Television Advertising that Works: An Analysis of Commercials fro ...

Viewers can typically procure DVR service through digital cable and satellite providers; however, third-party companies such as TiVo Inc. produce a stand-alone DVR and service package. TiVo is intuitive compared to the typical DVR because the service cross-tabulates the programming the viewer likes and records similar programs for later viewing.

Both TiVos and standard DVRs challenge advertising effectiveness given their increasing popularity. In March 2006, Interpublic media-buying giant Magna Global USA reported DVR penetration in the U.S. at 11.7%—up 10% from the previous quarter. Current projections indicate DVR penetration should reach 34.4 million by 2010 (Mandese, 2006). An online study conducted by Mindshare found 88% of respondents who currently own a DVR bought it to watch programs at their convenience, and 77% purchased a DVR because it allows them to skip commercials (Consoli, 2005). Consumer choice in selecting content as well as their ability to skip commercials concerns advertis-ers.

VOD continues to gain popularity as well. Magna Global USA expects that 66 million households will have access to programming delivered via VOD by 2010, compared to 24.5 million households measured in the first quarter of 2005 (Mandese, 2006). VOD has yet to realize a consistent revenue model and VOD content providers continue to test market different plans. Some content providers charge á la carte for programs with and without advertising, while others embed commercials and deliver content for free. For example, in a recent agreement between CBS and Comcast, the broadcaster plans to release episodes of CSI, NCIS, Survivor, and Amazing Race 24 hours after their prime-time airing. CBS plans on keeping the original commercials in each broadcast and will charge $0.99 per episode (www.cbs.com).