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My take on the TiVo 'death watch' crap - TiVo Lovers
For owners and fans of TiVo
zonereyrie
tivolovers
zonereyrie
My take on the TiVo 'death watch' crap

What I find annoying with this 'death watch' bullshit is that TiVo has continued to meet or beat their projections quarter to quarter. They laid out a plan for fiscal 2005 and 2006, and so far they have been able to execute that plan nearly perfectly. 2005 was all about boosting subscriber numbers, and they said right up front that they would be spending a lot of money, and therefore increasing losses, to acquire subscribers. Because TiVo subscribers tend to be very loyal (yes, some people dump TiVo, but not most users), getting them into the 'TiVo family' before they are lured by a cheap cable DVR, etc, helps lock in long term revenue for TiVo. Strike while the iron is hot - build the user base *before* the competition gets intense.

Fiscal 2005 just ended, 2006 is to be about profitability. They will be cutting back on rebates and promotions (so you might want to buy now, before the current rebate program ends). They paid off their long term securities debts at an accelerated pace in 2005, leaving them without that burden for 2006 and beyond. They came out with the 'night light' S2 units in 2005, investing in engineering to reduce production costs of the HW. They also started rolling more features into the standard subscription - HMO, TiVoToGo - and now we're seeing HME in trials and in 2006 we'll see enhancements to send video back to the TiVo from a PC, broadband video distribution, integration with portable media devices, and more. All integrated into the standard service.

TiVo has said they do not intend to compete on price, but on value. So you may get a cable DVR for $10/month - but it is a DVR. For $13/month (or lifetime, which I think is better anyway) you can have a DVR with more capabilities. Yes, TiVo costs more - with a $99 up-front cost and a few more bucks a month. But TiVo is aiming at people looking for more than just a dumb DVR. They're looking for a niche for people who want a DVR and other media features, for less money than it'd cost to acquire separate systems for things like streaming music, etc.

They're also fighting to keep the Cable Card deadline in place so cable companies have a vested interest in improving CC support - which will be good for all users. And they are moving TiVo into higher end machines - focusing more on the growing DVD recording market, as well as HD.

Are there risks? Hell yes. But TiVo has been on a steady course and they keep delivering what they've promised - usually beating the street's estimates too. Most of the death watch stuff I've read is crap. People who don't seem to know what they're talking about just spouting off. Many companies lose money while starting out, in fact, most do - I've seen people say that the fact TiVo loses money means they'll die. Sure, if they can't *stop* it - but they've said, for a while, that if they stopped spending money on acquisitions and just went to operations with their current users, they'd be profitable. They are already turning an operating profit, the losses are caused by the marketing expenditure to grow that user base. If they're willing to slow down growth, they can turn a profit overall.

Then there are people who say that because they don't have a cable HD solution today they're dead. Which is idiotic. The *vast* majority of the TV viewing market do NOT have HDTV. Only recently have sales of *new* televisions tilted to a majority of HD and HD-ready sets. Until then most new sales were still SD sets - and that's just *new* sales, which is a drop in the bucket compared to the installed base. People talk about the millions of HD sets, which is nice - but out of context. In context those millions are a very small percentage of buyers. And most of them are in the higher-end, early adopter segment - which is *not* actually TiVo's target demographic.

Does TiVo need to do something with HDTV - yes, no question. HDTV is here to stay and continues to grow. But they don't need to have it *now*. Notice that there aren't exactly a ton of CableCARD (the only way to do 3rd party HD cable recording) DVRs on the market. CableCARD as had a painful roll out with many issues and delays, most vendors have held back. Right now there are a fair number of CC enabled TVs, and that's about it. Most sets, even most HD sets, aren't CC enabled. The market is still young with a lot of time.

So it is really the early adopters pissing and moaning that because TiVo isn't giving them what they want right away that they must be 'out of touch' and a dying company. Which is just asinine. If TiVo can deliver HD products in fiscal 2006, as they've said, that should be well in time to still catch the market on the start of the growth curve. In the meantime their SD products suit the vast majority of users just fine.

