MAGNA Global updates On-Demand forecasts

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MAGNA has updated their On-Demand models to account for the most recently completed quarter and modified their historical data to incorporate new information about the past. MAGNA’s year-end 2012 forecast for DVR subscriber households is 42.7 million (36% of TV households), up from their estimate of 27.2 million (24% of TV households) as of the end of the second quarter of 2008 By 2012, they expect that true Video-on-Demand (distinct from the simulated VOD offered by DBS providers DirecTV and EchoStar) will reach 63.6 million households (approximately 54% of television households).  This compares with 39.0 million VOD households (35% of total TV households) at the end of the second quarter of 2008.


As of the end of June 2008, they estimate that 66.8 million households had broadband access out of 117.1 million total households.  MAGNA estimates that internet access was enjoyed by approximately 73.5 million households by the end of the second quarter of 2008.  “We expect that total broadband access will rise to cover 80.2 million households by the end of 2012.  This reflects more modest expectations of broadband growth in the near term due to generally reduced expectations for annual net subscriber additions.”

While younger audiences with DVRs certainly time-shift popular programs in meaningful numbers, the vast majority of these individuals still watch the vast majority of their television content through conventional means.  Among the ~20% of households with DVRs in late 2007, 30% accounted for 71% of total DVR usage.  Put another way, there is a subset of DVR users who are “power” users, but the vast majority of people use DVRs for a limited amount of programming.  So although the frequency with which heavy DVR users can be reached is challenged, DVR proliferation does little to impact prime time network TV’s status as the single most wide-reaching environment for advertisers.

DVR households consume only a third of prime time content in a time-shifted manner.  MAGNA forecasts that 36% of the population will have DVR services by 2012, and presuming all ads were skipped (and that there was no value to a skipped ad) this would equate to a reduction of 11% of prime time ratings points 10 years after the advent of the DVR.  This is equivalent to about 2 years worth of erosion due to viewing patterns shifting from broadcast to cable.  But even the notion of erosion is a false one, as both cable and DVRs contribute to higher total viewership of television AND disregards that with annual population growth of 1% per year, total television impressions rise by about 20% over a 10 year period.

So although the impact of DVRs and ad avoidance is real, the technology – and future iterations of it – primarily impacts the industry by focusing attention on the appropriateness of television as a marketing vehicle. 
New national-scale brands seeking awareness will continue to use and grow television budgets – and network prime in particular – because it remains the single most efficient means for reaching large audiences.  But older, more established brands rightly will continue to migrate budgets away from television.  Instead, and regardless of any future court rulings, these advertisers will continue to look towards forms of marketing which better target narrowly defined groups, much as they have since well before DVRs arrived.

DBS providers DirecTV and EchoStar remain the leading suppliers of DVRs

MAGNA estimate that DirecTV added 350,000 DVR subscribers during the second quarter, as approximately 55% of new subscribers ordered advanced set-top boxes (HD and/or DVR).  By their estimates, the company now has 5.9 million households with DVRs (34% of total subscribers).

Despite a smaller overall subscriber base, similar dynamics are driving EchoStar’s DVR subscriber levels, which they estimate now total 6.2 million households (45% of total subs).

Comcast remains the leading provider of DVRs and VOD among cable operators.  MAGNA estimates that more than 4.1 million Comcast subscribers now have DVR services, equal to nearly 17% of the company’s customer base.  Concurrently, approximately 16 million of its 25 million subscribers, or 67% of total, have access to the company’s VOD service.

Time Warner Cable added 160,000 DVR subscribers, and now counts 3.8 million in total, accounting for 28% of its basic cable homes.

TiVo’s stand-alone DVR subscriber total declined below 1.7 million for the first time since 2006, as the company continues to see erosion due to substitution of MSO-based DVRs.