ENTP 4311.

001
Exploration into TiVo

For Dr. Rajiv Shah

 1. What are the unique capabilities that TiVo, the product, offered in 2005
that are above and beyond what a typical DVR offered?
o “The portal to entertainment services in the home.”

TiVo in 2005 was one of the forefront providers of DVR technology and services founded by Ramsay and
Jim Barton. In essence, the TiVo product was a small ‘hard-disk-based replacement for the videocassette
recorder (VCR)’, but it allowed their users the freedom and convenience of viewing TV when they
wanted as well as how they wanted.

 TiVo was experiencing challenges in terms of competitive growth and in some cases competitors
such as Motorola, ReplayTV, and Scientific Atlanta were catching up. Some examples of shared
functionalities between TiVo and the competition are…
 Users could pause live television on a whim.
 Users could fast forward through commercials.
 Users could hit instant replays (This was used much more commonly during
sporting events).
 Most of TiVo’s functionalities were revolutionary when they came out initially. Naturally,
competition caught up in some ways but TiVo still found methods to differentiate their product
from the rest. For the most part, TiVo offered higher levels of functionality that exceeded the
competition. Some examples that TiVo prided themselves in are…
 TiVo users could access two weeks of their electronic program guide (EPG) and
could record shows the “old-fashioned way”.
 TiVo users could record entire seasons of their favorite shows using the “Season
Pass” feature.
 TiVo users could also utilize the user choice extension feature and could Wish
list record particular shows based on actors, directors, or styles of programming.
 TiVo also had a particularly valuable feature where based on historical viewing
habits and ratings, TiVo would use spare hard-disk space to record programs
that its user may enjoy.
o This was a particularly fascinating feature because it essentially eliminated the need for
its users to sift through thousands of channels, shows, and varying hours of the day.
TiVo automatically found the most interesting shows and offered what they described
as a “unique conflict resolution system” to its customers.
 TiVo also offered a premium service application coined ‘the Home Media Option
(HMO)’ which enabled users to view photos, listen to digital music, and
schedule programs to be recorded anywhere with internet access for a price of
$99.
 TiVo also offered what they called TiVo to Go technology. Basically, once their
customers had HMO, they could then bring TiVo recorded programs to their
computer or laptop.
 Something to note, however, is that although TiVo was indeed ahead of the competition… they
were steadily gaining ground and significantly narrowed the gap on basic DVR technology.
 2. As Tom Rogers, the new CEO of TiVo, what would you see as TiVo’s
greatest advantage and biggest strategic concerns? (This is looking at TiVo
both as a product and as a company)
o TiVo management initially focused on software and service as its ideal position in the
value chain.

Analysts expected as many as 40% of U.S homes would have DVRs by the year of 2009 and that in order
to accelerate growth, the price of DVRs had to be below $200.

 I would say TiVo’s greatest advantage was their users. When polled, 97% of their users were
‘very satisfied’ and would recommend their services to a friend. According to the paper, among
the avid users were passionate celebrities including none other than Oprah Winfrey who
adopted the ‘Kleenex’ concept whereby she generalized an action or word by a branded
product. (She was quoted saying that she was “TiVo-ing her favorite shows”)
o To break down what exactly the TiVo enthusiast would look like…
 Married
 Between 25 and 45 years old
 Household income of $70,000 to $100,000
 Families with young children (Parental controls)
 The biggest strategic concern I had regarding TiVo was that they had high marks and great
feedback from people who already consumers of TiVo. They did little to survey those who aren’t
o Another strategic concerns that I had was the shift to “the mass market” despite having
only 3 million customers. Ramsay wanted TiVo to be in every family home but at the
time it really wasn’t feasible.
o Because one of the biggest concerns was that prices of the hardware needed to be
significantly lower, they decided to aggressively cut prices.
 Something that I found was mildly interesting.
o TiVo discovered that consumers were surprised they had to pay monthly service fees
despite purchasing the product in a retail store.

3. TiVo’s ultimate business Model will depend on where it plays in the

industry value chain. Where is TiVo today (2005)? Who are its friends?
Enemies? What were some of the shortcomings of TiVo and the way it
was marketed and sold?
 TiVo management initially focused on software and service as its ideal position in the value chain.
As such, TiVo made an effort to base all of its efforts around this ideal.
o In 2005, TiVo offered boxes between $99 and $299. It had a new design and was sold by
some of the largest retailers. The new prices led to a surge in unit volumes but their
product wasn’t perfect.
o TiVo was seeing a growing roster of advertisers including GM, Coca-Cola, Universal
Pictures, Nissan, Fox, etc.
o TiVo’s season pass ratings carried more significance for networks.
 o The FCC could have major impact on TiVo. They basically were deliberating on whether
or not to force the cable industry to make their devices less proprietary and more open
for third party companies.
 DirecTV ALLY- THEN ENEMY
o DirecTV started off with a partnership with TiVo whereby they sold TiVo’s Series2
technology. They offered customers a basic TiVo DVR as well as a couple add-ons and
took responsibility for manufacturing, marketing, installing, and servicing TiVo accounts.
 Now, there was an extremely high satisfaction rate with TiVo among DirecTV
customers but due DirecTV sold its 4% stake in TiVo, resigned from its board,
and offered an alternative DVR late in 2005.
 Something funny to note is that while DirecTV still supported TiVo, they
actively pushed their customers to purchase a competing DVR and TiVo
maintained that “their venture was not over”.
 Netflix - ALLY
o TiVo and Netflix announced a strategic partnership in the fall of 2004 and hoped to work
with Hollywood to obtain rights to distribute content digitally.
 Comcast - ALLY
o Agreed to a distribution arrangement that would offer TiVo to their 21.5 million
customers in late 2006 or early 2007.
o While TiVo struggled with financial discipline, they felt as though the Comcast deal
would represent a new era and would revitalize things.
o Offered a high-volume distribution channel with a low subscriber acquisition cost (SAC)
 I believe the major shortcoming of TiVo’s model is requiring them to purchase the box.
Personally, I’m a believer of the freemium model where they would hypothetically provide the
box free of charge and ride the wave of subscriptions and various premium features.

