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Digital video recorders, including TiVo, provide a host of options for the television consumer, making them a desirable and competitive product in today's home entertainment market. Digital video recorders allow the viewer to record television programs directly from the television to a box located on top of the TV. This allows the viewer a tremendous amount of flexibility compared to regular TV. The viewer can record programs while away from home, or while they are watching another channel. Recordings can be scheduled remotely via the internet, and recordings can be transferred to laptops, iPods or PSPs. Viewers can essentially have their favourite shows taped whenever they are on, even if the show's time and date of airing has changed. Additional features allow viewers to rewind and fast forward through recordings, skipping through commercials and allow digital video recordings to be played back from multiple rooms in the house (TiVo). Research shows 65% of DVR skip through all commercials (MarketingVox), a testament to the flexibility and convenience enjoyed by consumers of the DVR product. TiVo has been joined by several other DVR providing companies, and the major cable providers now provide DVR as part of their home entertainment sales. For the sake of this paper, I will talk of the expansion of DVR sales in general, not just TiVo. The expansion of DVR sales depends on several factors. We will discuss the impediments to DVR sales, several factors that will continue to drive DVR sales, and conclude that DVR sales will eventually be used by nearly all of television viewers.
TiVo was founded in 1997, and was effectively the first company to market the digital video recorder with the advantage of not being associated with any set top box company (tivopedia.com). TiVo has four revenue sources. Hardware sales do not tend to turn very much profit, as they are kept low in order to encourage buyers to use their service. The provision of service, data reporting, which is sold to advertisers and marketing companies, and advertising, which allows companies to target viewers based on their viewing preferences.
In the U.S. in 2007, about 28 percent of cable subscribers have a DVR, with that number set to hit 50% by 2010 (Tech Report). However, several factors are acting as impediments to DVR's expansion into households, including financial restraints associated with the cost of DVR hardware and services, the ability of the consumer to obtain their favourite television series on DVD, and the development of internet television and websites that allow viewers to watch television shows. The cost schema of a DVR system is one impediment to a large percentage of people. PVRs currently cost about $200, plus a monthly fee on top of cable service of about $12-15. In the age of internet fees, cell phone fees, digital cable bills, and the cost of continually updating new pieces of hardware and gadgets, the costs associated with DVR drive away many customers. The ability of consumers to purchase DVD seasons of literally every television series is another impediment to DVR sales. Many consumers purchase, rent, or borrow from friends their favourite series' on DVD, making the need to record those shows needless. While obviously the ability to record programs will be helpful in watching other programs, such as sports shows and TV programs that the viewer will not be able to purchase on DVD, the presence of DVD television shows will push some consumers away from the DVR. Another factor that works against the DVR market is the presence of internet television and websites that allow viewers to download and watch episodes of TV in a live-streaming format for free. Of course, there are obvious negatives to watching television shows online. The quality of the footage of internet episodes is far inferior to watching digital television on an HD TV. Additionally, there does seem to be a different experience when one is watching television from a couch on a large TV as compared with loading streaming episodes online. As people become more technology savvy, they will begin to wire their internet episodes through the television. Nonetheless, many viewers will find it simply too expensive to pay for internet access and digital cable with DVR, pushing a large subset of people to obtain their television online. Currently, 20 % of online Americans watch TV online each week, more than the 14% who use on-demand services (Marketing Vox). In light of these impediments to buying DVR's, there will always exist a subset of people who either cannot afford to or will choose not to have DVR services.
One factor that is now contributing to the spread of DVRs into homes is their widespread adoption by cable companies, whereas a few years ago cable companies were worried that DVRs would destroy cable sales. DVRs have now been embraced by cable companies, who have realized the increased revenue the sale and service provision to DVRs can bring. The continued pushing of the DVR into the hands of cable TV watching people will be an important factor in the growth of the DVR market. As time goes on, cheaper technology and competition among cable companies will continue to drive down the costs of a DVR service, ultimately translating to an increase in DVR subscribers. In the end, only a small subset of people will choose not to enjoy DVR, most will likely switch to the more convenient and user friendly DVR, much like the colour TV eventually came to dominate all of the television market. Of the top 30 television programs this fall, an amazingly consistent 15-19% of viewers watched the programs by DVR. DVR viewership is especially pronounced on Thursdays, when 8 of the top 11 shows are aired (Taylor). Because of the obvious mesh between DVRs and cable companies, the push for DVRs in homes around the world will continue to grow. The two products complimentarily drive sales for one another. Having a DVR makes cable service more convenient, complete and an overall better product. It is no surprise then that studies show that DVR users watch as much as 29% more television among the 18-49 age demographic (Goetzl). It remains to be seen whether those viewers watch more television because of the DVR, or simply purchase the DVR because they are TV viewers who like it so much that they find the DVR recorder to be a worthwhile investment. It is likely a combination of both factors. The fact does however support the argument that DVRs are complementary to cable TV sales.
In conclusion, factors like the presence and ready availability of internet television and the high cost of a DVR device coupled with the high cost of DVR services are and will continue to be an impediment to a complete DVR permeation of the market. However, as costs are lowered, as they are in time with all technological devices, and as cable companies continue to market DVR services along with the fact that the DVR is a huge success with any person who owns or has tried a DVR, the majority of people are likely to eventually use DVRs. The amazing capabilities of the DVR that allow viewers to fast forward, rewind, pause, use instant replay, record shows remotely via the internet, and then allow viewers to transfer recordings to laptops, iPods or PSPs, essentially giving the viewer complete control over when and how he or she watches TV, only to name a few of the incredible features that TiVo possesses, is the reason that Michael Powell, Chairman of FCC called TiVo a "God's machine" and it is also the reason that TiVo will likely catch on and gain huge popularity.
- Cheung, Jacqui. "Report: DVR adoption to surge past 50 percent by 2010." Ars technical. July 19, 2007. http://arstechnica.com/gadgets/news/2007/07/report-dvr-adoption-to-surge-past-50-percent-by-2010.ars
- Goetzl, David. "DVR users watch more TV: Nielsen" Media Daily News. Aug. 2, 2006. http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=46322
- Taylor, Catherine. "DVR Viewership in Primetime is Very Consistent 16-17 Percent" bnet. Oct. 21, 2009. http://industry.bnet.com/media/10004666/dvr-viewership-in-primetime-is-amazingly-consistent/
- "Anytime is prime time for online shows; DVR Ad-Skipping Up." MarketingVox Daily. Feb. 2008.