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How to Save TiVo?

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TiVoted might not like this – there is more competition looming for their beloved personal video recorder. Despite inventing the market, and hitting the 3 million user mark, the company is going to have more competition on its hands. NDS Group, a division of News Corp, and Scientific Atlanta are going to launch new versions of their personal video recorders. Analysts expect massive improvements and parity with TiVo in terms of ease of use. This means fewer opportunities for TiVo to grow its business. It is only a matter of time before company gets acquired by a larger player, says Vintage Research William Kidd. No Kidding… really we did not know that! Given all the problems Comcast has had with Motorola-made digital video recorders, they might still be interested in TiVo. (Tivo Copy Cats via Reuters)

Now that everyone has started chanting the mantra I started preaching three years ago, I am going to think different. I think TiVo can be saved – actually with very little work. Here is how – TiVo should basically give away two million of these devices in next one month – hit the 5 million subscriber mark. That’s $65 million in monthly revenues (assuming everyone pays $13 subscription fees.) At those numbers the company can do $750 million in annual sales. Now since DirecTV customers are a big chunk of these customers, lets assume the revenue/annum is $600 million a year. Next cut back on marketing completely, ala Apple in lean years. Stop pushing the service – and turn TiVo into an exclusive club, a BMW among PVRs. Give the latest and the greatest to folks who want to pay for that, i.e. the TiVoted. Apple is a good lesson for TiVo – sure not the size of a Dell, but still making more cash. As a company focus on pushing the envelope, and develop one or two great products every year. Someone wants to come into the TiVo-fold, well, let them pay the “club fees” of $13 a month, and a device that the company doesnot sell at a discount. BMW doesn’t discount, Apple doesn’t discount. Get the drift.

Of course, no growth in subscribers means Wall Street isn’t going to like it. To that, I say screw them. How about taking the company private. Leveraged buyout! Small, company, which can become profitable. I know there is one gentleman who reads my blog, and is a tech buyout guru who could pull it off. Slow growth and profits versus certain death – well I take the former. TiVoted – what do you say?

What is TiVoTed? Old Red Herring copy maestro Jon came up with the phrase: TiVoted, worshippers of the TiVo personal video recorder (PVR). A cultlike following doesn’t necessarily translate into a huge market share. Just ask Steve Jobs.

11 Responses to “How to Save TiVo?”

  1. Well, I completely disagree with Brian.

    1) TiVo could become a status symbol, but less because the person has a TiVo and more because of what they can watch on a TiVo. Once TiVo supports IP video downloads (later this year), they’ll be leaps and bounds ahead of any competing product (although I’m not sure if NDS will do the same). Moto and SA are not going to add this support quickly because it erodes margins for the cable guys and their proprietary network. Anyway, the point is not the device, it’s what you have access to via the device.

    2) As for the money, how much cash do you think it takes to innovate? TiVo already has a sizable R&D group and Strangeberry did a lot to improve the horsepower, but good R&D is not that expensive. As a matter of fact, being smaller and leaner can actually make you more productive. (I mean Microsoft spends how many billions/year on R&D and I wouldn’t exactly say they’re getting a lot for their money. I would say Apple has been outinnovating for some time with a fraction of the budget.)

    Anyway, my thought is that TiVo has a clear advantage over the other device providers. This strength is actually born out of a supposed weakness. THEY ARE NOT BEHOLDEN TO ANY SPECIFIC DISTRIBUTOR. As I said earlier, Moto and SA can’t piss off Comcast, TW, and the rest of the group. Echostar is Dish. 2Wire is about the only real competition out there once IP video takes off, and I think TiVo can still go head to head with those guys, no problem. The fact is, most of the device guys have tight relationships with distributors who have a vested interest in keeping centralized control over content delivery via their proprietary networks. Comcast loses if everyone starts downloading all their TV over open IP networks because then they’re just a broadband service provider competing with a dozen other similar services who don’t have the same infrastructure costs to amortize. Once wireless broadband really kicks into gear over the next 5 years, Comcast will be competing on price with people that also have a more versatile product that costs in the low tens of millions to deploy, not billions. That ain’t pretty for Comcast.

    I would argue TiVo needs to continue focusing on developing IP video integration. They need to work agressively to solve cable integration issues with the cablecard. They need to continue to to do things like open the SDKs up to the public. Things will work out if they can weather all this bad press that’s been building recently.

    My only real concern is that all this TiVo bashing could become self-fullfilling. If consumers start to think TiVo is going under and their subscriber growth slows and their AR baloons, they’re takeover bait. If they can get some of the respect that they deserve and hold the wolves at bay for the next 18 month I think a lot of people are going to be eating their words (like they did with Apple).

    Just my 2 cents.

  2. Won’t work for two reasons: 1) having a TiVo is not a fashion statement or status symbol, so there is no way they can expect customers to pay more for less vis a vi competitor products, 2) TiVo does not have enough cash to support the R&D investment necessary to make it an elite product.