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Summary:

In the world of DVRs, the TiVo is easily the most important and capable device around. With a slew of options that allow you to find shows with ease and a user interface that is second to none, the product is a world-class entrant into the […]

In the world of DVRs, the TiVo is easily the most important and capable device around. With a slew of options that allow you to find shows with ease and a user interface that is second to none, the product is a world-class entrant into the market. Yet while most people enjoy the TiVo — it has had a steady 70-plus satisfaction rate for years — it’s still a fringe device that has little chance of survival unless the company does something to combat cable companies and increase subscriber count. Unfortunately, that “something” may be a dramatically different price point — free.

According to James McQuivey of Forrester Research, who joined me on my CNET Digital Home podcast last week, “TiVo has been fighting for years and has only sold about 1.7 million units of its boxes compared to your cable and satellite companies, who looked at TiVo and said, ‘1.7 million units? We can do that.'”

And it’s that issue: The cable companies can (and have) capitalized on TiVo’s business model by creating sub-par DVRs that mimic the device’s functionality at no additional charge, effectively ensuring that TiVo still incurs millions of dollars worth of losses each year. This despite the fact that the cable company DVRs simply don’t hold a candle to the TiVo; they are incapable of offering the kind of solutions we have come to expect from more advanced devices.


That said, they’re basically free. And as McQuivey explains, that’s what has made cable company DVRs so much more popular. “Compare that 1.7 million units sold-mark to the 25 million units shipped by cable and satellite companies and that must be very frustrating because honestly, the TiVo is one of the best consumer experiences you can have, but it says something about how to get a consumer electronics device into people’s homes when the best designed products can’t take off. And it says something when the comparative knock-off can take off like gangbusters.”

What does that means for the future of TiVo? At this point, things don’t look good. If cable companies can offer an experience that, although less enjoyable, cost about $5 per month, how can TiVo compete? TiVo has little to no chance of ever becoming a profitable company unless it finds a new way to market and differentiate its product. And the only way to do that is to offer it for free.

Given that its current stable of offerings range in price from $100 to $600 — and it still can’t turn a profit — “free” may not be an option. And judging by adoption rates and the fact that the general public is more than willing to take a sub-standard device over a great one because of its pricepoint, TiVo may not be long for this world. If you ask me, that’s a shame.

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  1. The writing was on the wall long ago for TiVo. The technology was merely a stop gap for the television industry’s move towards on-demand content. You saw the increase of VOD which was the first sign, along with content sharing sites, and others that was available to a larger population for a fraction of the cost.

    At the end of the day, it is about viewing television, and with WebTV and Fios TV providing the same advantages, it is only a matter of time before TiVo dies (barring a significant partnership or technological breakthrough)

    The day will come when everything is on-demand at a nominal fee. I imagine that only gives TiVo a few years to get its act together.

  2. The Yugo put Mercedes out of business, right? I mean, it wasn’t anywhere near as good, but it was cheap and it did the basics. That’s the same logic.

    The DVR market is growing rapidly. TiVo may never be the market share leader, but there is room to be a premium product at the high end of the market. There are many people, myself included, willing to pay more for a better experience. And that’s been TiVo’s new course – they’ve dropped subsidies on their boxes and are focusing on the TiVo HD with a $300 MSRP. When they sell it direct it has no subsidy, and only a small subsidy at retail. Sure, this has slowed subscriber growth in TiVo-owned subs, but it has decreased SAC. Each new sub is more profitable for TiVo, and they’ve slashed losses, and are projecting a positive EBITDA for the first fiscal quarter.

    And even at the low end TiVo still has a play – their OCAP software for Comcast & Cox. It has just started rolling out, and it has the potential to put TiVo into a lot of homes. Revenue isn’t as high as on the standalone subs, but revenue is revenue. And the international markets are another are with a lot of potential. TiVo now has DVB-T hardware (also capable of DVB-S), and they’ve internationalized their OS to support English, French, Germany, Spanish, and Italian as interface languages, with the ability to add others.

    Wei-Der – Unless OnDemand pricing comes WAY down, it won’t replace linear content. It would cost me several times as much as what I pay each month for cable and TiVo to watch all of my content OnDemand. And OnDemand doesn’t offer me the same capabilities as TiVo – such as stopping a program when I get tired and watching the rest the next day, or even days later. As for FiOS – FiOS is just another content provider like a cable system. In fact, they support CableCARD and you can use TiVo with FiOS – many people do.

