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tivo's problem in 2 words? bad advertising. it's 2005 and the VAST
majority of people that i talk to don't even KNOW what tivo is...forget
about them thinking about buying one. from day one, tivo's commercial
and ads have been pathetic. they have always stressed that it pauses
live tv and not much more. people aren't going to pay a subscription
fee if they think that is all they are getting. i own a little bit of
tivo stock. weird that they could never do a decent commercial.
http/www.latimes.com/business/la-fi-tivo20feb20,1,7567637.story
TiVo Looks to Devoted Fans to Help Keep It in the Picture
As the video-recording innovator struggles with competition, it needs
its faithful more than ever.
By Alex Pham
Times Staff Writer
February 20, 2005
Joshua Rafofsky and TiVo Inc. can't live without each other.
Rafofsky, a 33-year-old technology consultant from Hancock Park, owns
three TiVo digital video recorders ‹ two to record multiple shows that
might be on at the same time, and another just to tinker with.
"I know it sounds weird," Rafofsky said, "but TiVo's almost become a
member of my family."
TiVo executives feel much the same way about Rafofsky, though they have
never met him.
"The one thing we have is our customers," said TiVo board member Randy
Komisar. "They love us, which is why we're still alive."
Throughout TiVo's precarious existence, enthusiastic ‹ some would say
evangelical ‹ customers like Rafofsky have kept the company afloat in
the face of repeated predictions that it would fold. That devotion
matters more than ever as the Alviso, Calif.-based company struggles
anew to convince investors, potential partners and new customers that it
can compete in a DVR market it helped create.
Since January, TiVo has lost a key partnership and reshuffled its
executive ranks as well- financed competitors have gained market share.
TiVo has never had a profitable quarter, and its stock has fallen 37%
since the beginning of the year.
"They've really taken a beating," said Alan Bezoza, cable analyst with
Friedman, Billings, Ramsey & Co., an investment firm based in Arlington,
Va. "Clearly their long-term fundamentals are deteriorating."
TiVo, founded in 1997, helped introduce a new category of consumer
electronics: hard-disk-based video recorders that allow viewers to pause
and rewind live television as well as tailor recording schedules to
their personal tastes.
A Box ‹ and a Verb
Among its fans, "TiVo" quickly gained currency as a verb like "Xerox"
and later "Google." Outgoing Federal Communications Commission Chairman
Michael K. Powell spoke for many when he called TiVo "God's machine."
More than 3 million households have TiVo's particular brand of religion.
Another 3 million more have similar but less expensive recorders
provided by cable and satellite companies. Those companies, once thought
to be TiVo's strongest potential allies, are now its biggest threat ‹
with the deep pockets and wide subscriber bases that TiVo lacks.
Its only ally in this field of giants, DirecTV Group Inc., appeared to
turn its back on TiVo by declaring in January that it planned to start
distributing a rival digital video recorder this year. Days after that
announcement, TiVo co-founder Mike Ramsay said he would step down as
chief executive but remain chairman. Then TiVo President Martin
Yudkovitz resigned amid grumblings about the company's inability to seal
a distribution deal with cable powerhouse Comcast Corp.
"TiVo is a little guy. We're loved, but we have no power," said board
member Komisar. "We try to deliver the control of entertainment back to
the consumer. But to do that, we have to cut across the domains of very
powerful, very complex businesses ‹ all of whom have really sharp elbows
and the ability to say no to us."
Despite that, Komisar and other TiVo executives say they believe the
company can stick it out. They point to the 94% of U.S. households
without a digital video recorder as a wide-open market. They also
believe that the company can survive just fine on subscription revenue;
TiVo charges $12.95 a month.
TiVo has always had a precarious existence. When Ramsay and Jim Barton
founded the company, few understood its concept of pausing live TV,
recording shows on a hard drive and fast-forwarding through commercials.
Ramsay recalled that people thought it was just a fancy videocassette
recorder.
"People spent a lifetime putting up with the limitations of TV," said
TiVo Executive Vice President Brodie Keast. "It was TV by appointment.
And while consumers said they often felt it conflicted with their lives,
they didn't see it as a problem that needed solving."
