The DVR effect

In so many ways this television season is shaping up as those of the past have, a flock of new shows, some surprises, more disappointments and the suspenseful wait for the axe to land on those that sink.

But this year is quite different in an important way, as the first season in which digital video recorders have really become mainstream and the ratings that really count will include not just live viewing, when the show actually airs, but delayed viewing on DVR devices like TiVo up to seven days after that original airing.

That's hugely important for media people, as Media Life learned in a recent poll of readers about the new season.

The question posed to readers: What's the biggest storyline early in the season?

By far the largest share, nearly half, 44 percent, named DVRs, agreeing with this statement: "The impact of digital video recorders on broadcast ratings, with Nielsen's DVR sample more than doubling since last year. It will be weeks until we see the full picture for this season because it will depend on live-plus-seven-day-playback ratings."

Media Life then asked readers how the DVR ratings would affect their work as media planners and buyers. There were a slew of responses.

The overall sense was that DVR ratings would forever change broadcast television and how shows, networks and TV seasons are evaluated. But beyond that there was not a lot of agreement.

What follows are some of those comments, edited for conciseness:

"I think I will be buying a lot more sports! Planners are going to have to adjust CPPs and TRP levels to account for the dramatic drop in live ratings (I think the plus three part is crap, once it's on DVR very few people are going to watch the commercials, and the stations haven't really convinced me otherwise.) And agencies are going to have figure out and then re-educate clients on what to expect and what constitutes an effective buy. I believe the DVR to be the greatest invention since the VCR for watching TV and the worst, perhaps industry-killing innovation for the advertising industry. The DVR, even more than the internet, is going to be what forces advertising to change, evolve and adapt to a completely new landscape. We completely underestimated TiVo."

"DVRs will bring the ratings down. Once a show is recorded, the viewer isn't in any hurry to watch it. Between LPMs, DVRs, the increase in cable ratings, the political season, and the Olympics, 2008 is going to be a tough year for spot buying."

"It will certainly extend the period after a show airs before ratings actually matter."

"DVRs have become the means of watching TV. Why spend an hour watching it live when you can spend 45 minutes watching it an hour later. It's the only way I watch shows anymore."

"The new motto is, 'Get used to it,' this is the way people watch television and how it will impact ratings and viewership still remains to be seen. More work will need to be done to stay ahead of the curve on this one."

"I'll continue to buy good shows that reach the demos I need for individual clients--my ads stand out so they'll continue to be watched by MOST viewers of any specific program."

"Early in the season, I tape every new show, mainly due to my job as a planner, but even as a typical viewer, I will find the shows I like and I will tape them to watch at my convenience. As we all know, DVR taping impacts the real-time ratings we use to evaluate and project program delivery. I believe that the actuals delivered are mirrored as a percentage of the programs being watched in real time. As my personal example above, I tape shows, but when I decide I do not like something, I no longer tape it and only choose to tape the best ones in my view. The industry clearly needs to develop a method to rate DVR programming, but as a planner, I believe that the real-time ratings act as a percentage of total viewers and I continue to project based on the reporting available, as I believe those ratings are equal to the total viewers."

"DVRs' penetration is still not large enough to truly make a difference. The DVR demographic, although desirable, is still only a small audience to account for in planning and buying. So much hype for DVRs and energy put into them-yet so little true buying impact on my firm"

"As ratings go down, CPPs go up. Agencies/clients are holding on to outdated cost info. There are terrific integrated options on most stations but most buyers haven't been trained how to evaluate and recommend something that isn't 'sticking to the plan.' Stations/networks can't pay any less for programming so we all have to be more creative."

"I believe it will benefit most of the more unique shows, including 'Cane' and 'Journeyman.'

"Perhaps DVRs will make networks a bit more patient, willing to stick with shows longer, hoping to build viewership as the season progresses."

"It will impact it by lowering ratings, and it'll make it a little harder to figure out what people like to watch."

"There will be a lot of uncertainty and questioning the system--internally and client-side."

