TV in a TiVo world

Digital Video Recorders (DVR) are set to undermine the advertising-based revenue model of television broadcasting. Fortunately, new technology does provide a replacement.

Digital Video Recorders (DVRs) are changing the way people watch television. Time shifting, which is the short name for recording shows and watching them whenever you want, has been common since the arrival of the VCR. Digital Video Recorders, however, are different. Digital video recording is so simple, and the experience so seamless (you could never pause live TV with a VCR), that growing numbers of people don't watch "live" TV anymore. TV shows are automatically recorded for DVR users without the need to migrate tapes in and out of a VCR device, and choosing to record something can't get much easier than picking from a guide on the screen or specifying keywords. Even better, with the click of a button, DVR users can watch more TV and less advertisements.

This, of course, is bad news for makers of content for television. Advertisements are the way TV studios make money, as it generates the revenue that enables broadcasters to pay licensing fees. Some would probably say "tough luck." It's not consumers' problem that new technology has made obsolete a revenue model. TV studios just need to find new ways to make money.

I agree, to an extent. Even so, it's worth considering the value of Ad-supported television.

Some remember that I spent four and a half years living and working in Europe (in fact, I wrote my first article for ZDNet a month or two after arriving in Lausanne, Switzerland). European TV has far fewer advertisements. Part of this is due to regulations which limit the ability to put ads on television, and part of it is due to competition with state funded television stations that don't need quite as much ad revenue. Even so, my experience in Europe made coming back to the American television experience quite a shock. I felt I spent more time watching commercials than seeing the content I wanted to see.

Then again, it's no exaggeration to claim that America produces the TV shows that the rest of the world watches. Within America, the range of channels available has historically dwarfed the European norm (though that is starting to change). This is driven partly by a very large and unified market into which TV studios can sell their products, but is also driven by the profits ad-supported content has generated. As I've noted numerous times before, profits attract competition, and the profits generated by the American TV industry has produced competition in spades.

TV advertisements may be annoying, but they do serve a useful purpose, which is to fund the creation of video entertainment and thus help to make the industry a global leader.

What will replace this revenue source? Disabling the ability to speed through commercials, much as some DVD players force you to watch ads at the beginning of a DVD by disabling the ability to go straight to the root menu, is a non-starter, in my opinion. Few vendors of DVRs would agree to this, but more to the point, I don't think content providers have a right to demand it. They can't persist in an old revenue model just because it was such a money spinner in the past.

There are alternatives, however, particularly as TV moves in more interactive directions through more powerful set-top boxes and the shift to bi-directioal broadcasting technologies such as IPTV. We've all seen the animated promotions in the corner of TV shows. Currently, these seem mostly geared towards advertisements for other TV shows, but they are increasingly being used for other types of advertisements - particularly in sporting events. Combined with bi-directional broadcasting technologies, these ads could become more interactive. If DVR technology becomes as common as televisions, clicking on such integrated advertisements wouldn't even have to distract from a TV show. Such a model would particularly appeal to advertisers who have grown accustomed to the verifiability and tracking metrics common with Internet advertising.

Product placements in TV shows could become more important. Companies that own technology oriented around the creation of "hotspots" in video content exist, enabling viewers to retrieve information about the clothes people are wearing on Soap Operas or the Oscars (as examples). Combined with a bi-directional viewing experience and advanced set-top boxes, these hotspots could become clickable. Home shopping could merge with TV in ways never before possible.

All this might sound like a lot of clutter to the viewing experience. Granted, there would be an art to making an ad useful while avoiding glaring obtrusivity, but a balance is possible. One way to convince consumers to accept these ads would be to jettison an advertisement model that will wane as DVR technology becomes ever more standard.

Imagine a world where you can see an entire movie on network TV without interruptions. Granted, ads would be more interwoven into the viewing experience, but on the other hand, the jarring interruptions of blocks of TV ads would be removed (at least for content that isn't time sensitive, which doesn't apply to news channels), and content could still be free because revenue would be generated through increasing viewership, not restricted access.

That should appeal to those who dislike DRM on principle. There would be no need to protect the content when ads are an irrevocable part of the content and wide dissemination is something to be encouraged. Such content could even be uploaded to sites like YouTube with impunity. Heck, content companies might even want to do the uploading themselves.

Ad rotation could still be possible. From week to week (or even shorter timeframes, depending on the speed with which such things could be managed), new ads could be spliced into the stream and re-uploaded. Such rotation might approach the model found in traditional television advertisements.

Viewers could still get an unadulterated original, though that version is likely to be DRM-protected. In my opinion, consumers would be little concerned about such things so long as playback of the DRM-protected content was sufficiently universal. Furthermore, if free versions of the content are avaiable, the R in DRM might seem less restrictive.

This seems a much better reaction to the "problem" of DVR devices than draconian attempts to preserve dying business models. Perhaps something similar could even be applied to music, assuming the ads aren't so obtrusive as to make the audio combination uplayable.

Sometimes the best defense is to harness the momentum of your opponent. If free content is a hard thing to stop, then find ways to give consumers legal free content from which revenue can be generated.