DVRs and the Internet: How technology is changing TV watching
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KPCC business analyst Mark Lacter talks about how new technology is changing how people watch television.
Susanne Whatley: Mark, one of the reasons people were so attracted to Tivo and DVRs is that they could watch a show and skip through the commercials. But that's not happening?
Mark Lacter: Certainly not as much as some of the experts had expected Suzanne – and here you have an example of how audiences, TV networks, and advertisers are trying to figure out how new technology impacts them.
The latest Nielsen numbers show that almost half of the viewers in the 18- to 49-year-old category are actually watching the commercials on the playback of their digital video recorders – what we know as DVRs. And those numbers are up from last year.
Now this is a big deal, because the networks had worried that if viewers did a fast forward through the commercials, advertisers would be left with less bang for their buck – and then the ad rates would go down, which wouldn’t be so good for an industry already struggling because of the recession. Actually, there was such concern that the networks tried not to have the DVR results included in the regular ratings report.
Whatley: What's behind this?
Lacter: All kinds of explanations being tossed around, some having to do with the commercials being more entertaining, but mostly the researchers say that TV watching is still a passive activity and people are still in the habit of just sitting and watching.
And along with watching commercials, the networks are finding that more people are using DVRs, which has increased ratings. (The series House has done especially well.) The exception to this is the Jay Leno Show (the material is so topical that viewers tend to watch that show in its regular time slot).
Whatley: How does this affect Hollywood?
Lacter: Well, just as an example, it means that the networks will have a harder time convincing the Hollywood unions that the new ways of distributing content aren’t lucrative for them.
Remember during the writers strike, they didn’t want to acknowledge the fact that DVRs, the Internet, and cell phones would generate more ad dollars. It doesn’t look like they can make that argument anymore.
Whatley: The Rose Bowl in Pasadena recently was outfitted to host a huge concert – more than 100,000 people saw U2. How'd the live broadcast do and what does this mean for concerts?
Lacter: Here’s another new way of delivering content, Susanne. The live broadcast on YouTube generated 10 million online streams around the world – plus several million more since the concert.
No accurate estimates of how many people were actually watching online, but YouTube said it was the largest event in its history. And it shows the potential for delivering large audiences through social and video networking sites.
Now, the question is how to make money off those audiences – as popular as many of them have been, ad revenues have remained relatively small because viewers tend to pay less attention to online ads – and unless you charge, the way cable companies do with pay-per-view, advertising and merchandising are the only other ways to generate revenue.
Whatley: I know that during the U2 concert there was a button on screen that you could click if you wanted to purchase a CD.
Lacter: Right, kind of an impulse purchase. But the U2 event was special. To advertisers there’s normally just too much to navigate around on YouTube – and there's often no differentiation between a real concert and, say, a concert given by somebody's 5-year-old in the bathtub. Advertisers don't want the 5-year-old.
So the trick is to somehow connect the right audience with the right advertisers because otherwise there’s no way to pay for the good stuff, whether it’s U2 or any other kind of entertainment.
Thanks Susanne.
Whatley: Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LAObserved.com.
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