TV picture looks blurry: Effects of DVR Usage and Product Placement on Commercial Advertising or
What’s Killing TV Advertising…and how does it affect our favorite shows?
Elizabeth Thomas JMC 630 Research Paper Fall 2008 * Theories of Mass Communication Instructor: John Dillon, Ph.D.
You could say that every time the technology of communications changes, so does the world of advertising. After all, we are a nation living in “the information age,” so it is more and more the norm to be immersed in a society filled with media - and technology. Radio, TV and the internet led the most recent technological revolution. Television, in particular, has now become the punching bag for media critics, many of whom predict that loss of television ad revenues, declining ratings and a belief that DVRs are causing viewers to skip ad messages will lead to the demise of television as we know it. By allowing viewers to skip advertising, the continuing rise in DVR popularity does have huge implications for the advertising and television industries.
TiVo CEO Tom Rogers sent an alarming letter to shareholders just last month in which he stated, "We are very worried for the industry because we do not believe as a whole that it is responding urgently enough to the massive dislocations these new dynamics will create ... Easy commercial avoidance in the next two to three years will create such an overwhelming challenge to the economics of television that it will rock the very foundation of the industry. It may well make what the newspaper industry is going through today seem like a minor tremor in comparison."
On one hand, TV ad spending is still growing overall, and growth is projected to continue through 2010 (Jacobsen, Incentive, November 2004). On the other hand, online video usage is increasing and online ad spending now takes a larger
slice of the overall advertising pie. Digital video recorders (DVRs) and video-ondemand (VOD) capabilities are becoming more widespread, and audience fragmentation continues to present a major challenge to advertisers. Heavy
product placement seems to be one part of the solution as advertisers continue to look for ways to force viewers to see their messages. This begs the question, just what part does “integrated marketing” play in the creation of today’s TV content?
Product placement: Big business and getting bigger We’ve come a long way since young Elliot offered E.T. (The Extra Terrestrial) a handful of Reese’s Pieces in that much revered blockbuster of 1982. There is no denying the dramatic rise in product placement in both television and films ever since. Many speculate that this is the new face of advertising. Sponsorship in conjunction with product placement strategies are characteristic of TV networks and advertisers working together to meet mutual needs in the face of technological change. For instance, American Idol’s continuing dominance can be attributed in part to its sponsorship deals which guarantee airtime to advertisers and limit the number of spots sold in the open market. Idol is also a perfect example of effective, blatant product placement. While Coca-Cola spends in excess of $50 million for the exclusive rights to have judges Simon Cowell and Paula Abdul sipping their sodas out of Coca-Cola cups, the corporate giant sees
this as but one of many touch points for maintaining brand awareness (Fortunato, Windels, p 144).
What’s next in the evolution of product placement? As corporate insurance giant Geico found last year, America does not appear ready to support primetime programming linked directly to advertising; witness the quick demise of the ABC series “Cavemen,” a spin-off based loosely on characters from Geico’s TV ads. We must ask ourselves if advertisers will go so far as to influence the creation of new programming and is it possible that consumers will simply stop watching when other media offer less message-laden alternatives? Instances of product placement can be seen in a vast array of media offerings including television shows, videos, popular movies and video games, and are considered by many to represent the "new genre of marketing tools." In a research paper presented in 2000 at the 50th annual conference of the International Communication Association (ICA), Oliver and Weaver presented a study which expanded upon prior research and explored the effectiveness of product placement in television situation comedies. Specifically, they examined the effectiveness of product placement versus advertising on viewer recognition and recall. How the combination of product placement and advertising could work on viewers was also explored in-depth.
Oliver and Weaver discovered that “although advertisers seem to have intuitively expressed concerns that their product placements appear in positive contexts, there does seem to be a theoretical rationale for assuming that product placement would result in more positive brand attitudes when the programming and the characters in the program are perceived positively by the viewers.” In this study, both advertising and product placement for Diet Coke and Heinz Ketchup were studied over several weeks through multiple airings of the sitcom,
Seinfeld. The analysis of brand name recall showed significant effects for Diet Coke advertising but not for Diet Coke product placement (on its own). For Heinz Ketchup, product placement resulted in significantly greater recall, but advertising had a more “pronounced” effect. None of the analyses indicated that the combination of product placement and advertising was more effective than advertising alone. General results suggested that product placement may serve advertisers best interests, especially if the placement is prominent and the programming in which it appears is perceived favorably by viewers. Criticisms for the strategy include concern that too much product placement could ultimately dampen the public's reaction to the medium. In essence, what may be best for advertisers may not be best for viewers. Product placement, although still on the rise, does not appear to be the panacea advertisers seek.
