Study Suggests DVR Popularity Is Key to Long-Term Pay TV Success

Steve Tranter, VP, broadband and interactive, NDS

Steve Tranter, VP, broadband and interactive, NDS

February 13, 2009 – Strong consumer devotion to using DVRs offers TV programmers and service providers an important barricade against potential inroads of Web-based entertainment in core audience segments, according to findings of a recent survey commissioned by NDS.

In the survey, more than 70 percent of DVR owners said they can’t live without the device, and much of that loyalty owes to an ease of use that appeals to mainstream TV viewers. The NDS DVR Report, based on respondents in Australia, Italy, the U.K. and the U.S., also found that DVR owners watch on average slightly more than four hours (4.075) of recorded and live television a day and that 52 percent of DVR owners want a second DVR.

“They want to replicate the advantages of the living room DVR on all TV viewing devices,” says Steve Tranter, vice president of broadband and interactive for NDS. “They’re changing the way they’re viewing TV and planning their own personal prime time. It’s reconfirmation that once consumers have a DVR they can’t live without it.”

Among respondents -1,012 people aged 18 to 70 years old who have a DVR at home – the DVR is second only to the mobile phone as the item they can’t live without, superseding the landline phone, dishwasher, radio and MP3 player.

NDS, along with providing conditional access and interactive television middleware, supplies software that delivers DVR functionality to set-tops. Its software runs on about 90 million set-tops worldwide, serving 18 pay TV operators, including BSkyB, DirecTV, Sky Italia, SkyLife Korea and Foxtel Australia. More than 13.1 million of those set-tops are now DVR set-tops, with some operators’ DVR penetration rates approaching 45 percent, Tranter says.

Perhaps most notably, the survey found that acceptance and satisfaction with DVR use is strongest among older demographics more representative of mainstream majority TV viewer behaviour and tendencies.

While older demographics typically resist lifestyle-changing technologies, Tranter says, they are embracing a DVR user experience that does not require them to leave their familiar viewing device – the TV – as well as an experience that provides software applications and a user interface generally less complex and challenging than PC and Web operations. Nearly 61 percent of respondents think that a DVR is much easier to operate than a video cassette recorder.

“We broke down demos by gender and age, and you see much bigger acceptance among 50-plus, because it is so easy to use,” he says. “The largest numbers of acceptance and satisfaction were actually 70 percent of 60-plus-year-olds. They could find and set up recordings of programs of more interest to them.”

DVR users, the survey found, also are more prone to look at an entire day’s program guide, “so the user interface becomes a portal for promoting all live, VOD and other content,” he says. “It’s all about discovery, and the user interface is an important aspect of that. They don’t want to learn an interface. It should not be an impediment.”

As previously reported (June, p. 32), U.S. cable operator Cox Communications has selected NDS to implement a next-generation Cox TV user interface that will integrate search and other interactive functions across linear channels, VOD, DVR and Internet video content with features and look and feel eventually to be carried across TV, PC, mobile and other Cox subscriber viewing screens.

The Cox contract represents a first foothold among major U.S. cable operators for NDS, which hopes also to provide those and other pay TV operators with diverse DVR and set-top deployment scenarios. The traditional scenario involves multiple set-tops and DVRs per home. However, through its recent acquisition of Jungo, a residential gateway middleware company, NDS also is pitching a less costly scenario with one primary set-top gateway device and software to deliver video from any source to screens around the home.

“The gateway is all about getting TV and Internet content into the home, then managing across devices,” Tranter says. “Operators have the option of multiple set-tops or a gateway. We can also hang hard disks off of the residential gateway which can be accessed with managed quality by any set-top. This survey gives us confidence that viewers are ready to combine that TV storage with Internet, long tail, supplemental or ad content.”

Despite the increasing popularity of over-the-top Web video portals like Hulu.com, Veoh and YouTube – and increasing concern among pay TV operators that those portals’ control- and feature-richness could eventually draw mass consumers away from traditional TV – NDS insists that the pay TV operators hold a trump card in their ability to search, access, store and view entertainment from all sources, including TV, Internet and home movies, and tie them into a common user interface.

“There was all this talk about over-the-top, but the Yahoo announcement is in line with our strategy: widgets for delivering filtered Internet content to the TV,” Tranter says, referring to Yahoo!’s late August partnership announcement with Intel Corp. to co-develop the Widget Channel, a TV application framework optimized for TV and implemented through consumer electronics devices that use the Intel Architecture.

According to Intel and Yahoo!, the Widget Channel will allow consumers to watch videos, track stocks or sports teams while watching TV programs through use of TV Widgets, small Internet applications that are designed for the TV. TV Widgets will be based upon Internet services like Yahoo! Finance, Yahoo! Sports, Blockbuster and eBay that viewers can customize, and they will be open to the larger community of JavaScript, XML, HTML and Adobe Flash developers.

“Where we’re moving is putting more control into the viewers’ hands for finding content, recommending content – the DVR trains them into that way of thinking,” Tranter says.

As to fears among TV programmers that the DVR is already upsetting business models by enabling viewers to skip advertising, NDS research, separate from the new DVR Report, finds that “Actually there are more opportunities than there are threats,” he says.

“Everyone sees a threat to advertising, but we find the opposite,” he says. “Consumers are looking for more relevant content, and that includes ad content. The DVR brings in an element of personalization. That allows us to profile and target and also make recommendations for other programs. They’re planning recording and viewing, so they’re open to recommendations. We can find similar programs to what they’re recording.”

Despite some others’ survey reports that DVR users are skipping up to half of ads, NDS has conducted actual audience behaviour measurements through set-top monitoring and found much lower numbers. “People report 40 to 50 percent of ads skipped, but BSKyB numbers found the reality is 4 to 6 percent,” Tranter says, noting that the same set-top monitoring technology can provide relevant ad targeting intelligence. “We can store targeted ads on the [DVR] hard disk and replace non-targeted ads as a program is viewed.”

There is no doubt that ad models will have to adapt to on-demand and DVR technologies, he says, but those technologies also offer new ad inventory within onscreen guides, discounted ad-supported VOD movies, and even via banner ads during fast-forward or rewind activities.

And making ads more interactive, as well as targeted, is already producing the kind of viewer engagement that advertisers seek. “We have about eight years experience with interactive ads in Europe,” Tranter notes, “and now in U.S., and it’s enabling advertisers to go for direct response, which gets you a qualified lead, or to telescope viewers into longer form ads. Our experience is that viewing of 30-second interactive ads goes up on average to two minutes.”

The survey also revealed that more than 60 percent of DVR owners with a partner felt that having a DVR had improved their relationship, either by reduced arguing, gaining the ability to watch their own programmes while sharing their favourites with each other, or the ability to better plan an evening’s viewing.