    Online video often doesn’t often the same quality as cable content – and rarely does it offer true HD content. (And none of the download services – Apple TV, Xbox Live, VUDU, etc – offer quality HD either, they all over-compress it to reduce download sizes.) I want to see quality content on my 61″ 1080p screen, on my schedule. TiVo is the highest quality solution available today, and for the foreseeable future, IMHO.

  3. preetam mukherjee Tuesday, March 11, 2008

    TiVO has always been about the experience…the service.
    It needs to get out of that stupid box, and make that same experience+service available on other platforms as well.

    I say we need a TiVO for Web TV, IPTV, Mobile TV, we need more Slingbox-ish services bundled into TiVO, and in general…TiVO needs to acknowledge its forte(a very cool service) and capitalize on it horizontally + vertically.

  4. megazone, thanks for responding, i enjoyed reading your feedback and thoughts

    i’d like to first point out that Fios is already offering quite a bit of content on demand, already included in its monthly subscription fee, so we see that trend happening. also, Mr. Bewkes from TWC has mentioned that he’d like to see everything go VOD, so i dont think it’s too far fetched that we’ll see that

    in terms of pricing, i agree that some people may want premium service but your car analogy is off base in my opinion. if you look at cable/telecom, they are in a battle for market share, and a large part of it is based upon pricing.

    i’m not going to argue that there are more capabilities from TiVo, but there isn’t enough of a difference to sustain/become a leader.

    DVR is simply too easily distributed and accessible, and for a casual TV viewer it’s more than enough. Sure there will be that niche group of TV watchers that need TiVo, but I don’t know that it’s enough in the long run.

  5. TiVo has no future selling hardware, they’ve never made money at it and they never will.

    Their hardware sales are now simply a holding action. They added all of 19,000 net new subscribers in the past year from their own hardware sales.

    http://biz.yahoo.com/prnews/080305/aqw067a.html?.v=1

    I’m convinced that continuing the hardware sales is designed to give them bargaining leverage for both the patent suit and any potential software IP licensing deals, as well as perhaps a sale of the company for its IP.

  6. James Gardiner Tuesday, March 11, 2008

    This is an easy one.
    They should be licensing the technology to Sony, Panasonic etc. All the Big screen manufactures. For DIRT CHEAP. (a small % of a REALLY big number is a big number) Let them make the hardware.
    Make Tivio OS the NEW standard to replace the typical Tuner in all TV’s being sold.
    Make the Tivio OS very open. RSS-TV etc. I imagine they do a lot of this. but I have not seen a Tivio (not common here in Aust.)

    James

  7. Satisfaction is watching television on my own terms using my TiVo.
    TiVo has a chance if it’s current and faithful customers do not loose face and choose to take up arms against the discrimination and extortion games the Cable Companies are playing with consumer electronics users, manufacturers, and developers.

    Just today I received an extortion letter from Cox stating that I am going to loose some of the channels I watch as they switch to Switched Digital Video services, something they are already using to deny consumers access to video content on their own terms using a TiVo.

  8. blog.px » Satisfaction is watching television on my own terms using my TiVo. Tuesday, March 11, 2008

    [...] using my TiVo. (No Ratings Yet)  Loading … NewTeeVee asked a question today.  “Does TiVo have A Chance?” I responded with a comment on their blog, and here is more pertinent [...]

  9. I’ve been a loyal TiVo fan for over 8 years now, but I continue to be concerned about their future. Being the best has never been a guarantee of success (see Beta vs. VHS as the prime example). What’s lost on most people here is that the general population is satisfied with technology that is ‘good enough’ with low barriers of entry and lots of convience.

    I recently switched to Verizon Fios TV & Internet. The entire process of acquiring CableCard(s) and getting the unit setup is a chore even for the technically literate, but what’s worse is the fact that you can’t take full advantage of the On-Demand and built-in features of Fios TV. Those two issues alone are enough to kill a large % of market share. Sure… we all know the cable industry is dragging their feet on CableCard 2.0 but the average consumer could care less. They want a box they plug in, turn on, and go. Anything less creates barriers that will continue to erode TiVo’s market share.

    I suspect TiVo will eventually have to make a strategic move with one of the major cable or satellite providers in order to add value to both companies. They’re already working closely with Comcast with the upgraded (albeit underpowered) DVR’s, so time will tell.

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