Competitive Pressures
Eventually, Ramsay and Barton broke through the initial skepticism and
got enough funding to start selling boxes in 1999. By then, TiVo wasn't
alone. ReplayTV, another Silicon Valley company that had simultaneously
developed a digital video recorder, released a product days before TiVo
did.
The two jostled for the attention of consumers and investors.
ReplayTV relied on sales of its hardware to make money. TiVo took a
different route and offered a subscription option that let buyers pay
either a monthly fee or a single lifetime fee. TiVo used the fees to
lower the upfront price of the box, making it seem substantially less
costly. The gambit paid off ‹ consumers took to the lower price, handing
TiVo the first round.
Then in 2001, Microsoft Corp. introduced UltimateTV, a device that
boasted numerous features not available on TiVo's box, such as a second
TV tuner that allowed users to watch one channel while recording
another. TiVo seemed hopelessly outgunned.
Consumers once again rode to TiVo's rescue by embracing its simple
design over Microsoft's feature-rich but complex device. Microsoft
stopped marketing UltimateTV a year later.
TiVo survived a second round with ReplayTV in 2002. Determined to offer
a superior device, ReplayTV relaunched with two new features: the
ability to skip commercials without having to fast-forward through them
and the ability to send recorded TV shows to other ReplayTV owners over
the Internet.
Although that won ReplayTV customers, it also attracted lawsuits from
Hollywood studios, which contended that the company was violating
copyright laws by letting viewers share shows.
Already burdened by debt, ReplayTV's owner, Sonicblue Inc., filed for
bankruptcy protection in 2003 and sold the division to D&M Holdings
Inc.'s Digital Networks North America, which agreed to remove the
program-sharing feature from new models.
TiVo avoided ReplayTV's fate. Its fast-forward button lets users zip
through commercials but not skip them altogether.
"That met customer needs while still being respectful of [the TV
networks'] business models," Keast said. "The question for us was, did
we want to spend money on a fight we know we'd lose? Or did we want to
live to fight another day?"
The Next Battle
Now TiVo is facing what is perhaps its greatest challenge yet.
Cable and satellite TV companies are starting to roll out competing
digital video recorders built into their set-top boxes.
Unlike ReplayTV or Microsoft, cable companies have the means to install
boxes into millions of homes easily and fairly quickly. In addition,
cable companies are luring subscribers by giving away the boxes and
charging a lower monthly fee than TiVo does.
Comcast, the nation's largest cable company, with 21.5 million
households subscribing, charges $9.95 a month and no upfront fee for the
device. TiVo, on the other hand, charges $99.99 for a basic recorder
(after a $100 rebate) and $12.95 a month for the service.
"The key question for TiVo is, now that DVR is available on virtually
every cable system, why do people need to buy TiVos?" said Josh Bernoff,
an analyst at Forrester Research.
In a recent Forrester survey, 588 DVR users were asked to rate how much
effect their devices had on their TV-watching experience, on a scale of
1 to 5, with 5 being the biggest effect. TiVo owners registered 4.6.
"There are not that many products that make users that happy," Bernoff
said. But users of cable DVRs scored 4.4 ‹ not far behind.
"It's the difference between deliriously happy and really, really,
really happy," he said. "The difference between a DVR supplied by a
cable company and TiVo is not that great."
TiVo has been aware of this threat for years. That's why it has
continually been in talks with Comcast and others to distribute its
software and services on cable and satellite set-top boxes.
So far, its only success is DirecTV, which signed a deal in 1999 to
distribute TiVo to its customers until February 2007. As of Jan. 31, the
El Segundo satellite TV company accounted for 62% of TiVo's 3 million
subscribers. But DirecTV last month said it would begin to market its
own DVR this year, not just the TiVo box.
TiVo's vulnerability was further highlighted when Yudkovitz, its
president, resigned a few weeks later. The former NBC executive was
recruited in 2003 to help TiVo secure licensing and distribution
partnerships with cable and satellite companies.
Then word got out last fall that TiVo was close to striking a deal with
Comcast. TiVo would piggyback on Comcast's reach into one-fifth of U.S.
households, while Comcast would take advantage of TiVo's brand.
The deal fell through, with each side pointing a finger at the other.
TiVo "reneged," said a Comcast executive who asked not to be named. TiVo
Chairman Ramsay denied backing out of any agreement. A Comcast
spokeswoman declined to comment.
