Tuesday, January 18, 2005

The Death of TiVo

So, after opining on the mostly goodness of Netflix, I'm sad to say that I think we're watching the waning days of TiVo.

I love my TiVo. I've had it for over a couple of years now and I've convinced other people to get one. I have never once regretted purchasing it. My TiVo (called Employee 8 after former Celtic and current Hawk Antoine Walker) has been one of the best and most rewarding purchases I've ever made. A DVR really will change your life.

But, even as a TiVo evangelist, I've seen the writing on the wall. The company needed to partner with a cable company to expand the userbase and reduce the hardware costs. There's just no way that TiVo could survive on its own in a landscape where Comcast can put out a DVR for just an extra $5 a month on your cable bill.

So I hoped that TiVo would start to push the boundaries of home entertainment, all the while looking to partner with Comcast or Motorola (the provider of most cable boxes). TiVo announced a partnership with Netflix. Not bad -- a forward thinking idea, but not really valuable when most people are getting used to DVD quality (or better video). But on a networked HD TiVo ... wow, that'd be amazing. TiVo had also previously announced TiVoToGo, an update to your TiVo to let it shoot video back to your computer to burn to DVD for taking it with you on a trip or archiving. And then there was news TiVo was beta-testing a HD TiVo.

All of this pointed in the right direction -- an HD TiVo, where Netflix customers could request a DVD-quality movie to be dripped down over an internet connection, and where you could then send recorded television back to your PC in case you needed to bring a show on an airplane. Combined with the existing Home Media service that TiVo had released letting you push pictures and music to your TiVo, and TiVo had the whole home entertainment center covered.

The last step -- figure out how to get a HD TiVo to market. A normal TiVo simply isn't going to cut it for a majority of these new features, especially not when the entire television industry is betting on HDTV.

Now, this is a tough road for TiVo. Most HDTVs do not automatically decode HD signals, so they require a converter box. The cable or satellite companies control the converter box. This is necessary until the CableCard 2.0 spec hits, sometime in mid-2005 (though TiVo could have released a CableCard 1.0 HD device in the interim). Thus, TiVo needed to get into the converter box. They accomplished this with DirectTV. The last step is to get in bed with a big cable company ... let's say Comcast.

Well, recently TiVO CEO Mike Ramsey stepped down as CEO. And now we know why: TiVo backed away from a deal with Comcast. Simply insane.

Even in the worst scenario, a deal with Comcast broadens TiVo's userbase and exposes millions of people to their interface and software. If TiVo then wanted to come out with a standalone system, they could likely convince some percentage of users to come with them. Good products have a way of drawing a market.

TiVo blows this deal. Then TiVoToGo ships arguably months late, and the rollout is done so unbelievably stupidly that a number of high profile users (Atrios, for instance) start to complain about it. This is the hallmark of a company circling the drain. In an attempt to get some great PR out of CES, they announce a product as being available, yet 90% of their customers can't use it.

But this is 2005 and an agile, Web 2.0-type of company can react to the bad news, explain the situation, and start to make amends.

Nope. Not TiVo. There have simply been more posts on TiVoCommunity.com talking about how they have to slowly build up to not overwhelm their support staff. Most users on the priority list (folks who knew how to sign up their TiVo to get precedence) should get the upgrade by February ... or March.

Jesus. That's just fucking stupid.

Oh, and the standalone HD TiVo people are pining for? They announced it at CES.

ETA: mid-2006.

I'll say it again. Jesus, that's just fucking stupid.

I've seen first hand companies who hit this stage. They grow to fast, decide that rather than giving the market what it wants, they're going to try to create a new market where they can dictate the terms and pricing. Much of this is driven by the need to pay back the investments of the venture capitalists who invested in the company initially. So rather than doing the slow build and trying to own a large piece of an existing market, small companies try to go it alone and own a niche. And it almost never works.

TiVo can be saved. A smart CEO could come in and get the company in order. There's still a ton of good ideas coming out of TiVo, as they're starting to embrace the idea that the TiVo shouldn't be a closed box.

But they are rapidly running out of time. At this point, they have about 2.1m subscribers, but a bunch of those are DirectTV users who will likely move to a DirectTV DVR when one is released. A bunch more are older TiVo users who have never upgraded. The rest - let's say 1 million - are a very small portion of the cable marketplace. Many of them are not technophiles or television hobbyists. They're grandparents and moms and dads who don't care how they "TiVo" Spongebob, they just need it done. Comcast's DVR will be fine for them.

TiVo's going to lose a bunch of people this year to cable company DVRs. If they don't act quickly, it will not matter how much better the TiVo is -- price and inertia will win out. A $5 a month device that records HD is good enough for most folk.

Thus, TiVo will end up owning a niche market ... but it won't be one large enough to sustain a company or pay back its investors.

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