Tivo 2007: Dvrs and Beyond
TiVo 2007: DVRs and Beyond
Case Background
TiVo was first company to the market Digital Video Recording (DVR) device which had potential to replace videocassette recorder (VCR) with very user friendly user interface including electronic programming guide (EPG). TiVo DVR was basically a kind of computer, complete with software and a hard drive which allowed user to record live TV and with broadband connection access wide array of video content and interactive services. DVR enabled viewers to record live television (TV), playback a live TV shows at viewer’s convenience, skip commercials, record entire series with season pass automatically, and search their favorite shows by various criteria. TiVo’s technology allowed many busy families to make their own schedule of watching television (TV) instead of watching live TV at scheduled broadcasted time. DVR brought advantages like multiple room viewing, program suggestions based on viewer’s liking and integration of broadband based entertainment services like video on demand (VOD). TiVo’s main strength was its user interface (UI) which integrated live TV, board band content and very intuitive interface. Its software was capable of tracking viewer’s TV watching habit second by second and software platform capable of embedding DVR supported advertisements.
Despite of many advantages, Innovation of DVR brought complete disruptions to the TV eco-system. DVR affected primetime broadcasters who rely on advertisement revenue broadcasted on TV, advertisement industry due to DVR’s ability to fast-forward advertisement and companies doing audience research and measurement (ARM) by disrupting total live TV watching audience. Probably biggest challenge that TiVo faced was not having product distribution channel, well established in TV ecosystems like satellite or cable service providers right from its launch. TiVo’s challenge initially was to convey to consumers clear sense of what the DVR was and why they should buy one. DVR was so new concept that potential customers were having hard time understanding what technology was and what it did for them for comparatively premium price. TiVo could have used analogy of “tapeless VCR” or something similar phrase to put some frame of reference in customer base that were aware about TiVo marketing but unsure about its functions. According to consumer-adaption process (Chapter 9, page 175 of Kotler and Keller textbook), innovation diffusion process has five steps which TiVo’s marketing failed to follow. These 5 steps are (1) awareness (2) interest (3) evaluation (4) trial and (5) adoption. DVR was innovative product and was sold only via online (Amazon) and store like BestBuy. These distribution channels gave not change to customers of interacting with neither DVR function’s expert nor opportunity to be part of product demos which in turn caused lack of “interest” or “evaluation” of product which are essential elements in adaption process.
Main Issue
TiVo’s main issue around 2005 was that even with innovative product like DVR and huge market potential; TiVo accumulated losses of more than $500 million since its founding and never made annual profit. DirecTV which made about 70% of customer segment of TiVo had also announced that it will wind down of its commitment of distributing TiVo’s basic product. Around 2005, stock price of TiVo was three-year low. Also, during first half of 2007, its user base fell by a quarter-million subscribers, from an all-time high of more than 4.4 million to less than 4.2 million. Market competition of generic DVRs were increasing and incumbent satellite/cable providers were cutting prices drastically or providing free generic DVRs including low subscription cost compared to TiVo. TiVo’s main strength was its user interface but for new customers there was no way to interact with their product so attracting new customers was difficult for TiVo.
Possible Resolutions:
Tom Roger’s was considering multiple bets for TiVo business which included its roll as:
(1) Consumer electronics company (2) Cable/satellite distribution business (3) Software development and intellectual property licensing business (4) Advertising solution business (5) Audience research business (6) International business.
All of above businesses have potentials in various capacities of making TiVo profitable and long term industry player so I agree with Tom’s vision except prioritization and resource allocation based on each business segment potential is very essential. Following are few options with logic of why they should be considered on priority basis aligned with company’s core competency: Software.