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TiVo's Last Gasp 7 February 05
"As Kleenex is to tissue and Xerox is to copiers, TiVo is to digital video recorders." Jack Myers, media industry consultant, in The New York Times
TiVo, the pioneering digital video recording service, has had a rough year. It doesn’t look like it’s going to get better any time soon. Consider these recent news items:
Ø In early Fall, 2004, according to The New York Times, TiVo backed out of a major deal with cable operator Comcast to provide software to its set-top boxes. Comcast went to Motorola, who was able to provide a TiVo-type box for a service that became very successful for Comcast.
Ø In mid-January 2005, TiVo’s co-founder and CEO, Michael Ramsey, announced his resignation. Several board members told The New York Times that they were looking for someone who could repair relations with cable companies.
Ø On 1 Feb 2005, TiVo’s President, Marty Yudkovitz, resigned as well.
The company embarked on a $50 million ad campaign in the last half of 2004, with disappointing results. Its net loss for fiscal year 2004 was $59 million, and its cash position has declined from $143 million a year ago to $89 million on 31 October 2004. The stock price on 1 Feb was under $4 a share, down from a high of around $12 last March.
Many of TiVo’s customers continue to be passionate and committed to the company. David Pogue, the tech products writer for The New York Times, defended the company’s products in a recent article, talking about “the brilliant features that make a TiVo a TiVo.”
Unfortunately, TiVo’s recent innovations have focused on this existing committed customer base and have neglected new products that may have expanded the company’s reach. For the last several years, the emphasis of the company has been on ever more complex features aimed at very sophisticated users.
TiVo for the rest of us
TiVo intends to continue this strategy for the foreseeable future. According to ex-CEO Michael Ramsey, TiVo will focus on generating new products with features that appeal to more sophisticated users.
Last year, for example, TiVo introduced a digital video recorder with 140 hours of recording capacity. This year, the company has launched “TiVoToGo,” a software update that allows a TiVo subscriber to copy shows across a home network to a windows-based computer. The benefit is nifty – now you can watch your favorite TV shows on your laptop – but it won’t help gain new customers.
One of the major problems holding back TiVo’s growth has always been the product’s complexity. I asked a Circuit City salesman how complicated it would be to install a TiVo, and he encouraged me to hire an expert who could do a professional job.
This complexity represents a major barrier to purchase, and gives TiVo a poor profile in the four factor model of innovation success.
TiVo – High Benefits, High Barriers
TiVo needs the cable companies, because the cable service technicians can make a TiVo installation much less painful for new subscribers. At this point, however, the cable companies no longer need TiVo – they can choose from plenty of TiVo alternatives that provide similar kinds of services.
“People care about the TV viewing experience. If you can really make it better, it has a really profound impact.”
Microsoft Chairman Bill Gates, in Business Week
Microsoft is taking a fundamentally different approach with its Internet-based TV software, called IPTV. It is working closely, and often as a silent partner, with cable operators like Comcast and set-top providers like Motorola. Customers for IPTV services may never know that Microsoft software is enabling their viewing.
IPTV does more than TiVo. The software embeds the basic functions of a TiVo service into a new set of technologies that offer a variety of other benefits, including an almost infinite array of possible programming.
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Technologies sometimes experience a period of extraordinary improvement or a “last gasp” before being superseded by new approaches. As steam power overtook sailing ships in the late 19th century, for example, sailboat designers found ways to make their boats much faster. Sailboats did become faster, but it wasn’t enough to overcome the advantages of the new technology.
TiVo’s current innovations, as elegant and useful as they are, may represent the last gasp of its technology. Competing technologies and approaches have made TiVo’s offerings less compelling.
It didn’t have to happen this way. The company has made conscious choices, both in its innovations and in its relationships with potential partners, which played to its existing users rather than to the large group of new customers that it needed to attract in order to remain viable.
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