DVRS: CLIMBING THE SUMMIT

David Letterman may routinely mention how he “TiVoed” a show, but digital video recording has yet to gain traction among consumers. That’s why DVR was the subject of much discussion — and a tutorial led by C Cubed principal and DVR analyst Jennifer Choate — at the CTAM Summit, where marketers grappled with the need to better understand and sell the value proposition of the technology. Its functionality clearly meets the needs of today’s time-stressed masses who never learned to program a VCR. And the category has tremendous awareness thanks to TiVo’s marketing efforts to entertainment “influentials” such as Letterman. But while it may be a must-use for its devotees, the category has yet to take off for either the stand-alone DVR manufacturers or their licensed partners. DirecTV owner Hughes Electronics reported in its second-quarter earnings that the satellite TV company’s set-top box incorporating TiVo’s DVR functions (at $4.99 per month) has yet to meet its “quite aggressive” targets for the product. DirecTV COO Roxanne Austin called the rate of customer adoption for the product “very challenging,” with less than 10% of its 181,000 net new customers last quarter taking the TiVo service. But C Cubed’s Choate says this is good news for cable. Discussing highlights from C Cubed’s The DVR Monitor: Wave IV, Choate said DVR deployers such as Time Warner Cable and Cox Communications can learn from users’ experiences how to better communicate the life-improving benefits of DVR technology. Armed with the longest-running tracking study of DVR owners, and three years of comprehensive research with satellite, stand-alone and cable DVR users, Choate’s findings, including the latest survey conducted in May, are consistent across four waves of research. The latest wave, released next month, shows the hot-button topic of commercial-skipping is not the reason consumers purchase the product. “People buy DVR service for one reason but they love it for other factors, and that is what has to be marketed,” says Choate. “They want to record programs easier, not just skip commercials.” Top-of-mind mentions of what folks expect from their DVR is convenience of the record feature (47%), followed by “changed the way I watch TV” (13%), ease of use (12%) and features including pause, fast-forward and rewinding live TV (11%). Only 4% cited “no more commercials,” although the ability to fast-forward through commercials quickly becomes a basic expectation of users. “If you take away that ability you will have angry customers,” Choate says. But stressing commercial-skipping in a marketing campaign won’t sell many DVR products. DVR owners may watch fewer commercials, but they also watch a whole lot more TV (20% more hours each week), including a greater number of channels (41%) and more programs (42%) than in their pre-DVR lives. What’s more, 18% have upgraded their programming packages since owning a DVR. Users watch about 48.5% of television live, with the balance of viewing from the recorded cache. DVR usage does not impact pay-per-view or video-on-demand revenue: 21% of DVR owners purchase more VOD or PPV movies while 21% purchase less. “There is an upside for PPV and VOD sales if encouraged to be compatible with DVR, as there has been little loss when a DVR is added to the home,” says Choate. It also reduces churn. Overall satisfaction with the service is so high that 72% of respondents did not switch multichannel providers in the past year and 81% stated they have no plans to do so in the coming year. That high satisfaction and loyalty factor should be the starting point for cable marketers, says Choate. DVR service could truly take off if marketed to basic cable customers, she feels. Over 90% of DVR owners say their decision to invest in the technology was a good or excellent value, and more than 90% say it’s easy to use and more convenient than using a VCR. Make your basic customers feel savvy by marketing DVR to them; try experiential marketing with a free DVR box to test drive at home, says Choate — and they’ll not only sign up, they’ll want more programming choices (read: digital and premium) to fill their newly smart, easy and enriched viewing time. The basic ability to record is a critical feature that gets skipped in most marketing messages, which Choate says are too focused on the ability to “pause live TV” — a feature that confuses folks still wrapping their minds around the technology. The fact that the service continues recording while on pause, so they resume viewing from the point where they paused, may seem obvious to marketers but counter-intuitive to potential customers who think they’ll re-join live TV in real-time (not cached) action. These factors and concerns need to be communicated clearly and effectively in advertising efforts. The bottom line for 69% of DVR owners is that they can now watch more of what they care about when they want, and make better use of their free time. But while appreciating more control over their own viewing, emphasizing this may evoke the unwelcome implication that control means work — not ease, relaxation and fun, which is why people watch TV. “TV watching has come out of the closet,” Choate says. She likes Time Warner Cable’s current campaign showing how DVR enhances time spent with families and the ability to rest and relax with TV. The other big takeaway from DVR owners is that TV watching is just plain more fun when DVR-enabled, a factor cited by 54% of C Cubed’s respondents, while 45% said DVR gives them a higher quality television experience overall. Retaining DVR customers is also critical to keeping churn low. Choate says it’s a given that any DVR service must perform well on the basics, such as customer support. But operators must go beyond the basics to perform well on what DVR users value, while avoiding irritating them with features that don’t enhance what they value. “DVR owners now love the way they’re using their time, and they feel getting DVR was a smart buying decision — but if it’s not compatible with HD or VOD, you’ll lose them,” she warns. The time to strike is now. DirecTV is planning to juice its TiVo service by delivering exclusive game highlights of selected football games on Monday mornings to lure more of its NFL Sunday Ticket subscribers to sign up. Eventually, DirecTV wants to let fans choose from teams, players or specific plays. With so many cable subscribers already having defected to DirecTV for the Sunday Ticket package, this extra sweetener to football fans could overshadow cable’s DVR efforts — unless they engage in smarter DVR blocking and tackling now.