TiVo Facing Identity Crisis

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New report from The Diffusion Group suggests that TiVo must redefine itself as a 21st century media company if it is to survive.

A new report from The Diffusion Group, a leading digital consumer and new media research consultancy, suggests that as DirecTV phases out shipments of TiVo DVRs – a relationship that accounted for 70% of TiVo units sold in 2004 but will account for less than 5% of unit shipments by 2007 – TiVo will be forced to come to terms with an increasingly competitive market flooded by free DVRs from video service providers. "Can TiVo Survive? A Case Study in the Perils of First-to-Market Innovations" argues that though TiVo will look to new cable and satellite relationships to fill the gap, these dealings will generate far too little revenue to sustain the company for the long-term.

"TiVo's new president and CEO, Tom Rogers, will face many challenges as he leads TiVo into its post-DirecTV chapter," said Scott Kipp, author of the report and a contributing analyst with The Diffusion Group. "Service provider relationships will no doubt be the company's initial panacea, but while such relationships may be cause for short-term optimism, their ability to contribute significantly to the Company’s bottom line is limited."

"TiVo's long-term survival requires a major transformation in its branding and positioning strategies," continued Kipp. "It will simply not survive as a DVR solution provider. Instead, it must become a true 21st century media company, combining consumer electronics, digital audio, Web-based video, and T-commerce strategies, each with a significant Internet component."

Kipp says that one of the most significant challenges for Rogers will be simplifying the complex Tahiti vision into a single brand that says "digital media" to the consumer market. "When consumers think of digital media content and platforms, 'TiVo' should be the first brand that comes to mind,” said Kipp. "Pulling off such a major shift in branding from DVRs to services will no doubt require tremendous marketing and public relations efforts, as well as building partnerships with other new media players. But TiVo's very survival depends upon transforming the brand by transforming the platforms and services with which the brand is associated."

Other key findings from the new study include:

  • TiVo's recent deal with Comcast will face many difficulties and have little impact, if any, in terms of moving TiVo DVRs. Architectural differences in software will lead to limited deployments and compromised functionality (especially when compared to stand-alone TiVos).
  • TiVo's forthcoming Series3 HD-DVR with Multi-Stream CableCard and built-in networking will be too expensive for most consumers and thus require substantial carrier subsidies to impact the market. With cable and satellite companies leasing similar products for little or no upfront costs, the HD models of the Series3 will see tepid sales.
  • TiVo will win its patent dispute with Dish Network but won't see significant revenue from the litigation.
  • TiVo will remain unattractive as an acquisition target unless its stock falls to record lows – an event that has been made more likely due to the departure of DirecTV. Should a suitor emerge, the buyer will most likely be a broadband content distributor or a large consumer electronics company – an Apple/TiVo merger is not out of the question.

TDG's new report, "Can TiVo Survive? A Case Study in the Perils of First-to-Market Innovations," provides an examination of a variety of DVR and digital media subjects, some of which include (1) the unique evolution of TiVo as a company and technology purveyor; (2) the competitive environment in which TiVo now finds itself; (3) profiles of relevant competitors; and (4) the viability and likelihood of partnerships with Google, Yahoo, Apple, Sony, and online content purveyors such as MovieLink and CinemaNow. The report also offers TDG's latest forecasts for video subscribers, TiVo unit shipments and subscribers, as well as strategic recommendations as to how the Company can survive for the next five years.

About TDG Research –

The Diffusion Group is a consumer technology research and strategic marketing firm focused on the connected consumer and new media. Our mission is simple: to provide timely, actionable intelligence designed to best position new consumer technologies for rapid diffusion. TDG is committed to providing market research and strategic consulting services based on conservative, real-world analysis and market forecasts grounded in consumer research. For more information about The Diffusion Group, visit our website at http://www.tdgresearch.com.

Contact:

Andy Tarczon

andy@thediffusiongroup.com

214-677-9723

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