Grip on the DVR remote is tightening In 2004, Forrester Research group surveyed 588 DVR households and found users spent nearly 60 percent of their total TV viewing time watching recorded or delayed programs and skipping 92 percent of the commercials aired. As a result, the average viewer saw only 46 percent of the ads run on the programs he or she watched. While this was an early study, another intriguing result was the discovery of how uneven – and tough to measure – ad skipping can be. For example, DVR viewers tend to watch more movie ads, more funny ads and more ads appearing during news or sports events – even on recorded programs. In its conclusions, the Forrester research team suggests the ad industry place more ad hooks inside programming, and develop visual elements which persist beyond the programming and into the advertising. They also suggested placing messages within movie trailers and network promos since these enjoy higher viewership (Bernoff, 2004).
DVR usage just one more challenge to overcome DVR ownership rose from 9 percent of US households in 2006 to 20 percent in fall 2007 (Tuned In, Time Magazine blog, October 8, 2008). This is more than a 100 percent increase in a single year. Clearly, the introduction of DVR technology is changing the landscape of the television industry. Earlier predictions were that viewers with DVR technology would fast forward through all ads at the expense of other avoidance strategies (like taking snack breaks).
A Leichtman study cited in Cable World in 2003 predicted that the number of U.S. households with DVRs will grow to over 60 million by the end of 2011. This does not necessarily mean that advertisers will have a harder time reaching people who can fast-forward through commercials. More recently, researchers report that while 84 percent of DVR owners rate the ability to skip commercials as very important; only eight percent indicate it is the greatest benefit of having the device. In other words, viewers will not necessarily fast-forward through ads just because “they can.” Additionally, 45 percent of DVR owners in one current study recorded five or fewer programs per week, pointing to a vast preference for live TV.
Is reality TV the answer? In March 2007, a New York Times column by economist Austan Goolsbee detailed a new rationale for the rise in popularity of reality TV programming. Of course, it is cheaper to produce, but the crux of the article states that reality TV is more likely to be viewed live, making ads more likely to be seen. Another NY Times article the same month cited a study demonstrating empirically that people are less likely to record “timely” programming using DVRs. So, the average viewer prefers to watch reality shows live. One theory is that this is a natural result of the interactivity of such programs which allow viewers to cast their own votes and influence outcomes. This may also be why finding out who was kicked off the island or the dance floor or the American Idol stage seems to be the most popular topic of discussion at work the next morning. People want
to be sure they’ve seen these shows so that they can participate in discussion and stay “connected.” Whether or not TV execs realized this benefit originally, many now see viewers watching commercials rather than skipping through them during reality programming. We might infer that increased usage of DVR technology has actually led to a boom in reality programming.
A bottom-line approach for advertisers Any advertising environment presents both threats and opportunities for advertisers. All advertisers are looking to achieve three basic goals: 1) Reach a target audience, 2) increase brand recall or awareness and 3) increase sales. In theoretical terms, two critical factors determine advertising strategies: Understanding the vehicle necessary to reach the target audience and understanding the use behavior of the target audience. All aspects of any ad strategy emanate from an understanding of these two factors.
Uses and gratifications theory (Bulmer and Katz 1974; Rosenberger, Winner and Palm green 1985) can assist us in analyzing the threats posed and opportunities offered by the assimilation of DVR technology onto the TV landscape. Purposeful behavior on the part of the viewer is based on an expectation that his or her needs will be satisfied as they have been in previous experiences with the medium or content. In their seminal work on uses and gratifications, Katz, Bulmer and Gurevitch (1974) claim that this ”simply represents an attempt to
explain something of the way in which individuals use communication, among other resources in the environment, to satisfy their needs and achieve their goals (p.21).” In 2002, Rubin explained that from a uses and gratifications perspective, media use is largely purposeful and goal directed, with its most notable characteristic being that of an active audience (p. 528-529).
One way the DVR increases satisfaction for television viewers is by saving people time. By skipping commercials, the viewer is no longer “stuck” for the full length of any program. If an hour-long show can be watched in half the time, then the viewer has gained a half hour of leisure time. Thus, if the viewer is receiving gratification from using the DVR to skip commercials, then it is potentially a threat to the economic system of advertising.
The media dependency model may also help to explain the relationship between the technologies of television (DVR, VOD, etc.) and the advertising industries. Where dependency is “a relationship in which the satisfaction of needs or attainment of goals of one party is contingent upon the resources of another party,” then the need for information, entertainment and social interaction “are among the needs that create individual dependencies upon mass media” (BallRokeach and DeFluer, 1976, 1986 p.6). The stronger the dependency, the greater the likelihood of media use. Dependency on using media can be seen as pertinent to the uses and gratifications “active audience” characteristic.
