Media Report: In TiVo We Trust?

The PVR market leader is reaching out to advertisers. Slowly, they’re reaching back.

If you can’t beat ’em, sell to ’em.

Personal video recorders have been advertising’s bogeyman of late, demonized for enabling users to skip TV commercials with the push of a button. But now they are working to reposition themselves as opportunities rather than threats. And marketers may be warming up to them.

Market leader TiVo, which last year courted advertisers such as Lexus, Best Buy, New Line Cinema and Sony, took to the road again last month for another round of visits to ad agencies. The company has a new agency-friendly management team as well: veteran San Francisco agency media director Kimber Sterling joined last year as director of advertising and research sales, and a month ago, former NBC executive Martin Yudkovitz was named president.

“I am extremely encouraged by the news of Marty taking over,” said Alan Shulman, svp and creative director at Interpublic Group’s Universal McCann Futures. “He’s a guy who knows the interactive television business very well and was running that function at NBC. He understands the metrics of both how the broadcast industry is sold, from a national broadcast standpoint, and he understands the advertisers’ perspective and what TiVo has got to do in order to conform for them.”

In March, a 2-year-old lawsuit pitting 27 media companies—including all the major networks—against Sonicblue, the PVR pioneer and owner of TiVo rival ReplayTV, ended with Sonicblue in bankruptcy. ReplayTV’s new owner, Japan’s Denon & Marantz, is likely to follow TiVo’s lead in looking to accommodate networks and advertisers, buyers and analysts suggest.

“It’s not sleeping with the enemy, so stop complaining about it and start learning about it,” said Charlie Tarzian, CEO of Havas’ Euro RSCG Circle, New York. “Our clients are very fascinated by the potential. We all need to get across that it’s not about advertising; it’s about creating integrated marketing solutions. The PVR, VOD, HDTV and broadband innovations are pushing everybody toward the convergence of all communications arts. Whereas advertising right now is a one-way medium in an analog channel, which is what we would call broadcast and cable, that’s going to change, because we’re going to see a two-way dialogue emerge.”

TiVo, based in San Jose, Calif., is selling packages of four, eight and 12 minutes of commercial content on its ad channel, Showcase. New Line Cinema partnered with TiVo last year to create Showcase content for Austin Powers in Goldmember. The eight-minute ad—which Schulman said would have cost some $5 million to place on conventional network TV—featured the full-length trailer, the TV spots, a message from Mike Myers to TiVo subscribers and a music video from co-star Beyoncé Knowles.

Another high-profile Showcase ad, for Porsche’s Cayenne SUV, was created last summer by Carmichael Lynch, Minneapolis, and media buyer PHD in New York. It included a five-minute segment about the challenges of building an SUV under the Porsche brand and an IMAX clip of the car in action.

Still, TiVo is struggling to add new promotions. Only one major advertiser—Universal Pictures—is currently appearing on the Showcase channel (the rest of the ads are promos for TV programs). Universal’s ad, for Bruce Almighty, is six minutes long and features the trailer and a mini documentary about the making of the film. As TiVo aims to nearly double its subscriber base to 1.2 million by the end of the year, Sterling said the company is reaching out to fashion and packaged-goods companies as possible Showcase advertisers.

This is a baby medium: It hasn’t been two years since the first advertiser stuck its toe in the PVR water. (In November 2001, Lexus supported the launch of its ES 300 model with a TiVo sweepstakes, in which viewers used TiVo features to track clues for the chance to win a car.) Many advertisers remain uncertain about how to use the medium’s interactivity effectively, and they still wrestle with TiVo owners’ preference for zapping commercials (more than half do so on a regular basis, according to Boston-based technology consultant Forrester Research).

“Our sweepstakes came out of a brainstorming session where we asked, ‘Why do we have to take the PVR-will-kill-advertising idea at face value?’ ” said Bonnie Chan, communications director at Saatchi & Saatchi in Torrance, Calif., who created the Lexus sweepstakes when she was communications director at Team One. “The technology is here to stay. But we need some new ideas on how to use the medium.”

Although there are only about 1.5 million PVR users in the country, cable systems such as Cox Communications, Time Warner Cable, Comcast, Charter Communications and DirecTV are all experimenting with the technology. Forrester predicts that by 2007, 39 million households will have a PVR—half the number that currently subscribe to a cable or satellite system.

Euro RSCG Circle has used one such cable-system test, Cox’s Free Zone service in San Diego, to promote Volvo’s first SUV, the XC-90. The agency placed the surreal spot that features unicorns, the Loch Ness Monster and Elvis that was running mainly in cinemas on the service, which offers free entertainment and commercial information supported by ads. All content can be viewed on-demand with full VCR-like functionality.

“Surprisingly,” Tarzian said, “we got 125 qualified leads for two dealers in Orange County for that one car.”