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MIP TV Update: New Technologies Fire Warning Shot at Broadcasters

Ad-Skipping Could Cause Losses of $27 Billion in Next Five Years

New research suggests greater DVR impact than previously thought, according to new research released today by Accenture, a New York-headquartered management and technology consultancy firm. Their report predicts that ad skipping through devices like Tivo and other PVR’s (personal video recorders) plus VOD (video on demand) could cost the TV industry $27 billion in lost ad revenue over the next five years.

The firm, formerly known as Anderson Consulting, reports that 70% of ads are already being skipped by viewers with digital video recorders; that trend will only get worse as DVR penetration grows from the current 8% of homes with DVRs to a projected 40% by 2009.

The report's release comes just as top broadcast network executives told participants at the annual MIP TV/MILIA market that DVRs pose a serious threat to their ad base. Previously, network executives publicly played down the potential impact of the ad-skipping technology.

Accenture's research suggests that the impact of DVRs, video on demand and interactive TV will have a much greater effect on the linear TV business than anyone previously thought. The report says such changes in viewing behavior will exert downward pressure on CPMs (or costs-per-thousand viewers, the metric by which agencies buy TV audiences).

At the same time advertisers will have a tougher time reaching a mass audience, though more and more marketers, such as McDonald's Corp., have multiple messages aimed at multiple niches.

Michael Yudin, director of Carat Entertainment (USA) reacted to the report by saying, "Advertisers are demanding greater accountability, therefore greater measurement, On Demand will be able to provide that. This will create considerable challenges for the growth of linear TV advertising."

Accenture's research predicts TV ad revenue growth of only 3% by 2009, compared to other industry analysts predicting 6% to 10% growth by 2009. "A difference of potentially $27 billion in TV ad growth," said the report, which puts TV ad revenue in 2004 at about $60 billion.

The Accenture report comes right after Jupiter Research released its finding s that 27% of European internet users have decreased their TV viewing time.

The major media companies, however, might argue they are already exploring ways of working with advertisers in the on-demand universe. NBC Universal's Sci Fi Channel is one of many channels experimenting with video on demand in partnership with its advertisers. The broadcast networks have also worked hard to sell advertisers on product integration, weaving them into the fabric of TV shows.

Edward Flaherty