TiVo and Nielsen Media Research, the television ratings company, announced a deal Wednesday in which TiVo will provide a breakdown of how its customers are using their digital video recorders.

That means Nielsen will find out whether viewers are watching “American Idol” live or watching it a day later and, more importantly, which commercials they’re skipping and which were watched a second time.

“That’s huge,” said Josh Bernoff, a television industry analyst.

The arrangement will give Nielsen greater insight into the habits of a new generation of television viewers and it could change the landscape of the decades-old television advertising industry.

TV advertising generates more than $60 billion annually, Bernoff said. But the arrival of DVRs – the VCR-like devices that record programming to a hard drive – has skewed the assumption that if a household is watching a particular show, chances are good it also is watching the commercials. DVRs are in an estimated 3 million homes.

“The issue here is that the television industry has no idea how consumers’ interaction with TiVo and DVR technology affects their television viewing behavior,” said Jack Loftus, a vice president with Nielsen Media Research in New York. “Insight into how consumers use TiVos will be the first real solid information the industry has on this kind of usage.”

Take, for example, TiVo’s analysis of Sunday’s Super Bowl game. By far, the biggest spike in TiVo activity – pausing, rewinding or replaying – came during the end of the controversial halftime show.

On average, someone in almost every one of the 20,000 TiVo households that were tracked during the game rewound and replayed that portion of the show at least once.

The only other significant spike in rewinds and replays occurred during a second-quarter Bud Light commercial involving a flatulent horse and a candle.

To companies like Nielsen, the advertising agency that produced the commercial or executives at Anheuser-Busch, having that information could prove invaluable.

The Bud Light commercial could have been viewed as offensive to some. But the data doesn’t lie. It was the second-most-replayed moment of the Super Bowl after the now-infamous incident in which Justin Timberlake ripped off part of Janet Jackson’s bustier, exposing her right breast.

It’s those sort of results that Nielsen will be looking for as it analyzes the raw data of what volunteer TiVo households are doing with their remote controls.

And there’s potential to learn much more about viewers with DVRs, said Kimber Sterling, director of advertising and research sales at San Jose-based TiVo.

Consider that TiVo already has been able to draw conclusions about viewer habits just by analyzing anonymous data of its subscribers for the past couple of years.

TiVo knows, for example, that reality shows and events such as the Super Bowl or Grammy Awards are watched mostly in real time because it’s tough for viewers to stay away from people or news that give away the endings.

“Viewership behavior is just so different once someone brings a DVR into the home,” Sterling said. “Marketers need to understand those differences of what people watch and when they watch.”

But the data, no matter how insightful in the short term, won’t provide a good sampling of what’s happening in living rooms across the country because DVRs still are limited to a small number of households, said Bernoff, the television industry analyst.

Overall, of 3 million DVRs in use in the United States about 1 million use the TiVo service.

“That’s not a strong enough sampling,” Bernoff said. “Nielsen prides itself on statistically accurate sample but this is not representative of the entire population. You can’t just make assumptions. You have to sample people accurately.”

(c) 2004, San Jose Mercury News (San Jose, Calif.).

Visit MercuryNews.com, the World Wide Web site of the Mercury News, at http://www.mercurynews.com.

Distributed by Knight Ridder/Tribune Information Services.

AP-NY-02-05-04 0917EST

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