Welcome to Rye Country Day's Economic Blog. Here you will find perspectives by students taking Economics at Rye Country Day School. It is meant to be a forum where students can openly express their ideas and take positions on relevant economic issues. I urge everyone to participate in presenting their own ideas in an open manner so that we can all learn from each other. Regardless of whether you are currently taking Economics, everyone is invited and encouraged to comment on articles and get involved. Feel free to e-mail me, Alex Osborne at alexander_osborne@rcds.rye.ny.us , with comments or suggestions.

Thursday, January 18, 2007

Featured Entry - Tivo, the Best Thing to Happen to TV?


On the surface Tivo appears to be on of the best ideas for television in a long time. The customer can record his favorite show and then watch it at a more convenient time and just fast-forward through those borting and time-consuming commercials. Now, as we look deeper into the impact of Tivo on the industry there is a major loser in this new technology. The companies that advertise on television programs can deal with it, they can find other ways to spend their money. The group that will feel the biggest impact of the Tivo phenomenon is the television networks. With Tivo's increasing popularity, networks can no longer demand the same money from companies to advertise on their programs with the knowledge that there is a chance their commercial will not be seen. I think it may be too early to think about price controls. Although this could be a bigger problem in the future, TV networks have two things still working in their favor that will keep them afloat for the time being. At this point, Tivo is not yet in every household in America, most likely due to its price or the reluctance of people to deal with the technology. Secondly, networks have the luxury of charging a lot for advertizing spots on live programs like sports, where Tivo has less benefit. The whole thing has sparked great competition between networks for the big live games because they have become the most sought after shows as people are more likely to be glued to the TV set for three hours. Clearly one side would say no to the question raised by the title, it is like anything where there are two sides to the debate but in this case only one side matters, that of the customer, for they dictate and it's the responsibility of the networks to adjust.

- T. A. Canning

6 comments:

Matt Reese said...

I don't think there's too much to worry about here. Tivo only works because networks air commercials in the first place. There are 3 entities at work here: Tivo, the networks, and the businesses that buy network time. The thing is, they all need to work in symbiosis. Without commercials Tivo isn't as useful anymore and without the networks it has no point. Plus, companies probably prefer to advertise on television (they must, if they still do) so keeping networks alive is pretty important. I think this is a case where the invisible hand makes sure everything runs smoothly.

Joshua Miller-Frankel said...

I agree with Matt for a few reasons. One reason is that companies still pay a ridiculous amount of money for commercials i.e. super bowl ads. Also, I dont think everyone has tivo so there arent that many people skipping commercials. Also, if its a live event i personally like to watch it when it happens rather then tivo-ing it and waiting just to fast foward the commercials. I dont think that tivo is really affecting the advertising business in tv that much.

Will Hilbert said...

First of all many people that have Tivo do not automatically skip the commercials. So advertising is not totally overlooked. Although it does not look like recording tv shows is on the decline. With the release of io with DVDR, which is the same thing as tivo but included with io, advertising does not look like it is going to do too much better. But still the majority of people don't have a recording system for shows, but as prices go down there will be more of an incentive and more of a reasonable price to buy it.

Andrew said...

I think TiVo is just another step in the process of ending broadcast television. TiVo has led to similar products (DirecTV has a DVR now) and services that hold similar principles, such as iO Digital Cable. In fact, I don’t think that networks are too worried about their advertisements, because networks are already putting their own shows on their websites once they have each been broadcast, likely thanks to the surge in popularity in websites such as YouTube. With computers and the internet, television may soon become a thing of the past, as all shows may become viewable online in a format where people can watch it whenever they want. And I think also that the idea of losing advertisers will be avoided, as advertisements can (and are) simply be placed on the webpages. In the end, I think that the only economic losers will be TiVo, first because of the increased competition in a very limited field, and second because once the technology offered is unnecessary and obsolete, the company will have nothing else to fall back on.

Marianna said...

About what Josh said...I don't know how much a regular commercial costs but I do know that 30seconds of SuperBowl time is $2.5million. That is a lot of money for 30seconds and there is an incredibly large number of people who are willing to pay that much for the time. During and event like the SuperBowl I would guess that most people aren't Tivo-ing it because most of the experience is watching it live (and if it is being Tivo-ed it's because they want to watch it again). So I know not every network television channel has the opportunity to air the SuperBowl but most have some show that brings in enough viewers that the price for a commercial spot can still be pretty high. I don't have Tivo and I'm not 100% sure how it works (and I'm not sure there are that many crazy people out there who feel how I feel about it) but 24 (on FOX) is a show that I absolutely cannot miss and I feel like even if I did have Tivo I would be watching it at 9:00 on Monday like the rest of the country and experiencing it at the same time (a little overboard, I know). That example makes sense assuming that when the show/event is airing for the first time you can't fast forward through the commercials. Other networks have shows that are equally as popular such as Grey's Anatomy on ABC. For now I don't see the companies having serious issues with this but if Tivo is cheaper in the future and becomes increasingly popular they may have to adjust a bit like Alex said.

Alex said...

Check out this article, it eases my worries and is on the topic of TiVo and DVR systems like it.

http://www.nytimes.com/2007/02/16/business/16commercials.html?ex=1329282000&en=ac19fdf65f3c4ef3&ei=5088&partner=rssnyt&emc=rss