Innovative Media Technologies: Digital Video Recorders Changing the Ad-TV Business Model

Digital Video Recorders (DVRs) as innovative media technology are expected to have a major impact on the TV industry. This paper analyzes the impact of DVRs on the business model of Ad-TV program providers. It introduces the approach of program choice models which are well established in the media economics literature and enhances the traditional program choice models by taking into account different levels of DVR diffusion implying different levels of ad-skipping. The paper shows that DVR diffusion reduces viewer satisfaction and lowers the numbers of programs offered in Ad-TV. It raises the issue that with significant DVR diffusion only one program provider broadcasting a so-called 'common denominator' program at relatively low costs can stay in the market. From the scenario analysis, the paper derives recommendations for the design of business model of Ad-TV program providers and concludes with a brief summary and an outlook to further research.