Advertisers, the Guilds and Some TV Networks Get it - Disney Does Not

This week begins what is called in the TV business as the "upfront" season - TV networks show off their new prime time programming in an effort to get advertisers to spend billions of dollars on commercial time before the fall season begins. But with the growing popularity of TiVo and other Digital Video Recorders (DVRs) that allow viewers to time shift programming easily and fast-forward through advertisements, convincing advertisers that broadcasting remains the best place to spend those dollars is becoming increasingly challenging.

The good news is that it appears that at least some of the parties to the current 80 year old advertiser-supported TV broadcast business model are willing to change their practices to meet the challenges posed by DVRs and other distractions that encourage viewers to bypass ads. As the New York Times reports today, (registration required) networks and advertisers are experimenting with different content models to keep the viewer engaged. For example, Fox included short vignettes of original content which were broadcast in commercial breaks during serial shows like "24." Others, like the CW network, are using so-called "content-wraps" that blend entertainment and advertising in breaks that last about two to two and a half minutes.

Similarly, it appears that the Hollywood guilds are also willing to live with the disruption caused by these new technologies, even going so far to say as it is overstated (a Nielsen study (registration required) supports this). "Everybody Loves Raymond" creator and executive producer Phillip Rosenthal, speaking on behalf of the Screen Actor's Guild, the Writer's Guild West and The Director's Guild, told a Congressional panel last week that the claim that the DVR has resulted in no one watching commercials was "somewhat specious," and in any event was not an excuse for making particular products part of the storyline of television shows (I discuss that in greater detail here).

But contrast these enlightened views with the position taken by Disney in its recent licensing agreement with Cox Cable. That agreement provides Disney's ABC television content to Cox's video-on-demand service provided that Cox disables the function of the service that permits viewers to fast-forward through ads. Obviously the business people are not talking to the marketing people at Disney - the Times quotes ABC's Vice President for marketing as saying of viewers, "[t]hey have control, and we are not going to fight that. We want to make it easy for them to get what they want, where they want, when they want." Oops, guess not.

What concerns me is the precedent this sets for other similar agreements. The Disney-Cox agreement only affects video-on-demand. Can attempts to disable the fast-forwarding function on cable DVRs be far behind? If you think I am being paranoid, you might recall that about a year ago, an ABC advertising sales executive admitted that the network had discussed using a technology that would disable the fast-forward feature on DVRs. Moreover, respected cable and satellite industry analyst Craig Moffett of Sanford Bernstein cheered the ad-skipping part of the Cox-Disney deal in a report issued right after it was announced:

Given the rising pernicious impact of DVR consumption and the flow of ad dollars toward more accountable and engaging media, this announcement could serve as a blueprint for the broader television and cable industry. If so, this shifting business model could ultimately re-order the current television food chain.

Rather than view the impact of DVRs as one that actually promotes more television viewing by giving viewers greater flexibility, Disney (and Moffet) view it as pernicious. Will the company risk alienating viewers by taking away the control that viewers have come to expect?

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