The squabble left even longtime TiVo supporters spooked.
"TiVo is really facing a final showdown," said Gary Arlen, an
independent technology consultant and TiVo stockholder. "And it doesn't
look to be a winning battle."
TiVo executives disagree.
"Since we don't have a deal with cable now and we're doing just fine,
I'd have to say that we're not dependent on cable for our success,"
Ramsay said.
Instead, the company unveiled a strategy to tightly integrate the TiVo
box with broadband Internet through a home network. That would pave the
way for TiVo to deliver movies, video clips or music on demand to the TV
via the Internet ‹ whether it's piped in by cable companies or by phone
companies.
TiVo also aims to bring content to other devices, such as laptops,
hand-held movie players or cellphones. It took a step in that direction
last month by announcing an alliance with an old foe, Microsoft. The
deal creates a free service, dubbed TiVoToGo, that lets people transfer
recorded TV shows from their TiVo to their laptops or other devices
running Microsoft's Windows operating system.
Those tactics won a mixed response.
"I have TiVo, so from the standpoint of an early technology adopter, I
think it's very interesting," said Rob Sanderson, an analyst with
American Technology Research. "As an analyst trying to determine whether
this will help TiVo overcome its challenges, I don't think it will.
"This will make hard-core TiVo users very happy. But their problem is
not preserving that recurring revenue stream. Their problem is in
growing that base into the mainstream. This will not help them get those
mainstream folks who just care about the basic DVR functions."
Wooing Advertisers
TiVo also is working hard to recruit advertisers. Though TiVo doesn't
have the reach of traditional TV, it does have the ability to gauge how
effective the ads are by tracking how many viewers watch them and for
how long. And it can play with the advertising format in ways
traditional TV cannot. For example, it can store ads of longer duration,
say five or 10 minutes, on the device's hard drive.
"We're starting to see some industry acceptance of DVR as an ad
vehicle," said Tim Hanlon, senior vice president of Starcom MediaVest in
Chicago, a subsidiary of Paris advertising agency Publicis Groupe. "And
TiVo gets full marks for creating some of the most innovative
advertising platforms."
At the same time, TiVo still lacks the broad reach advertisers seek.
"Scale brings you to the table," Hanlon said. "Right now, they're a
niche company."
But TiVo has an advantage ‹ a small army of fans.
Rafofsky has persuaded dozens of people to get TiVo, including his
father, his sister, a niece, two stepbrothers, his in-laws and five
buddies from high school.
He has received glossy fliers from Comcast, his cable company,
advertising cheaper DVRs. Each time, he said, he tosses them in the
trash.
"To some degree," he said, "I'd feel like I'd be selling my soul if I
switched.
-end
tivo's problem in 2 words? bad advertising. it's 2005 and the VAST
majority of people that i talk to don't even KNOW what tivo is...forget
about them thinking about buying one. from day one, tivo's commercial
and ads have been pathetic. they have always stressed that it pauses
live tv and not much more. people aren't going to pay a subscription
fee if they think that is all they are getting. i own a little bit of
tivo stock. weird that they could never do a decent commercial.
http/www.latimes.com/business/la-fi-tivo20feb20,1,7567637.story
TiVo Looks to Devoted Fans to Help Keep It in the Picture
As the video-recording innovator struggles with competition, it needs
its faithful more than ever.
By Alex Pham
Times Staff Writer
February 20, 2005
Joshua Rafofsky and TiVo Inc. can't live without each other.
Rafofsky, a 33-year-old technology consultant from Hancock Park, owns
three TiVo digital video recorders ‹ two to record multiple shows that
might be on at the same time, and another just to tinker with.
"I know it sounds weird," Rafofsky said, "but TiVo's almost become a
member of my family."
TiVo executives feel much the same way about Rafofsky, though they have
never met him.
"The one thing we have is our customers," said TiVo board member Randy
Komisar. "They love us, which is why we're still alive."
Throughout TiVo's precarious existence, enthusiastic ‹ some would say
evangelical ‹ customers like Rafofsky have kept the company afloat in
the face of repeated predictions that it would fold. That devotion
matters more than ever as the Alviso, Calif.-based company struggles
anew to convince investors, potential partners and new customers that it
can compete in a DVR market it helped create.