""DVRs will finally help give a more accurate picture of what people watch. Let's face it, rating systems are really totally imperfect, so anything that can give a more accurate picture is progress long overdue."

"I think that Nielsen's DVR impact will be a huge bomb."

"DVRs will have only a small impact on ratings. Overall, when viewers love a show, they still want to see it in first air so they can talk about it the next day. Even when shows are recorded, it is primarily because viewers are not home or can't watch, not because they want to skip the commercials."

"DVRs will delay getting full details as to how a show is truly doing. Networks are going to have to quickly figure out how they are going to determine what makes a show popular or not and look to other avenues of getting the show watched."

"The impact will only be slight. Nielsen ratings figures have always been suspect to fraud, in my opinion. I prefer to go by first-hand viewer feedback, as well as my own opinion of the current programming offerings. If anything, DVRs will add more viewers, who can now have access to programming materials at their convenience in a manner that works better with their schedule."

"I think if people DVR a show to watch it later they obviously chose something other than that show to watch, and it shouldn't affect the ratings for that particular day one way or the other. Time-shifted ratings are a 'myth' that shouldn't be tallied or counted as viewed for that day. It's like reruns, they don't rate like a first-run show, so DVR'd shows are just taped because they came in second for the night and they shouldn't count in the overall ratings."

"This is just a continuation of decreasing ratings for traditional media as more and more mediums become available and technology allows consumers to do what they want when they want. Network TV is still the biggest reach medium there is, and local TV and radio are still strong and the best way to go for many clients. But the ways they should be planned and bought are changing."

"DVRs will continue to affect viewership numbers. Viewers will continue to do what they have to avoid watching commercials. This why I approve of widespread use of product placements, as they make the shows more realistic when the characters can bee seen using REAL products, not fake studio knockoffs. The message gets through."

"A show being DVR'd is not something that can be counted on. Plus, just because it's been DVR'd doesn't mean that it will be watched. Plus, the fast forward button is still readily available on the remote. Basically, I think it's nice for the stations to get added exposure of their shows, but the Nielson ratings are all that we can count on for this diary market."

"In evaluating shows, you now have to look at not only Nielsen's ratings but the live+7 as well to really see how effective a program is. This year is going to be based more on qualitative information than real ratings data."

"I think it will make producers a little less trigger-happy when it comes to deciding which new shows will get the ax. With live-plus-seven, they cannot determine based on overnights which show will live, unless overnights are incredibly low in the main demographics."

"Confusing in the short-run, promising in the long-run."

"It will deliver preliminary numbers for most of the hottest hits that incorrectly indicate serious erosion. Confusion will reign. But subsequent measures, such as live plus seven, may reveal little overall loss for these hits."

"It's a 'watch when you want to world,' and that will only increase as the years go by. One good thing about this is that there have always been shows that get this treatment. Finally, they will get their due."

"On ratings, it's too soon to know for sure, but I suspect it will have a major impact. On program evaluation, it will depend on the degree of ad avoidance. On my job, it will depend on how the first two points play out, but I don't see it making it easier."

"It will cause total time spent with television to increase. It will cause a nice lift for some 'appointment' programs. The new appointment shows are the ones that are recorded so you can watch them over and over again. It won't impact my job at all because after years of working in the TV biz, I'm working in internet media now."

"DVRs are going to help the ratings of many programs. The biggest impact will be on scripted dramas. The question we have to ask is, are commercials being watched during the playbacks or fast forwarded through? Right now it is a wait and see situation."

"Some shows will benefit from DVR's in my opinion, especially the serialized dramas and the most popular series ('CSI;' 'Grey's Anatomy' and 'House,' for instance). I'm betting the networks will look at the DVR ratings and give some promising new shows a chance. (After all, back in 1981, NBC renewed 'Hill Street Blues' in part because it was doing well with those who subscribed to cable TV--a relatively small number at the time.) DVR households could also become the make-or-break factor."

