Tivo Case Write Up.
This case is a classic example of exciting high potential technical innovations losing to the general inertia in adoption, primarily due to weak marketing strategies. TiVo being the pioneer in DVRs, were and are poised to capture the entire Television industry. Their weakness in Strategy stems from an imbalance in resource distribution between R&D and Marketing.
The theme inferred being, Venture into only those domains in which the organization has considerable expertise and strong management strategy.Technical innovation which is ahead of its time must be released in a phased manner, from general consumer to niche segments, keeping it affordable to the normal consumer. Also, packaging the product and partnerships to completely profit from it is imperative. The above claims are substantiated and supported by Jim Barton, who said “We were a bit starry-eyed in the early days about DVRs and how everyone would jump on it”.TiVo’s initial strategy was based on macro bets to develop a new platform of On Demand TV and Digital Video Recorder with the presumption that the consumer will adopt it instantaneously, which led to many smaller bets resulting in lack of direction and high investment.
At the outset it was poised to redefine TV viewing experience, the Stand-Alone DVR was an intuitively developed and packaged product, which captured the niche, high income urban segment instantaneously.But TiVo’s management missed the opportunity to release lower versions, of the DVR which could be cheaper to purchase, install and subscribe to, thereby effectively limiting their target market, with high unintended consequences. But, TiVo was recognized as technological innovator in the DVR sphere which gave positive branding. TiVo’s strategy of being only a “Facilitator” with dependence on MSOs or Cable Operators for content distribution lost them a crucial leverage.TiVo must have transformed its image from a CE producer to a TV/Internet content distributor similar to the MSOs, which would have let TiVo leverage its technical innovation to its benefit and become market leader in VOD,DVR etc.
The immediate release of comparable DVRs by MSOs is a measure of TiVo’s technical success, but exemplifies TiVo’s lack of control on its IP which is the primary reason for its lack of growth. This forced TiVo to make partnerships with MSOs, who were its primary contenders. Bringing its ARPU to 1/10th and losing its own customer base, essentially losing its identity.TiVo’s technology and hardware positioned it advantageously to tap the potential of Broadband Media which was one of the key successes of its strategy, ironically, the partnership with MSOs made TiVo completely lose its advantage of being future ready. TiVo’s high installation charges coupled with its dependency on the Cable operator for the cable card put it in an impasse with its competitors, directly affecting the sale of Stand Alone TiVo DVRs, thereby losing customer base, which trickled down to loss of DVR based ad revenue.These are essentially due to its inability to tackle all the smaller bets which cropped up in its pursuit towards the Macro-trends.
Tom Rogers’ primary vision as evident from his contention that TiVo’s current market share mattered less than its ability to capitalize on a world where TV users would be able to access video content via Broadband Internet, is to occupy and lead the Broadband Media and On-Demand TV domains. Which I believe is the correct way forward.Given its current partnership with Comcast, which would potentially place the TiVo brand as either Software and/or Hardware in millions of households, positioning TiVo crucially, to leverage its Internet TV functionalities and its advertising features. TiVo, being the leader in DVR advertising coupled with its large customer base obtained from Comcast and its innovations such as ‘ad-tagging’ and ‘Showcase’ which are radical and substantially lucrative for businesses to capitalize on, can easily differentiate itself and win over competing DVRs which are plagued by ‘ad-skipping’.It can be understood why it will succeed, by taking the Music industry as an analogy, the user wants free content and free content can be embedded with ads which is a source of revenue.
Rogers made the correct decision of partnering with Amazon which increased their reputation as a dependable source for studios and users, along with the intuitive UI and ‘Swivel Search’, combining Cable/broadcast/internet was a lethal combination which is poised to overcome all competition.TiVo’s strategic option to go forward is to primarily stay the course with a few strategic additions. TiVo will benefit by maintaining a steady partnership with Comcast as TiVo would penetrate millions of households, which can be capitalized upon with its unique advertising features. The Audience Research and Measurement wing of TiVo can become a major source of revenue due to the large user base and its ‘per-second’ evaluation of audience characteristics, which is unparalleled, even by segment leader Nielsen Media Research.Intellectual Property licensing is another segment, TiVo must pursue.
In view of the April 2011 ruling in-favor of TiVo against EchoStar for IP infringement, TiVo can generate easy revenue through licensing even from competitors, who will be compelled to license or partner with TiVo to use its patented technology. This will essentially place TiVo in its rightful position as the market leader for DVR solutions with Internet-TV and On-Demand TV features coupled with refined and advanced User Interface.