Since January, TiVo has lost a key partnership and reshuffled its
executive ranks as well- financed competitors have gained market share.
TiVo has never had a profitable quarter, and its stock has fallen 37%
since the beginning of the year.
"They've really taken a beating," said Alan Bezoza, cable analyst with
Friedman, Billings, Ramsey & Co., an investment firm based in Arlington,
Va. "Clearly their long-term fundamentals are deteriorating."
TiVo, founded in 1997, helped introduce a new category of consumer
electronics: hard-disk-based video recorders that allow viewers to pause
and rewind live television as well as tailor recording schedules to
their personal tastes.
A Box ‹ and a Verb
Among its fans, "TiVo" quickly gained currency as a verb like "Xerox"
and later "Google." Outgoing Federal Communications Commission Chairman
Michael K. Powell spoke for many when he called TiVo "God's machine."
More than 3 million households have TiVo's particular brand of religion.
Another 3 million more have similar but less expensive recorders
provided by cable and satellite companies. Those companies, once thought
to be TiVo's strongest potential allies, are now its biggest threat ‹
with the deep pockets and wide subscriber bases that TiVo lacks.
Its only ally in this field of giants, DirecTV Group Inc., appeared to
turn its back on TiVo by declaring in January that it planned to start
distributing a rival digital video recorder this year. Days after that
announcement, TiVo co-founder Mike Ramsay said he would step down as
chief executive but remain chairman. Then TiVo President Martin
Yudkovitz resigned amid grumblings about the company's inability to seal
a distribution deal with cable powerhouse Comcast Corp.
"TiVo is a little guy. We're loved, but we have no power," said board
member Komisar. "We try to deliver the control of entertainment back to
the consumer. But to do that, we have to cut across the domains of very
powerful, very complex businesses ‹ all of whom have really sharp elbows
and the ability to say no to us."
Despite that, Komisar and other TiVo executives say they believe the
company can stick it out. They point to the 94% of U.S. households
without a digital video recorder as a wide-open market. They also
believe that the company can survive just fine on subscription revenue;
TiVo charges $12.95 a month.
TiVo has always had a precarious existence. When Ramsay and Jim Barton
founded the company, few understood its concept of pausing live TV,
recording shows on a hard drive and fast-forwarding through commercials.
Ramsay recalled that people thought it was just a fancy videocassette
recorder.
"People spent a lifetime putting up with the limitations of TV," said
TiVo Executive Vice President Brodie Keast. "It was TV by appointment.
And while consumers said they often felt it conflicted with their lives,
they didn't see it as a problem that needed solving."
Competitive Pressures
Eventually, Ramsay and Barton broke through the initial skepticism and
got enough funding to start selling boxes in 1999. By then, TiVo wasn't
alone. ReplayTV, another Silicon Valley company that had simultaneously
developed a digital video recorder, released a product days before TiVo
did.
The two jostled for the attention of consumers and investors.
ReplayTV relied on sales of its hardware to make money. TiVo took a
different route and offered a subscription option that let buyers pay
either a monthly fee or a single lifetime fee. TiVo used the fees to
lower the upfront price of the box, making it seem substantially less
costly. The gambit paid off ‹ consumers took to the lower price, handing
TiVo the first round.
Then in 2001, Microsoft Corp. introduced UltimateTV, a device that
boasted numerous features not available on TiVo's box, such as a second
TV tuner that allowed users to watch one channel while recording
another. TiVo seemed hopelessly outgunned.
Consumers once again rode to TiVo's rescue by embracing its simple
design over Microsoft's feature-rich but complex device. Microsoft
stopped marketing UltimateTV a year later.
TiVo survived a second round with ReplayTV in 2002. Determined to offer
a superior device, ReplayTV relaunched with two new features: the
ability to skip commercials without having to fast-forward through them
and the ability to send recorded TV shows to other ReplayTV owners over
the Internet.
Although that won ReplayTV customers, it also attracted lawsuits from
Hollywood studios, which contended that the company was violating
copyright laws by letting viewers share shows.