"The penetration of DVRs is getting high enough that their impact on ratings needs to be taken into account. What will be critical is the number of people that watch commercials on their recorded shows. If a significant number don't fast forward through the commercials then the overall impact will be small. However, it the opposite is true, then this will really have a major impact on what I buy and how I negotiate. It might actually be good for advertisers in the long run because the networks and their affiliates won't be able to justify price increases when their audiences can be shown to be not only decreasing (they already are but this hasn't impacted pricing yet for some reason) but that fewer people are actually watching commercials. It also should have an impact on how they schedule commercial blocks in order to minimize impact on commercial ratings."

"DVRs will obviously affect national TV negotiations from now on. I'm not so much concerned with the program ratings as I am with the commercial ratings. The industry needs to go to second by second data with some type of +3 or +5 data stream to accurately gauge engagement."

"As it will take longer to evaluate the ratings data, I suspect we'll see more grassroots protests to bring back canceled shows as people are actually watching them (even though the quick numbers may not indicate as such)."

"DVR makes our jobs more difficult. Who really wants to watch commercials if you don't have to anyway? I can't believe I just said that."

Technorati : The DVR effect

Something new under the sun

Innovation, long the preserve of technocratic elites, is becoming more open. This will be good for the world, argues Vijay Vaitheeswaran (interviewed here)

A CRISIS is a terrible thing to waste," Vinod Khosla laments to Larry Page. The two Silicon Valley luminaries are chatting one evening at the Googleplex, the quirky Californian headquarters of Google. The crisis which Mr Khosla is concerned about is caused by carmakers' addiction to oil and the consequent warming of the planet. "The energy and car industries have not been innovative in many years because they have faced no real crisis, no impetus for change," he insists.

The two are plotting what they hope will be the next great industrial revolution: the convergence of software and smart electronics with the grease and grime of the oil and car industries. Mr Khosla is kicking around his plans for getting "chip guys" together with "engine guys" to develop the clean, software-rich car of the future. Such breakthroughs happen only when conventional wisdom is ignored and cross-fertilisation encouraged; "managed conflict", in his words.

Mr Page, co-founder of Google, had earlier hosted a gathering of leading environmentalists, political thinkers and energy experts to help shape an inducement to get things moving: the Automotive X Prize, to be unveiled in early 2008. The organisers will offer at least $10m to whoever comes up with the best "efficient, clean, affordable and sexy" car able to obtain the equivalent of 100 miles-per-gallon using alternative energy. The charitable arm of Mr Page's firm has already taken hybrid petrol-electric vehicles, like the Toyota Prius, and turned them into even cleaner "plug in" versions which can be topped up from an electric socket.

Mr Khosla believes clean cars, using advanced biofuels or other alternatives, will come about only through radical innovation of the sort that Big Oil and Big Autos avoid. Risk and acceptance of failure are central to innovation, he argues, but the dinosaurs typically avoid both. "Big companies didn't invent the internet or Google, and much of the big change in telecoms also came from outsiders," he adds.

Coming from almost anyone else such talk would sound preposterous. But Mr Khosla and Mr Page are not ordinary businessmen or armchair revolutionaries. Mr Khosla helped to found Sun Microsystems, a path-breaking information-technology firm, and he went on to become a partner at Kleiner Perkins, a venture-capital company that was an early backer of Amazon.com, America Online and many other pillars of the internet economy. Mr Page's Google is one of the internet's biggest success stories. At 34 he is a multi-billionaire.

But these men are from Silicon Valley; and Silicon Valley is not America. It is tempting to dismiss such breathless talk of revolution as just more hype from people who are seeing the world through Google goggles. After all, go beyond the rarefied air of northern California and the rules of gravity are no longer suspended. The well-established industries which they mock still move at their usual but reliably glacial pace, right?

Well no, actually. Rapid and disruptive change is now happening across new and old businesses. Innovation, as this report will show, is becoming both more accessible and more global. This is good news because its democratisation releases the untapped ingenuity of people everywhere and that could help solve some of the world's weightiest problems.