The threat of a more ‘gratifying” TV viewing experience through DVR usage is countered by several potential opportunities. If people are fast-forwarding, then they are concentrating on the advertisement (Mandese, 2004). They are looking at the video, as opposed to taking a “bathroom break.” As a result, some advertising execs feel the bar has been raised for those on advertising’s creative side. Visually desirable ads will be noticed more even during fast forwarding, according to Martin Rubenstein, group account director for Lopez Negrete Communications (Fortunado, Windels, Fall 2005).
The second “opportunity” of DVR usage, from a uses and gratifications viewpoint, is the ability of viewers to playback advertisements, again placing greater emphasis on the creative visual components within ads. Adam Troyak, senior strategist for the integration group at GSD&M Advertising claims “clever commercials will get stopped and replayed.”
The simplicity of the DVR in time-shifting programs could be seen as a tremendous advantage given the number of people who record shows during times when they have no opportunity to view the programs as scheduled. Advertisers may actually be gaining viewership – even when some ads are fastforwarded.
Give the public what it wants According to Cable World Magazine (March 2003), studies indicate that the DVR is having a positive impact on how consumers enjoy TV. Yes, the ability to push a button and skip past the ads is a hot issue for advertisers, but, in reality, consumers have had this capability ever since the introduction of the remote control. That unobtrusive technological advance allowed viewers to channel surf during ads for the first time, to freeze frame (or pause) and to hit a “mute” button. People have been time-shifting network television since the VCR went mainstream. At that time, advertisers also howled the battle cry we hear today regarding DVR usage. Now, viewers have been fast forwarding through ads for decades and national advertisers still spend nearly 75 percent of their ad dollars on TV (Karp, June 2007). According to industry analyst and author Dan Rayburn, the demise of TV is completely overrated. He implies that many in the industry are prophesizing gloom and doom “just to be cool,” repeating complaints they’ve heard through the years which don’t really carry any weight. The ad industry has long harbored an old saying: “Half the money I spend on advertising is wasted. The problem is; I don’t know which half.” Soon, we may be able to answer this question because of technologies like digital video recording.
In a recent article, Rayburn also pointed out that absolutely no one is throwing out their TV set. “People who don’t watch much TV currently, never really did,” he quipped in a popular webzine. It is in our nature to talk about one thing replacing another whenever new technology is introduced, and the speed of media “convergence” has created an expected emotional buzz. Still, we must consider that TV did not, in fact, replace radio. Internet video is not going to replace TV. The DVR and TiVo are to advertising today exactly what the VCR was to this same industry 25 years ago. The introduction of the VCR saw people zapping through commercials, and what has been the end result? In truth, the DVR has simply replaced the VCR and made it possible for viewers to see multiple programs from a single time slot – thus increasing overall viewership. That may actually provide more opportunities for advertising messages to be viewed.
DVR usage could be the solution - not the problem It is likely the DVR will play a part in forcing the eventual transformation of ad models into something more engaging to consumers and more measurable for advertisers. Conventional wisdom predicted doomsday for commercial TV when DVRs first enabled mass ad skipping. Let’s face it; as commercials are sped through, they do become less effective. Ineffective ads will no longer command today's rates for network and cable broadcasters, and those which rely entirely on selling ad time may no longer be viable enterprises.
According to a series of industry-related blogs from Anne Marie Fink, VP-Equity Analyst Media and Entertainment with JP Morgan Asset Management, the prognosticators on Wall Street who claim that the DVR will bring death to TV commercials are dead wrong. She believes the DVR will actually save commercial TV by eliminating interruption, which is the real source of viewer irritation. According to Fink, “The same consensus about new technology nearly killed the VCR in the early ‘80s. Studios were so worried about consumers suddenly having the ability to record programs and skip commercials that they went so far as to ask the Supreme Court to ban the new device. Of course, TV studios lost that battle, and it was the best thing that ever happened to them and to the film industry.” Once the penetration of VCRs into American households was underway in the late 80s, the home-entertainment business started its unstoppable rise. More than 20 years later, home entertainment now accounts for more than 60% of a typical film's revenues and profits (Fink, 2005). Movie studios have used their vast libraries to reap financial results at all-time highs. Now TV product is being sold on DVDs, increasing the profitability of TV production, too. Some series, like Fox's "24," have made more money from DVD sales than from syndication.
Using DVRs as a force for good Let’s assume that recent studies are accurate. It's not commercials people dislike; it's the interruption. Print media has shown us that consumers seek out
commercial content. One of the top 10 reasons people buy newspapers is for
advertising content. In the long-term since its introduction, there has been lack of widespread commercial skipping with VCRs suggesting that consumers are not willing to expend much effort to avoid commercials. For years we’ve heard the complaints that TV shows have too many commercials. TiVo owners have cited the ability to fast forward through ads as one of the top benefits of the device. What is the difference between print ads and TV spots? In a word - control. Consumers have complete control over how much time they spend with a print ad. Technically speaking, DVR owners can “control” how much time they spend on the details of TV ads which interest them. In contrast, any 30-second spot is too long if the product is not relevant to the viewer. The DVR can empower viewers and remedy this problem by allowing the viewer to control TV ads. The five to 10 seconds a person spends with a fast-forwarded ad is all the time necessary for an irrelevant product ad. Viewers are paying more attention to speeded-up ads than they do "live" ad because they have to find out when the ad ends and their program restarts. Additionally, the fast forward break allows no incentive to change channels or run to the kitchen. In fact, recall of commercials viewed in DVR homes is just as good as in non-DVR homes (Fink, 2008).
