Could the rise of the DVR have been prevented?
Television viewership via DVR has continued to rise — with many primetime shows seeing as much viewership via DVR as live. This is only going to continue, as the ability to watch a show whenever I want is much more convenient than having to be in front of my television at a given time.
This is not good news for networks and advertisers, as a DVR allows users to skip ads — and who wouldn’t want to do that? If I were an advertiser, I wouldn’t be comforted by a network executive telling me that the viewers who aren’t skipping ads are “too busy on their phones to skip through the ads.” Clearly the rise of DVRs is not good news for networks and advertisers — but could it have been prevented?
The rise of DVR at the expense of VOD
This was the Comcast On Demand screen from 2009, a decade after the first TiVo:
This screen makes it impossible to find anything!
There are only five genres, categories that overlap with one another…and where’s search? The show I want to watch is likely 3–4 layers deep — and I’m not necessarily sure which menu option to start with.
Compare this to the DVR experience. With DVR, I can scroll through the channel guide interface I already know and just press a single button to record the whole series.
Now — which is easier? Digging through a bunch of menus to find my show — and even if it’s available, likely only getting the last few episodes of it? Or using an interface I already know and pressing a single button to record all of my show’s episodes?
Had the interface and value proposition of VOD been better, would DVRs have become mainstream?
VOD actually presents a much better value proposition for the consumer than DVR — at least in theory. With DVR I have to remember to record a show, which also makes it much harder to find and catch up on a new show; and I’m likely paying my cable provider $10/month for this feature. Compare this to VOD — where theoretically every episode of a show is available for free. Even if there are ads, this is great! I don’t have to remember to record any shows — I can just search for the one I want!
But this was never the case with VOD. The interface was impossible to use, and the shows I wanted — if I could even find them — were never available. So I, along with many consumers, paid for DVR. I didn’t care as much about the ability to skip ads. I just wanted a guarantee that my shows were available and an interface that allowed me to find those shows — and I already knew how to use the channel guide and press record.
Similar to that of DVR, usage of Netflix has also risen even though it is basically an on demand product, just like cable VOD! With Netflix, not all shows are available, but if one is, generally every episode is available — so I know I won’t have to scrounge around for historical episodes. And compare the VOD interface above to Netflix’s from 2009:
It may not be perfect. But there is search at the top along with many more genres — this is much better than Comcast’s VOD menu!
Free often loses to simple
Yes Netflix is less expensive than cable. But for many cable customers, Netflix was an additional cost — it didn’t replace cable (for most consumers) back in 2009. And DVR was an extra cost as well.
Yet both of these rose in the face of free VOD. They were both replacement services for cable VOD (Netflix television viewership is higher than that of movies) and were more expensive, yet they were much simpler to use — so they grew in usage.
And TV is not the only case where a more expensive, but simpler, product trumped a less expensive, but more complicated, one.
For example, Uber — while often cheaper than cabs now — grew at a time when cabs were less expensive than Uber. But consumers loved the convenience and reliability of being able to push a button and know a car was available — versus having to wait for a cab and not knowing if one would arrive. So they were willing to pay more to use Uber.
Similarly the iPod came out three years after other MP3 players — including ones by powerhouse consumer electronic makers such as Sony. But instead, the PC-maker Apple won with a premium product that had a more intuitive interface and an easier way of getting songs onto the device.
And so the incumbent can fall
Often companies focus on getting their product as inexpensive as possible. They think that, if their product is cheaper — especially if they are already the incumbent — then there is no way a user would switch from them to a more expensive option.
But as we’ve seen with VOD and DVR — this is not the case. Users chose the more expensive DVR option because it was easier to use, with a simpler interface and a better value proposition. And there is little chance of VOD slowing DVR and Netflix growth now, as it is difficult to change user behavior — which is not good news for advertisers and networks.
But this — just like Uber and the iPod — reinforces the importance of a simple, easy-to-use interface combined with a high value proposition service. And the combination of these two often outweighs cost in the mind of the consumer. Incumbents who ignore this fact often allow new entrants — even those with much worse cost structures — to overtake them.
