Millions of viewers are using their DVRs to fast-forward through commercials, so the industry is seeking ways to enhance and monitor its advertising.

Viewers and advertisers can now gear themselves for interactive television commercials, thanks to a deal announced by NBC Universal (NBCU) and TiVo in November 2007.

For advertisers, the prospect of having interactive spots, measured second-by-second, is a marketing dream, a dream that has grown out of a marketing nightmare.

The nightmare began when TiVo, of Avisto, CA, began producing a television recorder with the ability to easily fast-forward through commercials. That capability, which other DVRs are rapidly installing, threatened to negate every commercial in every program that viewers record for later viewing.

In their joint news release, TiVo and NBCU referred to "the new ways consumers are watching television" and "the significant strategic challenges they (advertisers) face in the age of the DVR."

TiVo-NBC Agreement Will Help Industry Cope With DVRs

The NBC-TiVo deal will not stop the fast-forwarding, but it will give advertisers two new weapons in their struggle with DVRs.

1. NBCU advertisers will be able to purchase TiVo’s interactive tags which allow viewers to click on a tag to obtain more information about that product. The companies said the tags will provide advertisers "with an effective way to reach live, time-shifted or fast-forwarding viewers."
2. TiVo will offer advertisers reports on exactly which commercials are being viewed or skipped, based on second-by-second monitoring of DVRs in 20,000 volunteer households. The TiVo reports promise to be the industry’s most accurate monitoring of commercials.

Industry Wants to Know Which Commercials Are Being Skipped

"Every creative director in the country wants to know if his or her advertising campaign is being skipped," Todd Juenger, TiVo vice president of research, told the Boston Globe.

Major advertisers are certain to be watching the TiVo/NBCU experiment because the technology could allow them to turn brief commercials into longer sales presentations to the most interested viewers.

Both the interactive feature and the commercial monitoring technology are apt to show up in other DVRs eventually, perhaps under TiVo licensing.

One Fifth of U.S. Households Have DVRs

Industry sources said one fifth of United States television households already had DVRs in 2007. That number was projected to increase to 35 percent in the next five years.

Although TiVo pioneered the development of DVRs, sales of its recorders accounted for only 1.7 million of the USA’s estimated 20 million units in 2007.

Since TiVo and others estimate that about 60 percent of DVR owners skip the recorded commercials, the impact on advertising can run into billions of dollars.

In 2007, Neilsen Ratings was testing ways to measure the viewing or skipping of commercials by DVR owners, an accounting that could be depressing to the industry.

Industry Looking for Ways to Curtail Commercial Skipping

Meanwhile, cable companies, TV networks and advertisers were searching for ways to curtail fast-forwarding through the recorded commercials.

At least two cable companies were testing offers of free premium programs that are modified to prevent the viewer from skipping the commercials. Other schemes to discourage fast-forwarding have met public disfavor.

Tracey Scheppach of Starcom USA, a large media-buying firm, told the Boston Globe that people don’t "hate advertising. What they hate is irrelevant disruption" and they will play a larger role in determining what is relevant.

They will play that role by voting with the fast-forward buttons on their DVR remotes.