That "bloop-bloop-bloop" you hear is the collective fast-forwarding over the commercials as households with TiVos (NASDAQ: TIVO) or other digital video recording (DVR) devices zoom through the ad breaks. A recent article in the Los Angeles Times reports that with DVR use on the rise, the Nielsen ratings group has started to monitor how American television watchers view commercials.
Advertisers have been claiming of late that the increased use of DVRs cuts down on the actual viewing of commercials. With fewer eyes ostensibly on the advertising messages, many feel that the cost for air time should be reduced. This month, with May sweeps on the books, networks and advertisers begin work on contracts for the fall season, so these fresh Nielsen numbers may be used as a bargaining chip to calculate ad rates for prime-time space on the major networks. Last year, advertisers pledged $8.75 billion in commercial-spot dollars during the "upfront" sales season. Current expectations are for this figure to decline this year.
A recent Nielsen survey showed that DVRs are in 17% of American households; the average commercial is seen by 40% of those viewers who play back shows on their DVR device. 40%? Is that really possible? Even when my husband and I are home when our favorite shows start, we typically wait a determined period of time (10 minutes for half-hour shows, 20 minutes for hour-long programs) before sitting down to begin watching. That way, we can skip all of the commercials -- except for Apple Inc.'s (NASDAQ: AAPL) "I'm a PC/I'm a Mac" spots, which just amuse me -- and still finish at the top (or bottom) of the hour.
Between DVR technology, iTunes downloads, streaming video over the Internet, and the quick availability of DVDs, the television industry is changing at warp speed. The ratings and advertising worlds may just have to catch up.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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