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Recorders Like TiVo Hurt TV Ad Market

Posted December. 30, 2005 03:21,   


For TV viewers in the U.S., the commercials that interrupt programs every five to 10 minutes are annoying. Companies are paying a lot of money for advertisements in an effort to publicize their products, but viewers do not want to watch them.

This situation, however, has changed ever since a few companies, such as TiVo, launched Personal Video Recorder (PVR) set-top box technology in the 2000s.

By connecting a set-top box to a TV, one can record TV programs in real time and skip commercials by pressing the “skip” button when playing the program back.

This put free-air TV and cable TV in the U.S. into a state of emergency because the skip function, which lowered the exposure rate of viewers to ads, was likely to decrease their advertisement revenue.

Currently, the number of TiVo subscribers is increasing exponentially, surpassing four million.

In Korea, LG Electronics has already launched “time machine TV,” which has PVR functions, and Samsung Electronics is planning to sell a similar product starting next year, raising speculation as to whether advertisement-skipping will take place in Korea as much as it does in the U.S.

Viewers Aren’t Watching Commercials-

According to Accenture, a U.S. consulting firm, eight percent of U.S. households have PVRs or Digital Video Recorders (DVR), which function similarly to PVR’s, and 70 percent of them are skipping commercials. Moreover, two percent of all ads are skipped.

Accenture predicted that by 2009, 40 percent of U.S. households would have PVR or DVR, and that 22 percent of all TV ads would be skipped.

As a result, large companies are raising pressure on TV broadcasting companies to lower the cost of TV ads.

The phenomenon of skipping ads was found to be very prominent when it comes to TV dramas, movies, music programs, and sitcoms, and less prominent during live programs such as news and sports programs.

Korea Would Be No Exception-

Time Machine TV, launched by LG Electronics launched in late April 2005, enables a user to record 13 hours of TV thanks to a 160GB hard drive, so viewers do not have to miss live programs while skipping ads when they watch TV.

It is estimated that about 25,000 to 30,000 LG PDP TVs have been sold. Next year, LCD TVs with more than 37 inches will also have record functions.

Because Samsung electronics is also planning to market large TVs with similar functions, Time Machine TV is expected to spread fast among consumers.

It is highly likely that the TV ad-skipping phenomenon of US will also occur in Korea.

“Existing TV commercials are exposed to consumers without consumers’ consent, and this will result in a backlash,” said Ahn Jong-bae, a media and video professor for Hansei University. “With the development of digital TV technologies, the number of such commercials will decrease by 40 to 50 percent in the next five years.”

Do-Young Kim Sang-Hoon Kim nirvana1@donga.com sanhkim@donga.com