And, of course, people cry doom and gloom over the potential of TiVo losing DirecTV as a channel. First of all, DirecTV has no plans to drop TiVo support. The existing agreement allows them to support users indefinitely, and they'd be stupid to turn off ~2million systems. They're not that dumb. Even if they did stop selling new units, and even that isn't clear - TiVo says that when/if the NDS units ship they will do what is needed to remain a competitor - TiVo gets revenue from the existing users. But even if they did lose that, DTV is less than 10% of their revenue. They may be nearly 2/3 of the total subscriber base, but TiVo gets just over $1 a month per user. They've said they could lose that revenue base and absorb the loss - of course they'd also be free of any expense of supporting DTV.

It seems like predicting doom for TiVo is the latest fad, and it is damned annoying to see people spouting the same old bullshit over and over.

Current Mood: annoyed annoyed
Current Music: office buzz

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Comments
moskevyu From: moskevyu Date: March 11th, 2005 09:24 pm (UTC) (Permalink)
If there's a good thing coming out of this it's that TiVo shares are on sale. A few more tech breakthroughs and a successfull judgement against Echostar and they have a good chance of coming back up.

But I agree, the doom and gloom stuff is getting really stale.
zonereyrie From: zonereyrie Date: March 11th, 2005 09:34 pm (UTC) (Permalink)
Yeah, I didn't even get into the IP issues. I've seen people whinging that if TiVo really had IP they'd be suing everyone.

Which is sheer ignorance. They have a test case in progress against Echostar, and it seems like a strong case. There is absolutely no point in wasting money on lawyers trying to sue other parties at this time. It is better to go through the test case. If TiVo wins then many other companies will probably license their patents without a fight simply to avoid the trouble and cost of being sued. And those who don't will have a tougher time fighting TiVo in court with the patents already having been upheld.

They have over 70 patents already, and more to come. Patents are useful things. In addition to pursuing licensing revenue, they can also be used defensively. Others also have patents, and if one of them came after TiVo they may be able to settle it with a patent swap instead of paying out. Which is what TiVo did with ReplayTV.
gonna_shinee From: gonna_shinee Date: March 11th, 2005 09:32 pm (UTC) (Permalink)
i want tivO
zonereyrie From: zonereyrie Date: March 11th, 2005 09:38 pm (UTC) (Permalink)
Well, they're not that expensive now. :-)
banzai From: banzai Date: March 11th, 2005 09:35 pm (UTC) (Permalink)
Not to be overly simplistic, but the whole deal smacks of the "Apple Death Watch" days of yore. I agree—it's hooey.
zonereyrie From: zonereyrie Date: March 11th, 2005 09:39 pm (UTC) (Permalink)
Yeah, very much so. I think the rumors of Apply *buying* TiVo are far-fetched. A few years ago Apple was buying Palm, according to the rumor mill. But there just seem to be people who like to predict the worst for any popular company - and TiVo and Apple have a lot in common with respect to the loyalty and fervor of their userbase.
(Deleted comment)
zonereyrie From: zonereyrie Date: March 11th, 2005 10:06 pm (UTC) (Permalink)
Thanks. It is been stewing in my brain for a while as I bounce around the various TiVo groups and blogs, and it finally boiled over. ;-) I've worked for startups - hell, I *work* for a startup - and I've seen them succeed and fail. The conclusions I've seen people drawing are irrational.
gonna_shinee From: gonna_shinee Date: March 11th, 2005 10:48 pm (UTC) (Permalink)
where's the cheapest place to get it?
zonereyrie From: zonereyrie Date: March 11th, 2005 11:14 pm (UTC) (Permalink)
For standalone TiVo's the 40 hour units tend to be the same price everywhere - $199 with a $100 rebate currently, so it comes to $99. Sometimes they get cheaper if a store runs a sale, etc.

DirecTiVo units start at $99 MSRP, but are often less with promotions.
stile99 From: stile99 Date: March 12th, 2005 04:03 am (UTC) (Permalink)

Or try TiVo...

