Fall TV Preview: As audiences embrace on-demand and streaming, they're even OK now with commercials. Could that be the death knell for the DVR?

This summer, the last-known videocassette recorder manufacturer shut down production – effectively ending that once-dominant medium after several decades. Could the DVR soon face a similar fate?

More than 17 years after digital video recorder technology was first launched at the 1999 Consumer Electronics Show, growth has stalled. About 50 percent of U.S. television households now use a DVR, but that number is flat, and has been for several years. While older viewers continue to adopt the DVR, younger viewers – including Millennials – seem disinterested.

“I think we can fairly say that the DVR’s reign is about to end,” Alan Wurtzel, NBC’s research and media development president, recently told reporters at the Television Critics Association press tour. “Anybody who wants a DVR has one. If you don’t have one, it’s because you don’t want it.”

According to CBS research, DVR usage by adults 18-49 – still the money demo targeted by advertisers – actually declined by six percent last season.

“The younger people who were the first people to adapt to time-shifted viewing were now moving their time-shifted viewing to video-on-demand and [over-the-top streaming services like Netflix],” said CBS chief research officer David Poltrack. “They became less dependent on their DVR. While the penetration has plateaued, if you look, the increase in actual DVR playback itself was smaller and smaller every year.”

The DVR is flat, but not declining overall, because as young people drop out, the oldsters are picking up the slack. “There’s continuing to be older people who are just beginning to catch on to time-shifted viewing and using it more,” Poltrack said. “So there still is growth there – but it’s more of a 60-plus audience than even a 50-plus audience. The younger audience ultimately moved on.”

Forrester Research analyst Jim Nail called the DVR a “Generation X device.” That’s the generation that has the highest penetration, he noted, and became adults right as the technology went mainstream. “But it’s never been a great solution,” Nail said. “As easy as it is to program, much easier than the VCR was, it’s still too hard. It still requires some degree of effort. The number of hours that people actually use it is pretty modest. We’re definitely seeing as people get more comfortable with streaming, that is the preferred solution.”

READ MORE: Generation Clash: Networks Strike Back at Millennials

The DVR was a magical invention for a generation of TV viewers who struggled to videotape live TV on their VCR. (Remember the blinking “12:00” clock on most video machines?) “Five years ago, no one could live without their DVR,” Poltrack said. “You asked them could you live without your DVR and they said absolutely not. Five years ago, everyone was totally committed to time shifting and the DVR, being able to fast forward commercials. In the last couple of years that has changed significantly. People now are very comfortable living without DVRs.”

One cable exec blamed, ironically, the explosion of high-quality programming over the past few years: “The Achilles’ heel of the DVR is that it’s only as good as what you tell it to record. And a lot of times, people don’t know what channel a show is on or what time it’s on, or may not even know that they want to record a show until they hear about it through word of mouth.”

The younger end of the 18-49 demo (such as 18- to 24-year-olds) are used to accessing programming on demand, which means “the DVR is probably a foreign concept to a young millennial,” the exec added.

On the other end of the age range, older viewers are just now adopting the DVR and using it more. “There is still growth there, but it’s more of a 60-plus audience,” Poltrack said. “The younger audience ultimately moved on.”

What changed? The ability to catch up on shows via VOD or streaming services. According to CBS research, consumers are questioning whether it’s worth paying $10 to $15 a month on a DVR when there are other, free time-shifted options. “We put to them the simple question: ‘You’re now using VOD, you’re now using [streaming], you have ways to time shift your television viewing other than a DVR. Would you consider lowering your level of your subscription and no longer pay for the DVR?’ Half of the people in that scenario said yes, ‘I can live without my DVR.'”

As audiences watch more TV on mobile devices, they can’t access their DVR. At the same time, network apps are making it much more convenient to quickly access a TV episode.

READ MORE: Netflix Boss Says Don’t Believe the Ratings You See for His Shows

Meanwhile, what was once a chief selling point for DVRs has become less important for consumers: Fast-forwarding through commercials. That’s right: Audiences are once again embracing ads (which can’t be fast-forwarded on VOD or streaming platforms).

“That’s the other thing that has changed in the last few years and really quite suddenly,” Poltrack said. “People really don’t object to commercials. They complain about the quality of commercials sometimes, and they’d rather have fewer commercials. But when we ask people if they could save a dollar by taking commercials, they would take the commercials. If it costs them a dollar more to skip the commercials, they wouldn’t skip the commercials. What they tell us is they find commercials are often informative, entertaining, part of the culture and to not have any exposure to commercials is not something they seek.”

Even consumers with DVRs are fast-forwarding less through commercials, because they’re preoccupied with a second device (such as a mobile phone or tablet) while watching.

“This has been quantified by Nielsen, that fast forwarding by people watching on a DVR has declined,” Poltrack said. “Not a great deal, but significantly. We’ve also done research that shows that people who are on Twitter or IMing on a second device while watching television are more able to recall the advertising on those shows than people who are not on those devices.”

That’s why, as fall TV launches, network execs aren’t exactly shedding a tear for the DVR. If you watch a program on VOD instead of DVR, they benefit more. And if you watch it via their own online platform, they receive an even higher ad rate. “This is all moving in a positive direction for us,” Poltrack said.

That doesn’t necessarily mean the DVR is disappearing just yet. Streaming, after all, has its own limitations, “because the availability of content is still pretty unpredictable,” Nail said. “If you really want to watch something and you can’t be there when it’s live on air, then you still really need a DVR.”

Also, DVR users still swear by the technology’s curation abilities. The DVR still makes things easy by listing shows from multiple networks all in one place. (Compare that to the process of having to visit multiple network apps to watch different shows.) “That’s what is slowing down VOD and also what makes over-the-top challenging,” Poltrack said. “If it wasn’t for that, if the interface was easier, I have a feeling that you’d have a further erosion of DVRs.”

The cable exec isn’t writing off the DVR just yet. He said he believed younger audiences might still catch on to the technology – once they’re exposed to it, and realize they can use it in concert with VOD. (Sample a show on demand, then record a season pass on the DVR, for example.)

The DVR may also regain relevancy as the technology moves away from hard drives and to the cloud – allowing users to finally access their recordings on their mobile devices. “Once you move to the cloud, that I think whatever we’re seeing with DVRs is just a moment in time,” he said. “I think DVRs have another act to them.”

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