It's the new thing in TV taping and Sky has hit 'fast forward'

Tim Webb looks at the fight for supremacy in personal video recorders and asks if TV advertising is doomed

Back in the dark ages, when the humble video recorder was the latest must-have in television technology, two platforms, Beta- max and VHS, slugged it out for pole position. Betamax lost (largely because the big Hollywood studios backed VHS) and was consigned to the can.

Fast forward 20 years and broadcasters are drawing the lines for the next battle: to corner the market in personal video recorders (PVR)s.

It is still a niche market. There are currently only around 200,000 PVRs in the UK. Most of these are Sky's model, Sky Plus, the one PVR that is backed by a broadcaster. By 2007, business information group Datamonitor estimates that up to a quarter of all homes in the UK will have a PVR.

This week Sky, just over 15 years to the day that it started life as a satellite broadcaster, will update the market on the latest sales figures for Sky Plus when it announces its first-half results. Its target is 315,000 Sky Plus subscribers by the end of June. That still only represents a fraction of the company's total subscriber base, which broke through the seven million barrier last year. But if PVRs become the next big thing, Sky wants to make sure it is leading the way.

PVR will revolutionise how we watch television. If viewers want to pause a programme, with the press of a button, a PVR will start recording it. When they want to start watching again, the PVR will start playing where they left off while continuing to record the show.

Viewers can rewind live so they can replay a single scene over and over and then rejoin where they left off, or continue watching the live programme. They can also record and watch two channels at once, while digital recording features make asking the kids to set the video a thing of the past. Unlike VCRs, PVRs store the material on a hard drive similar to a PC's, so video cassettes aren't needed either.

In October Sky launched its biggest marketing drive since the launch of Sky Digital five years ago for the service, and will spend £20m pushing Sky Plus with help from the likes of Alice Cooper and Ronnie Corbett. More unlikely pairings will be unveiled at Easter for the next round of promotions.

The company is typically bullish about the prospects for Sky Plus, which was actually launched in August 2001. Jon Florsheim, BSkyB's managing director of sales, marketing and interactive, says: "We thought it would be great to add something new to talk about and appeal to new customers who may have resisted Sky Digital over the last five years."

The Sky Plus machine costs around £200. For Sky viewers signed up to its premium package, the £10 monthly subscription is waived and the installation fee is cut to only £50. There are other PVRs on the market, made by the likes of Panasonic, but Sky remains by far the largest main player. Jean-Paul Edwards, head of media futures at media buying agency Manning Gottlieb OMD, says: "Sky Plus is fully integrated with Sky Digital, and also has the company's marketing and customer services behind it."

It cannot be a coincidence that the promotion comes just when sales of Freeview are taking off. Sky insists that the free-to-air digital platform, which tends to attract older audiences who do not want to subscribe to a large digital pack- age, is not a threat. But it works in Sky's favour that there is no PVR tailored specifically for Freeview, at least not yet, because the company can look to Sky Plus to help keep its churn rate - viewers who do not renew their subscription - low.

Of wider significance is the effect that PVRs will have on the nation's viewing habits - and on advertising. PVRs will allow viewers to fast forward through commercial breaks of recorded programmes, and some have gone so far as to proclaim that PVRs herald the death of commercial television. Studies carried out by the Interactive Television Research Institute estimate that "ad avoidance" increases by an average of 52 per cent when the same content is viewed using a PVR, compared to households without a PVR.

Nigel Foote, group strategy director of media buying agency Starcom UK Group, is having none of it. "PVRs do not mark the end of commercial television," he says. "There were similar arguments used when VCRs were introduced, but viewers still watch adverts. Similarly in multi-channel homes, they do not always switch over during commercial breaks. PVR is just the next step in television's evolution."

But there is no doubt that advertisers will have to change their approach. They will have to become even more creative to get their message across. The new buzzwords among media-buying agencies are "infommercial" and "advotainment". Mr Edwards at Manning Gottlieb OMD says: "We will move away from the traditional 30-second commercial break and there will be more bumper sponsorship of programmes

"In the future, advertising will have to be more efficient and better targeted. To stop viewers skipping ads, advertisers will have to make them more entertaining and relevant. Like schedulers, advertisers will have to fight harder for market share."

Product placement is currently restricted under broadcasting regulations that require programme makers to justify the use of a branded product editorially. But if the rules are relaxed, more advertisers will use it to make up for any fall in the viewing of commercial breaks.

Of course, there are other challenges on the horizon for new Sky chief executive James Murdoch, quite apart from his appointment upsetting some shareholders and last week's announcement that finance director Martin Stewart was leaving. For a start, a former deputy managing director of Sky Television, David Chance, announced the launch in March of Top-Up TV, which will offer an extra subscription-fee package for Freeview customers. The service, which will cost £7.99 per month, will offer UK Gold, E4, Cartoon Network, Discovery, UK Style, Bloomberg, Boomerang, Discovery Home and Leisure and Turner Classic Movies. Mr Chance said he hoped to add Sky One, Sky's flagship entertainment channel, to the platform.

Then there is Microsoft, which has launched Windows Media Center, allowing customers to control their television, music and computer from a single remote control linked to their PC, as well as having a PVR function.

Mr Florsheim at BSkyB says the technology is difficult to use and insists there is room for Sky Plus and Windows Media Center in the market. Mr Edwards adds: "There is nothing to stop Sky linking up with PCs in the future." Let battle for the nation's eyeballs commence.