DVR Penetration to Grow to 35% in Five Years

A new research brief from Jupiter Research says that DVR penetration in the U.S. will grow from 19% in 2007 to 35% in 2012. That means penetration will almost double in five years. In the last year or so, various research companies have been putting out press releases saying that the U.S. DVR penetration rate is about 21%. Nielsen said penetration is at 20.5%, Leichtman Research said it's at 20%, and IBM said it was at 24%. So I think even Jupiter's assessment of 19% is definitely in the ballpark.jupiterlogo.JPG In fact, I came up with the 21% figure by calculating the average of all four numbers which is 20.88%. Since four different sources came up with very similar numbers, I'd say it's as accurate as you can get. Trying to figure out forecasts, however, can be tricky. JupiterResearch says that the growth to 35% in five years means that there will be about 20 million new DVR households. That's a huge opportunity for DVR providers. Jupiter's forecast breaks down DVRs between Telco DVRs, Cable DVRs, satellite DVRs and stand-alone DVRs (like Tivo). Interestingly, the largest project growth sector is the Telco DVR market. That's because Telcos are only starting to rollout IPTV services and DVRs and have a very small market. In five years, Jupiter is predicting an over 460% growth rate (0.5 million to 2.8 million). Second largest growth is in the cable DVR sector with their numbers doubling from 10.3 million in 2007 to 20.7 million in 2012. In every year, Jupiter is forecasting that cable DVR penetration will be the leading segment. The smallest growth is for the stand-alone DVR market--yes, that means Tivo primarily. Jupiter is predicting relatively stagnant growth for that market from 2.1 million in 2007 to 2.8 million in 2012. It seems Jupiter is saying that stand-alone DVRs, like Tivo, will play an increasingly smaller role in the market. Personally, I think Tivo will remain a strong contender in the DVR market since its features and partner offerings are much stronger than anything the cable or satellite providers have with their DVRs. But many people have been saying that Tivo, as a DVR set-top company, has a limited future. So I see one of two things happening: 1) Tivo begins to show real growth by lowering its prices, dropping subscription fees dramatically and touting its unique features and advantages over cable and satellite DVRs. It can also drop its hardware business and sell services like DVR software, DVR advertising and analytical services. Or 2) Cable and satellite providers start adding new features similar to Tivo so that there's no real difference except between them. Cable/satellite companies end up getting a bigger market and Tivo ends up getting acquired by another company. Operators have a huge advantage over Tivo because they already provide TV services and can upsell customers to a DVR. Switching to HD? Your provider will likely try to get you to add a DVR to your service when you call to make the switch. Moving? When you set up service, your cable or satellite company can offer you a good deal on a DVR. Consumers that have never owned a Tivo won't know what kinds of cool features are available to them and will have no problem owning cable/satellite DVRs. Tivo, on the other hand, must market itself heavily to show that there's value in dropping the cable/satellite DVR for their own box. Perhaps the best thing Tivo can do is to give away the DVR box and offer low-cost subscriptions in exchange for advertising revenues and subscriptions to premium services like music, place-shifting, Internet access or podcasts. Providing software, rather than hardware, can cut costs and be another wise move for Tivo. This report should be a wake-up call for Tivo. If things don't change much, stand-alone DVRs like Tivo may end up with a very small piece of the DVR pie in the next five years. [tags] research, Jupiter Research, DVR, cable, satellite, TV, DVR penetration, digital video recorders [/tags]
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