Research
Coming, a surge in DVR ad-skipping
By Kevin Downey
Jul 2, 2009 - 7:55:20 AM

When buyers and sellers finally kick off this year’s upfront, several broadcast networks could well see pricing increases over last year, despite the weak economy and network television’s sinking ratings.

But if they do, it's almost certain to be the last year for such gains.

The networks have done a good job of explaining away the impact of DVRs on ratings, noting that in fact few users actually bother skipping through commercials.

But that is about to change, according to one top researcher. As more and more users acquire and begin to use DVRs, ad skipping will become a far larger issue for networks, and those annual cost-per-thousand pricing increases will become a thing of the past.

“You will see that CPMs will start to come down. They are on an upward slope now, but that will change,” says Tom Schultz, managing director at DVR Research Institute, a California-based consulting firm.

About one-third of homes now have DVRs, and the total number of ads skipped is only about 6 percent across DVR and non-DVR households, but Schultz is predicting that in two years the number of DVR households will increase to 50 percent and the percent of ads skipped in all TV households will rise to 20 percent.

Within DVR households, ad-skipping will become more common. Schultz notes that the longer people have DVRs, the more adept they become at using features such as fast-forwarding through commercials. And as they become adept, they use those feature more often.

“I think this will be very problematic for broadcast primetime,” says Schultz. “The more popular a show is, the more it is time-shifted.”

DVR Research Institute recently released the results of a survey it conducted with ad agency executives about how they’re changing their media buys and commercial executions as viewers increasingly fast-forward through commercials.

Schultz's findings are comparable to those of other research studies.

Magna, the global media buying shop, last November found that 11 percent of network primetime viewing is to time-shifted programs, meaning shows recorded and watched after they originally air.

Of that, roughly two-thirds of recorded commercials are fast-forwarded through, meaning about 8 percent of all commercials are skipped.

Still, there are some hopeful signs the networks won’t be hit quite as hard by commercial skipping as the DVR Research Institute is estimating.

“I have [commercial skipping] going to about 16 percent by the end of 2012,” says Bruce Leichtman, president and principal analyst at Leichtman Research Group. “I have DVR penetration going to about 50 percent by early 2012.”

Moreover, media buyers and sellers are now using as currency Nielsen’s C3 ratings, which are commercial ratings for live viewing and three days of DVR playback. C3 ratings already factor out fast-forwarded commercials.

And it’s widely thought that TV viewers in some cases pay more attention to skipped commercials than live commercials since they’re looking at the TV screen as they fast-forward.

“There is mounting evidence that those who do watch during DVR playback are actually more attentive viewers,” says Steve Sternberg, executive vice president of audience analysis at Magna.