Three of four companies that advertise on national TV said they will reduce their spending over the next five years, two-thirds said they will increase spending on program sponsorships, and 46% indicated that their budget on product placement will increase, all as a result of the increasing influence of personal video recorders (PVRs).
"As PVR's penetration nears 2 million households, advertiser concern is mounting," said Josh Bernoff, principal analyst at Forrester Research, Cambridge, Mass., which has just released a report, "Will Ad-Skipping Kill Television?" "Advertisers say they will cut TV spending across the board, on national, local, and cable advertising, in the next five years as PVRs reach 30 million households."
The report, compiled in conjunction with the Association of National Advertisers (ANA), New York, also said that 68% of those surveyed agreed with the statement that,"My ad agency is ill-equipped to help me with the ad-skipping problem."
The impact on advertising will result in a $7 billion decline by 2007. "But ad-skipping won't destroy the TV business," said Bernoff. "New ad revenues for commercials in video on-demand will nearly make up the shortfall, and we also expect consumers to pay $6 billion for new services like subscription video on-demand in 2007."
According to the report, networks can fight ad-skipping by tying ads closer to programs, and "advertisers must transform their commercials to lure in the ad-skipper," said Bernoff. The report also recommends that advertisers concentrate ad buys with fewer networks to get first shot at sparse product placement and sponsorship spots, and that they set aside 5% of their media budget for non-standard formats like interactive program guide panels, interactive commercials, and ads on PVR menus-none of which are susceptible to ad-skipping, per Forrester/ANA.
The Forrester/ANA report garnered responses from 112 marketers in more than a dozen different vertical industries. Most of those surveyed had the title director of advertising or vp-advertising.