DVR usage growing fast, and that’s good and bad for TV

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Digital video recorders are a double-edged sword for the broadcast networks and a single-edged one for cable channels, according to a lengthy report from Sanford C. Bernstein Co. media analyst Michael Nathanson.

With DVR penetration near the 30% mark, Nathanson investigates who is using the technology and what it means for the entertainment industry. Though some of his findings are expected (the wealthiest are the biggest users of the technology), others are surprising (consumers record more broadcast shows than cable shows). Even more provocative is Nathanson’s pitch that broadcasters and cable networks should push for a cut of the revenue cable and satellite operators get from selling cable boxes with DVR capabilities.

‘The emergence of this technology over the past decade has quickly altered the economics of the television industry,’ Nathanson wrote. The bad news is that overall, live television viewership dropped 4% in the 2008-09 season. Nathanson doesn’t attribute that drop entirely to DVRs, but it is probably a factor. More disturbing is that the big four broadcast networks had declines of 13% in live viewership.

The good news, Nathanson said, is that the gradual change in ratings to include DVR viewership is helping broadcast television more than cable. DVR viewership has boosted broadcast ratings by 17%, and the skipping of commercials even went down a little this year compared with last year, according to Nathanson. ‘Our analysis shows that consumers are overwhelmingly ‘DVRing’ broadcast content compared to cable network content,’ he said.

Content companies, Nathanson argued, should try to use the growing popularity of DVRs as leverage to squeeze money out of the cable and satellite companies that sell the service to consumers. ‘DVRs are being sold to watch content,’ Nathanson said in an interview.

That’s true, but somehow we anticipate that distributors will respond that programmers asking them for a cut of the revenue they get from DVRs would be like auto manufacturers asking gas stations for a piece of the revenue they make from selling fuel.

-- Joe Flint