The seditious scene from the Googleplex also captures the challenge this presents to established firms and developed economies. For ages innovation has been a technology-led affair, with most big breakthroughs coming out of giant and secretive research labs, like Xerox PARC and AT&T's Bell Laboratorie.

It was an era when big corporations in developed countries accounted for most R&D spending. .

North America still leads the world in research spending (see chart 1), but the big labs' advantage over their smaller rivals and the developing world is being eroded by two powerful forces. The first is globalisation, especially the rise of China and India as both consumers and, increasingly, suppliers of innovative products and services. The second is the rapid advance of information technologies, which are spreading far beyond the internet and into older industries such as steel, aerospace and carmaking.

What is innovation? Although the term is often used to refer to new technology, many innovations are neither new nor involve new technology. The self-service concept of fast-food popularised by McDonald's, for instance, involved running a restaurant in a different way rather than making a technological breakthrough. However, innovation can involve plenty of clever gadgets and gizmos.

One way to arrive at a useful definition is to rule out what innovation is not. It is not invention. New products might be an important part of the process, but they are not the essence of it. These days much innovation happens in processes and services. Novelty of some sort does matter, although it might involve an existing idea from another industry or country. For example, Edwin Drake was not the first man to drill for a natural resource; the Chinese used that technique for centuries to mine salt. But one inspired morning in 1859, Colonel Drake decided to try drilling for oil in Titusville, Pennsylvania. He struck black gold and from his innovation the modern oil industry was born.

The men in white coats

The OECD, a think-tank for rich countries, says innovation can be defined as "new products, business processes and organic changes that create wealth or social welfare." Richard Lyons, the chief "learning officer" at Goldman Sachs, an investment bank, offers a more condensed version: "fresh thinking that creates value". Both hit the nail on the head, and will serve as the definition in this report.

According to popular notion, innovation is something that men wearing white coats in laboratories do. And that's the way it used to be. Companies set up vertically integrated R&D organisations and governments fussed over innovation policies to help them succeed. This approach had successes and many companies still spend pots of money on corporate research. But firms are growing increasingly disenchanted because the process is slow and insular. A global study across industries by Booz Allen Hamilton, a consultancy, even concluded that "higher R&D spending doesn't ensure better performance in terms of growth, profitability or shareholder returns."

Now the centrally planned approach is giving way to the more democratic, even joyously anarchic, new model of innovation. Clever ideas have always been everywhere, of course, but companies were often too closed to pick them up. The move to an open approach to innovation is far more promising. An insight from a bright spark in a research lab in Bangalore or an avid mountain biker in Colorado now has a decent chance of being turned into a product and brought to market

So why does the generation and handling of ideas matter so much? "We firmly believe that innovation, not love, makes the world go round," insists John Dryden of the OECD. Corny perhaps, but studies do show that a large and rising share of growth-and with it living standards-over recent decades is the result of innovation (see chart 2). Innovative firms also tend to outperform their peers. "We're not discovering new continents or encountering vast deposits of new minerals," Mr Dryden adds. Indeed, the OECD's experts believe that most innovation has been caused by globalisation and new technologies.

Analysis done by the McKinsey Global Institute shows that competition and innovation (not information technology alone) led to the extraordinary productivity gains seen in the 1990s. "Those innovations-in technology as well as products and business processes-boosted productivity. As productivity rose, competition intensified, bringing fresh waves of innovation," the institute explains.

That is why innovation matters. With manufacturing now barely a fifth of economic activity in rich countries, the "knowledge economy" is becoming more important. Indeed, rich countries may not be able to compete with rivals offering low-cost products and services if they do not learn to innovate better and faster.

But even if innovation is the key to global competitiveness, it is not necessarily a zero sum game. On the contrary, because the well of human ingenuity is bottomless, innovation strategies that tap into hitherto neglected intellectual capital and connect it better with financial capital can help both rich and poor countries prosper. That is starting to happen in the developing world.

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