Why DVRs Are a Must-Have

A new national study suggests that the digital video recorder is becoming a “can’t live without” device for one in five U.S. consumers.

The study — conducted by our company, The Carmel Group, in early 2006 — projects that subscribers to digital video recording services will increase to 20 million by 2008. Satellite and cable operators and such stand-alone service providers as TiVo Inc. will benefit.

The study, DVRs: Time In A Magical Box, will be released on Feb. 20, and combines three key elements: projections of future DVR deployment in the U.S., a survey consisting of 1,800 consumers and an in-depth analysis of how the recorders will affect advertising.

OVER 20 MIILLION SERVED

The study projects that digital recorders will be installed in more than 20 million U.S. homes during the next four years. Moreover, since 75% of households that use the device possess just one recorder, service providers are likely to find growth by installing additional DVRs in these households. Since 1999, total revenues generated by the sale of DVR-related hardware, software and services are estimated to have topped $1.1 billion.

One implication: Cable is still playing catch-up. Satellite providers account for the largest percentage of digital recorders deployed (at more than half) — closely followed by cable — while a small percentage of consumers use stand-alone devices.

Naming names, today’s top DVR service providers are Dish Network, Comcast Corp., DirecTV Inc. and Time Warner Cable. In addition, The Carmel Group believes that as a result of consolidation and market competition, by 2008, the main four DVR manufacturers will be Scientific Atlanta, TiVo, Motorola and EchoStar’s Dish Network.

Key opportunities arising from the growth of DVRs among service providers are many. These opportunities include the stepped-up selling of additional devices to current DVR users; reaching female consumers; and better targeting the special interest markets, such as Hispanic or Asian viewers.

The study also points out that even as the DVR’s capabilities challenge the traditional 30-second advertising model, it is concurrently creating innovation and new advertising techniques (such as product placement and targeted advertising).

The Carmel Group found that DVR users have a thirst for multiple digital services and devices, such as high-speed Internet and HDTV, among others. And who are the early adopters of emerging technologies, such as online gaming, voice services over data lines and satellite radio, making them a prime audience for bundled services? You guessed it: DVR users.

Why is the DVR a “can’t live without device?” The answer lies in its combination of record, pause, fast-forward and replay capabilities, as well as the DVR user’s infatuation with the service.

THE NEXT BIG THING

Not unlike color TVs, cell phones and today’s iPods, this helps to indicate that the DVR is positioned as the next gotta have device or service in the multichannel-video business.

Jimmy Schaeffler is chairman and CSO of The Carmel Group, a nearly three-decades-old west coast-based telecom and entertainment consultancy founded in 1995.