4. In TiVo’s eco-system discussed in question 4 above, how does each player

view TiVo? How would you apply the Chakravorti reading from session S-
11 to the TiVo situation?
 DirecTV obviously doesn’t believe in TiVo anymore. If I’m understanding it correctly, they only
continue to support them because they’re either contractually obligated to or can afford to. The
fact that DirecTV is actively leading their customers to a competitor means they’re already done
with TiVo.
 Netflix probably believes they can work together for a common goal, but that’s likely the extent
to their partnership.
 As for Comcast, I think they believed in the potential of TiVo. Specifically, in advertising. That it
could potentially “become the advertising platform for TV”.
 One facet of Chakravorti’s article was the idea of flexibility. In my opinion, TiVo’s strategy was
intended to be flexible in a sense that everyone can and should use their product. They fail to see
that while everyone could potentially use it, would everyone want it? They continued to frame
their product based off of the feedback of the people who already liked it. Their model and
approach were very inflexible in that manner.
 A related topic to the above would be equilibrium. TiVo sought to create and maintain an
equilibrium where consumers would willingly purchase their product but failed to find a long-
term business model that effectively captured a wide audience consistently. They sought to
innovate and to try varying business models and strategies, but none really were effective.

5. Are there any network effects in the DVR business? And how does it
matter to TiVo?
 Yes! In TiVo’s case, you were able to link the TiVo DVR to a wired or wireless network to either
Apple or Wintel PCs. It didn’t save the files, however. It just served almost like a display capture
device. It ‘pulled’ the pictures and or music onto the TiVo platform and you could view it from
there.

6. Apply any other readings and tools (at least a couple) developed and
discussed in sessions s04 through s12, that you would consider relevant to
TiVo in 2005 – Porter, Barney, SWOT, Drucker, Financial Analysis,
Magretta, Kim & Mauborgne-… apply the ones you think are most
relevant here.
 In MacMillian and Rita Gunther McGrath’s article on differentiation, it highlights successes of
other companies notably Oral-B. Essentially, customers were over using the toothbrush to the
point where the bristles were no longer effective. By introducing the patented blue dye to the
brush, they were able to turn differentiation into a competitive advantage.
o This is something that I believe that TiVo failed at. While they tried their best to offer
differentiation in terms of features, they were never able to effective capture and
patent a feature that translated into a competitive advantage for themselves. The
competitive advantages that TiVo had over their competition simply wasn’t as
substantial as the example used in Oral-B.
 Regarding their business model, I feel as though they did an adequate job regarding who their
target customer is. They were able to identify who they were, what they looked like, as well as
how they operated. But, they got so seemingly tunnel-visioned on that ideal picture of their
customer that they couldn’t look past that ideal family. They couldn’t capture people outside of
that specific identity. Their offering was also a complex issue. It was focused, defined, and
intentional… but at the same time it wasn’t fully fleshed out properly. It just wasn’t broad enough
probably due to the way they gathered feedback from the community. In terms of sources of
competence and how do we make money were also areas of confusion and conflict. Nothing ever
really felt solid or concrete.
o One of the biggest problems for TiVo was, in fact, flakey character of TiVo’s business
model. Ramsay even states “As the founder, I encouraged creativity around the product
and brought its value to customers. But now we need creativity around business
models, and that area has not always been clear.” While creativity is a good thing, it
seemed like a complete mess. It was hard to follow, confusing, unfocused, and unclear.
7. What should Tom Rogers, as the new CEO, do? What are his options that
the case mentions? What are the pros and cons? And what would you
recommend TiVo do going forward?
 First and foremost, I think he needs to commit TiVo to one simple ideal and or line. They
described themselves as “The portal to entertainment services in the home”. For me, that’s just
not appealing. Perhaps having a different ideal such as “Watch your favorite shows whenever,
however.”
 There were a few options that were suggested.
o Content Distributor
 Pros
 By using the Internet, TiVo could bypass the existing methods of
distribution.
 Cons
 Potentially rebrand
 Not highly profitable
 Potentially just deliver content to TiVo customers
o International
 Pros
 Great opportunity
 Potentially could become a worldwide phenomenon
 Cons
 Stretching resources that were already thin
o Comcast and Advertising
 Pros
 Could become THE advertising platform for TV
 Cons
 Inherent risk of others signing on
 Would TiVo be able to innovate and maintain its edge
 Tiny Business ($5 million)
o Stand-alone DVRs
 Pros
 If TiVo can make the stand-alone DVR work, it would have the potential
be a home run.
 Potential to innovate and establish itself as a strong branded product
 Cons
 Solve the problem of “subscriber acquisition cost” (SAC) (lower it)
 “Is it realistic for TiVo to aggressively sell our stand-alone system in
direct competition with Comcast?
 Ultimately, I’m one to go for the higher risk higher reward plays. The two that come to mind are
the stand-alone DVRs and the International route. If I had to make the decision I’d likely go for
the International route. It’s limitless potential for Asian entertainment most notably Japan and
Korea. The article references Japan, but I think a dark horse that they didn’t mention would be
Korea. There was so much growth and room for growth at that point in time and they could
have cemented themselves in Asia potentially. I would reroute the thin resources out of the
west and move to the east but that’s understandably a daunting task and you’d need to shift the
foundation of the company.