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International Herald Tribune

By Brian Stelter

This week, the annual ritual in which the U.S. television networks present their schedules to advertisers opened with a mystery: Who stole six million viewers?

That is the number who were watching prime time television in the United States last May but have disappeared this year, according to Nielsen ratings. Each of the major broadcast networks, save for Fox, has seen its audience decline this season.

Where some of last May's 44 million viewers went is not a mystery, according to the networks. The writers' strike this winter accelerated the flight of viewers to cable channels and other media.

But the more significant shift cannot be blamed on the strike. In the past television season, there has been a sharp increase in time- shifted viewing. Some of the six million are still watching, but on their own terms, thanks to TiVo and other digital video recorders, streaming video on the Internet, and cable video-on-demand offerings. So while overall usage of television is steady, the scheduled broadcasts favored by advertisers are in decline.

The mystery, then, is what the networks should do now. Advertisers are watching closely, as are broadcasters in other countries, like Britain, where digital video recorders have also been highly popular.

"Part of the reason why advertisers buy television is because of its immediacy," said Brad Adgate, research director of Horizon Media, an advertising agency. As more consumers time-shift their viewing, "there becomes less of a difference between ads in magazines and ads on television."

Broadcast television remains the dominant medium for advertising in the United States. About $9 billion in ad spending is expected to be pledged during the so-called upfront market, when advertisers make their commitments to autumn programming. But with prime time audiences in decline, networks have no choice but to adapt.

For starters, the prime-time schedules crafted by television programmers might become less important with each passing year. "The days of the 'lineup' are numbered," said David Wolf, a senior executive in the media and entertainment practice of the consulting firm Accenture.

In other words, with fewer viewers watching over-the-air television, networks cannot assume that a popular program like "Dancing With the Stars" will keep viewers watching all the way to the late news, a pattern that has helped networks introduce new shows in between.

Many of the top-rated broadcast shows have 20 percent to 25 percent ratings gains when DVR viewing is calculated. In urban areas, the gains are even greater. In Los Angeles, fully half the 18- to-49-year-old viewership for some shows, including "The Office" and another NBC sitcom, "30 Rock," happens on a time-shifted basis.

As time-shifted viewing grows, hit franchises - ones that viewers will record or watch online each week - become even more important. "As a result of time-shifting, the biggest shows are getting bigger, and some of the smaller shows are getting negatively impacted," said a senior television executive who spoke on the condition of anonymity so that he could be candid.

At a series of upfront presentations this week, the networks are likely to discuss the dizzying number of new ways to watch television. Last week, for example, NBC started streaming some episodes to the Apple iPhone, and Microsoft added show downloads to its online store.

The availability of television shows online has become widespread surprisingly quickly. Some series are viewed millions of times a week via free, advertising-supported streaming Web sites like Hulu, Veoh and Fancast (and the network sites themselves). DVRs and online streams offer "a fairly large library of content available on an on- demand basis," said Amy Banse of Comcast Interactive Media, a division of the cable giant Comcast.

"The Hills," the most popular show on Viacom's MTV, is a leading example of the shift. Comparing television ratings with online streams is imprecise, but the audience for the series soars when on- demand options are factored in. The show has averaged 3.7 million "live" viewers on Monday nights since March 24, but almost a million more viewers have watched each episode using DVRs. On the Internet, episodes and excerpts have been streamed another 32 million times. Some overlap undoubtedly exists, as some fans watch the episode both on TV and online. But every viewing is another advertising opportunity for MTV.

Streaming is popular among younger viewers, who are able to sample shows they would otherwise miss.

Cable operators offer yet another on-demand option. Comcast and Time Warner Cable, the two largest cable providers in the United States, are increasingly promoting their video-on-demand platforms, which are mostly associated with movies and premium programming. One- third of U.S. households have on-demand capabilities, and Comcast said its platform recorded more than 300 million video views in March, up 50 percent over the previous year.

But of all the time-shifting technologies, digital video recorders are the most popular. One in four American households uses a digital video recorder to time-shift shows and skip commercials, up from about 15 percent last May. The broadcast networks experienced a 60 percent rise in recorded viewing this season. Last year, in recognition of the growth of DVRs, many television networks converted to a new ratings metric for buying and selling ad time that includes shows watched within three days of the broadcast.

For networks, the DVR is a friend and an enemy: "the classic frenemy," said Alan Wurtzel, the head of research for NBC.

While they enable viewers to watch more hours of television, they hurt the rate of commercial recognition, as about half of all commercials are skipped in time-shifting modes.

"Honestly, if I could wish away the DVR, I would," Wurtzel added. "But I can't. It's growing."

Time Warner is trying a half-measure: letting viewers start an episode anytime during the hour of its broadcast. "I'd like to see this get to the point where we have so much content that consumers can actually plan their lives around knowing that they don't have to plan their lives," said Peter Stern, the executive vice president for product management at Time Warner Cable.

Originally published by The New York Times Media Group.

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