If a viewer is interested in the product being advertised, he or she can choose to slow down and watch the full ad, and technology is currently in development to create “controllable” commercial content for the near future. One of the most surprising uses to come out of DVR uses and gratifications research is that children today are using DVRs to store commercials for the toys they want, creating video wish lists to show their parents. Similarly we have seen more TV spots designed to drive viewers to longer ads on websites – BMW Films, for example, and American Express' Seinfeld and "Superman" ad series. People want to spend more time with personally relevant commercial content. DVRs can enable them to do so. What this means to the advertising industry is a need to create better TV commercials and that can only happen over time. Meanwhile, DVRs need to find their way into more households. The rivalry between satellite and cable multichannel-TV providers is actually driving this penetration. Satellite is already pushing DVRs to new subscribers to blunt the impact of cable's competitive advantage with video on demand (VOD). This effort has been so successful that most cable companies today now offer DVRs to subscribers just in order to match their competitor’s offers. Fink describes ways ad agencies might begin to evolve campaigns to work on multiple levels, from fast-forwarded to longer-form. She suggests that creative teams work to improve the quality and entertainment value of ads since viewers
now have greater control over commercial content. Fortunately, advertisers are paying more for more effective ads. Better ads work better because they are less annoying and because consumers do self-target. Those interested in the advertised item will spend more time with the product, and advertisers will achieve reach and deep impact at the same time. The television industry need only look to its magazine counterparts to learn how to command higher CPMs using these same attributes.
No substitute for commercial TV Advertisers are working hard to find new methods to reach consumers, but they have not found and are unlikely to find any vehicle that delivers their messages as effectively as commercial-supported TV still does today. What the advent of the DVR in every home really means to advertisers is the need to create a better form of TV commercial. In place of the 30-second TV spot we need a more powerful form of
advertising. Being controllable and allowing customers to self-target, DVRenabled ads may give birth to a new golden age for TV commercials. Instead of dreading DVRs, advertisers, agencies and the media could join together to hasten the arrival of their savior.
Someday your computer will become your TV …and other urban myths Earlier this year, CNET News.com’s Stephanie Olsen reported that industry-wide research supported a prediction that TV ad spending patterns will change dramatically over the next decade. An estimated 75 percent of national advertisers plan to cut spending on TV commercials by 20 percent or more over the next five years, when they believe the market will be saturated with ad skipping devices like the DVR.
Some advertisers feel the internet will be the beneficiary of all this shifted spending. Certainly, online video has had a major impact on the way TV and film content is being created, marketed and consumed, but distributing video online is not replacing traditional, regular broadcast programming. Some media critics have gone so far as to say that in the future our computers will become our TVs; yet, there is no evidence to support this theory. None. Technologically, the Internet can't support the numbers when it comes to viewers all watching a show at the same time. (CNET News.com)
Out of all the hype, we can see that not all news for advertisers and network execs is bleak. The DVR affords many opportunities for television networks and advertisers to use their interdependent relationship to create a new communications environment which is still economically beneficial.
More study of uses and grats may clear TV’s static The advertising industry needs to understand consumer media dependencies and their use of TV and DVR technology better. Any threat posed by the widespread use of DVRs will only be fulfilled if advertisers take no action to adapt. The DVR changes the relationship between the audience and the TV medium by giving the viewer greater control and the possibility of more leisure time to participate in that medium or in other activities – or with other media. If viewers watch more content because they are using DVRs to meet their own needs and desires, then advertisers and TV execs can begin to understand the creative approaches that work among both zappers and non-zappers. Message framing can be used more effectively in advertising scenarios. The measurability of viewing and skipping patterns inherent in DVR technology may offer unique opportunities to understand what content audiences really want to see.
The potential ability of the DVR to “kill commercial TV” by creating an easy option for skipping ads certainly may exist. Still, the voluntary nature of advertising supported programming has always given viewers a chance to optout. Whether it is for the bathroom, the snack, the conversation, the VCR or the DVR, advertisers have always successfully competed with something for viewer attention. Their challenge today, as always, is to figure out better and more creative ways to effectively communicate with audiences in welcomed ways.
More research into DVR usage patterns is warranted and may help advertisers to overcome the hurdles which lie ahead.
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