precision. As a result, advertisers will have an increasingly difficult time reaching mass audience, the report notes.

A number of marketers, most notably Mercedes-Benz, are trying to get in front of the trend and find new ways to spend their ad dollars amid the uncertainty brought about by the growing adoption of DVD technologies by viewers.

Last month, Mercedes-Benz shifted strategy by giving Dish Network’s 10 million interactive satellite-TV subscribers an advanced “all-access pass,” a gimmick that allowed those subscribers to view its new M-Class luxury SUV through an interactive ad campaign.

The Mercedes-Benz campaign consists of a 30-second TV spot called “Blank Page,” which invited viewers to opt-in (via an on-screen pop-up message, or “trigger”) to an interactive Web-like environment. From this interactive-TV channel, viewers could see the expanded version of an advertisement called “Test Track,” which presents a longform look at the new model.

Viewers can also access a photo gallery, order brochures and learn about the new Mercedes-Benz M-Class through advanced interactive-TV advertising, developed by Dish Network and Turner Media Group and built by interactive-TV veteran OpenTV Corp.

“We viewed these 10 million [Dish subscribers] as a select group, and the interactivity allows us to generate a large number of leads as we set about to travel the country,” said Liz Birenbaum, Mercedes-Benz supervisor for Internet marketing. The carmaker is integrating the interactive advertising piece into its 35-city “Road Rally” that takes place this month. “This is an experiment, and we think it’s the future.”

VOD is available now to 14 million cable subscribers. But at today’s pace of deployment, it should be available to most digital-cable subscribers—currently at 22 million—by the end of next year.

Accenture, meanwhile, forecasts that traditional TV ad revenue will increase by a total of only 3% by 2009. That’s a far more pessimistic estimate than other industry observers, but clearly, whatever the figure, advertisers are demanding greater accountability and therefore greater measurement that various forms of television-on-demand will be able to provide. They’re also more wary of the answers they’re getting.

What, Me Worry?

One ad-sales veteran at one of the major broadcast networks takes the long view: A lot of technologies can kill broadcast TV, but it’s the main game in town. The Big Four have been counted out so many times, the TV boss says, they’ve learned not to panic.

“Television has proven to be adaptable, and it’ll adapt to these changes as well. And right now, DVR penetration is too small to influence [advertising] negotiations this year.”

But networks are studying the TiVo influence, for sure. In a recent study conducted by David Poltrack, CBS executive VP for planning and research study, the network asked 734 DVR owners about their viewing the previous evening.

Not surprisingly, only 26% of them were watching live programming. “But the other thing that was clear was that these people were watching more TV,” Poltrack says. “And they’re also much more likely to watch network television.”

At the time of the study, Nielsen was reporting a 47% share for the four networks in traditional-viewing circumstances and in DVR homes. Poltrack, however, found that, the night before, 80% were watching playbacks of previously aired network shows. What’s more, 76% of the recording for future viewing was of network shows. Why? Poltrack says it’s because “network shows still have a higher profile for people who watch TV.”

Great. But what about all those buyers making deals for retailers that have time-sensitive sales? Starcom’s Hanlon suggests there’s a solution to get them: “It’s fair to say that technology will come along that will allow advertisers to tie DVR platforms together so that they could buy across all of the DVRs.”

In the future, he believes, advertisers will find DVR disc space and manage it, so they won’t be as beholden to programmers. “Imagine watching a program that you recorded two weeks ago with a new ad inserted based on the time you’re actually viewing it.”

If commercials can be updated to match when time-shifting viewers see the show, networks will really see what happens to the notion of a program schedule.