If you don't mind factory recons you can save.

http://www.tivo.com/2.0.1.asp
gonna_shinee From: gonna_shinee Date: March 11th, 2005 11:45 pm (UTC) (Permalink)
ok thanks!
starbucking From: starbucking Date: March 12th, 2005 04:01 am (UTC) (Permalink)
Nice post, Megazone. I'm a new Tivo lover and already have two, and almost never use my (gasp!) 8 VCRs. Can't wait until Tivo-to-go get's the Mac OSX treatment.
From: (Anonymous) Date: March 13th, 2005 05:46 pm (UTC) (Permalink)

Don't forget, either...

The release of the development kit for the Tivo means that there will be quite a few new "features" developed for Tivo at no cost to the company, whatsoever. They already have the "user community" vibe, too which is probably "priceless".
weaktwos From: weaktwos Date: March 13th, 2005 09:18 pm (UTC) (Permalink)
Well said. The product is sound, and I think the faithful will convert. People have their cheap cable dvrs, but I can happily schedule my recordings away from home, as well as stream music. Hah!

I eagerly await the HD cabable cable card machines, though. Maybe then I'll get into HD cable. 'Til then, I am not bothering.
From: (Anonymous) Date: March 14th, 2005 05:14 am (UTC) (Permalink)
Strong comment about how the DTV channel only accounts for 10% of revenue.

HDTV is still in early adoption, but a lot of the TIVO owners I know are also early adopters, and the inability to have a solution will hurt.

Bigger problem is lack of dual tuners. Goes back to the cost of the hardware. TIVO hardware is much cheaper than equivalent Media Center PC. How cheap can you make the dual-tuner models? $99 is an excellent price point, but will be hard to maintain with higher specs to handle HDTV / dual-tuners / cablecard.

Also, TIVO needs to develop a better hardware upgrade path. Both financial (turn in your old boxes for a rebate, thus preventing a glut of older models) but also though transferring your ratings and seasons passes to new boxes. You could easily turn this into a new revenue stream. With 3 millions users, some of them are going to want new boxes at some point.

HME is nice, and does outsource some development costs, but the company has shown a real inability to develop other revenue streams outside monthly fee. Downloading movies will not be a market for the next five years. Need to tie HME into the TV more (buy the items featured on this cooking show. Buy the book mentioned on this show. Buy the music on SNL). Also tie into IMDB and other information, but in the main TV screen, rather than in separate HME apps. Little evidence company can pull this off. They focus too much on the monthly fee and defending that fee.

Also need to push the limits on suggestions and other data mining opportunities. Quantify that info and post it daily (what is the most Tivoed moment of the day? of the week? Enormous PR from this.
erinin3d From: erinin3d Date: March 14th, 2005 10:53 am (UTC) (Permalink)
I hope you're right!

From: (Anonymous) Date: March 16th, 2005 01:40 am (UTC) (Permalink)

Expanding?

If TIVO wants to stay alive, they have to keep moving, they can't stand still. Other products are moving in, they have to "cut them off at the pass". Maybe, as some argue - they aren't big enough to compete... But they still can't just rest on their laurels.

Look how many options there are to consider - HDTV, Satellite, DVD+-R, PC interface, and VCD burning... dumb PVR recording... Pick the best options and run with them, and don't try to pull an "Apple" on your hacker community.

I have a beef- where's the Canadian service? They've got a prime market of 30 million people (10% of the N. American English-speaking market...), NTSC, same channels in many cases. I don't understand why this market is ignored - especially when they were in the UK market. I'm tired of the stock answer "We are considering it..."
zonereyrie From: zonereyrie Date: March 16th, 2005 03:01 am (UTC) (Permalink)

Re: Expanding?

What I've heard in regards to Canada is that the regulatory environment there is unfriendly to companies like TiVo when it comes to getting the guide data. It kept both TiVo and ReplayTV from trying the market.
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