Personal Video Recorders: A Threat to TV?

A few weeks ago, Eric Picard shared his take on interactive TV (iTV) and gave us some wise recommendations for making advertising work in this new medium. I’d like to take a step back and try to convince any remaining skeptics out there that the time has come for iTV.

“Interactive TV has been a year away for 10 years,” someone recently told me. How true. It was nearly 10 years ago that Time Warner launched its ill-fated iTV trial, which wound up, according to all accounts I have read, a complete and utter flop.

I’m sure that there were many reasons that this trial was unsuccessful. But I think most would agree that two primary factors played a significant role:

1. Nobody was online.
2. There was no compelling functionality.

World Wide What?

Few people understood basic interactivity with a computer. Graphical operating systems had been around for six or seven years, but most people’s experience with a computer ended at 5 p.m. when they went home from work. Their understanding of this functionality was limited to a finite set of applications that existed on their hard drives (or floppy drives, etc.). Most people didn’t “go online” at that time. Most folks didn’t know what email was, and even fewer knew anything about “Click here.” There was no Web to explore.

Sure, early adopters had CompuServe, AOL, Prodigy, or even Apple’s short-lived eWorld. But people were stuck inside the “walled garden” content of these service providers; the breadth of the World Wide Web hadn’t hit yet. And “surfing” had not even come close to reaching critical mass.

Today, everyone’s online. The global Net population is over 300 million, with 122 million U.S. users, or nearly 50 percent of Americans. Most of the American public is now familiar with basic interactivity via a computer screen. The jump to the TV screen is very small. America has spent the last five years obsessed with the Web and how it touches more and more pieces of our daily lives, forcing everything to evolve. And now more and more people are turning to the Web for entertainment, using this naturally interactive medium as a way to kill time.

Where’s the Functionality?

iTV didn’t really do anything back then. I think (and I stress “I think” here because I haven’t been able to dig up definitive details on this) that the Time Warner trial was limited to video on demand (VOD). And I’d be willing to wager that the overall selection was pretty limited.

Nobody cared. People were in the habit of going out and renting videos for the weekend. It’s what you did. Pay-Per-View movies were relatively new — most folks probably thought that Pay-Per-View was exclusively for boxing matches and other high-profile events.

Killer App in the Making

The personal video recorder (PVR) is the killer app for iTV. I don’t want to delve into what a PVR can do — you can find that out by visiting TiVo.com. And there’s still a question as to whether PVR functionality really is interactive TV. I’m stumbling around in that gray area myself but leaning toward No, it’s not interactive TV. But I’m confident of this: If PVR is not iTV, it is the gateway through which we will get there.

The concept of a PVR is extremely difficult to market because you can’t describe its functionality in a short message. You almost have to sit down and walk people through a demonstration in order to get the full impact across. I believe that this fact alone has been the biggest impediment to mass adoption of these devices. Naturally, there are other factors involved, not the least of which is a high sticker price of yet another set-top box.

But I believe that if TiVo could figure out how to tell its story in 30 seconds, its boxes would be in millions of homes right now. As a TiVo owner, I can usually convince people that they need one in about 15 minutes. Once you get one and realize what it’s capable of, then you truly wonder how you’ve ever lived without it (or, at least, how you’ve watched TV without it).

So, we’ve got mass-market penetration of Internet access laying the groundwork for people wanting to interact via other devices. And we’ve got the killer app. Something so powerful, simple, and revolutionary — finally — that people will want to interact with their TVs, even if it is just like a VCR on steroids.

Sounds like a revolution brewing, if you ask me. And let’s not forget that the majority of people with PVR boxes don’t watch live TV. They allow the box to record particular programs and then watch them at their leisure. So PVRs kill prime time.

And a good portion of the users also fast-forward through commercials. I’ve seen numbers quoted as high as 88 percent — 88 percent! So PVRs also kill traditional broadcast ad models.

TV is evolving. It’s been a long time coming, but here it comes. Finally.