Commentary: The growing use of DVRs

Study: About 16% of commercials will be skipped by 2011

About 6% of TV commercials in the U.S. are fast-forwarded because of DVRs, reflecting about $5 billion in what some consider wasted spending. By the end of 2011, about 16% of commercials will be skipped.

The data come from a study titled "Advertising in the DVR Age," which the DVR Research Institute will release Friday. It bases its conclusions on a poll of 200 top U.S. advertising executives and on averages from other research firms.

There are about 30 million DVR households, a number expected to rise to 50 million -- or 49% of U.S. households -- by the end of 2011. When a show is time-shifted, as many as 70% of ads are avoided, and as users get accustomed to their DVRs, they watch more and more TV in time-shifted mode.

All these numbers add up to 16% of commercials being skipped by the end of 2011, an opportunity loss of about $14 billion.

In fact, polling found that advertisers and advertising agencies fear the effect of DVRs much more than other TV industry developments, including mobile platforms, channel proliferation, VOD and falling consumption because of video games and the Internet.

As DVR Research Institute managing director Tom Schultz puts it: "A loss of 6% of all ad spending is somehow passing under the radar. It is difficult to imagine, however, that a loss of 16% will go unnoticed or unattended."

Of course, the ad-skipping is being attended to, and in various ways. Nielsen, parent of The Hollywood Reporter, has come out with its C3 ratings, which include viewers who watch a show up to three days after it airs and exclude fast-forwarders.

One problem, though, is that ad buyers are confused about C3.

"Many respondents don't know that fast-forwarded ads are not included in the C3 ratings," Schultz says.

Adam Zarrin, another managing director at the institute, says that while Nielsen has done a fine job marketing its C3 product, TV stations and networks haven't sufficiently passed the word along to advertisers.

Plus, C3 isn't a perfect representation of how many are watching shows -- and ads -- even in time-shifted mode. For some shows, as much as 25% of time-shifted viewing happens after three days have passed.

TiVo and other DVR suppliers also are trying to create ad-friendly solutions.

TiVo, for example, has text- and logo-based ads during pause and fast-forward modes. The DVR pioneer also allows viewers to get longer versions of ads they find useful, request coupons and even order pizza from Domino's or movie tickets from Fandango.

The institute says that, beyond educating advertisers about how C3 data can be used, ad sellers and buyers need to ramp up experimentation.

Trying shorter commercials -- say, 15 seconds each -- and increasing their frequency, is an example. Making ads so intriguing that they are talked about, sought and rewound is another obvious strategy.

The institute also suggests buying the first or last commercials in a pod as those are least likely to be fast-forwarded. Also, learn which shows are watched most in time-shifted modes, and revisit your desire to advertise on them.

Other experiments in the works include shorter commercial breaks and showing backstage action in a small box during commercials so audiences have an incentive to keep watching -- especially younger viewers, who are most likely to fast-forward through ads.