Already burdened by debt, ReplayTV's owner, Sonicblue Inc., filed for
bankruptcy protection in 2003 and sold the division to D&M Holdings
Inc.'s Digital Networks North America, which agreed to remove the
program-sharing feature from new models.
TiVo avoided ReplayTV's fate. Its fast-forward button lets users zip
through commercials but not skip them altogether.
"That met customer needs while still being respectful of [the TV
networks'] business models," Keast said. "The question for us was, did
we want to spend money on a fight we know we'd lose? Or did we want to
live to fight another day?"
The Next Battle
Now TiVo is facing what is perhaps its greatest challenge yet.
Cable and satellite TV companies are starting to roll out competing
digital video recorders built into their set-top boxes.
Unlike ReplayTV or Microsoft, cable companies have the means to install
boxes into millions of homes easily and fairly quickly. In addition,
cable companies are luring subscribers by giving away the boxes and
charging a lower monthly fee than TiVo does.
Comcast, the nation's largest cable company, with 21.5 million
households subscribing, charges $9.95 a month and no upfront fee for the
device. TiVo, on the other hand, charges $99.99 for a basic recorder
(after a $100 rebate) and $12.95 a month for the service.
"The key question for TiVo is, now that DVR is available on virtually
every cable system, why do people need to buy TiVos?" said Josh Bernoff,
an analyst at Forrester Research.
In a recent Forrester survey, 588 DVR users were asked to rate how much
effect their devices had on their TV-watching experience, on a scale of
1 to 5, with 5 being the biggest effect. TiVo owners registered 4.6.
"There are not that many products that make users that happy," Bernoff
said. But users of cable DVRs scored 4.4 ‹ not far behind.
"It's the difference between deliriously happy and really, really,
really happy," he said. "The difference between a DVR supplied by a
cable company and TiVo is not that great."
TiVo has been aware of this threat for years. That's why it has
continually been in talks with Comcast and others to distribute its
software and services on cable and satellite set-top boxes.
So far, its only success is DirecTV, which signed a deal in 1999 to
distribute TiVo to its customers until February 2007. As of Jan. 31, the
El Segundo satellite TV company accounted for 62% of TiVo's 3 million
subscribers. But DirecTV last month said it would begin to market its
own DVR this year, not just the TiVo box.
TiVo's vulnerability was further highlighted when Yudkovitz, its
president, resigned a few weeks later. The former NBC executive was
recruited in 2003 to help TiVo secure licensing and distribution
partnerships with cable and satellite companies.
Then word got out last fall that TiVo was close to striking a deal with
Comcast. TiVo would piggyback on Comcast's reach into one-fifth of U.S.
households, while Comcast would take advantage of TiVo's brand.
The deal fell through, with each side pointing a finger at the other.
TiVo "reneged," said a Comcast executive who asked not to be named. TiVo
Chairman Ramsay denied backing out of any agreement. A Comcast
spokeswoman declined to comment.
The squabble left even longtime TiVo supporters spooked.
"TiVo is really facing a final showdown," said Gary Arlen, an
independent technology consultant and TiVo stockholder. "And it doesn't
look to be a winning battle."
TiVo executives disagree.
"Since we don't have a deal with cable now and we're doing just fine,
I'd have to say that we're not dependent on cable for our success,"
Ramsay said.
Instead, the company unveiled a strategy to tightly integrate the TiVo
box with broadband Internet through a home network. That would pave the
way for TiVo to deliver movies, video clips or music on demand to the TV
via the Internet ‹ whether it's piped in by cable companies or by phone
companies.
TiVo also aims to bring content to other devices, such as laptops,
hand-held movie players or cellphones. It took a step in that direction
last month by announcing an alliance with an old foe, Microsoft. The
deal creates a free service, dubbed TiVoToGo, that lets people transfer
recorded TV shows from their TiVo to their laptops or other devices
running Microsoft's Windows operating system.
Those tactics won a mixed response.
"I have TiVo, so from the standpoint of an early technology adopter, I
think it's very interesting," said Rob Sanderson, an analyst with
American Technology Research. "As an analyst trying to determine whether
this will help TiVo overcome its challenges, I don't think it will.
"This will make hard-core TiVo users very happy. But their problem is
not preserving that recurring revenue stream. Their problem is in
growing that base into the mainstream. This will not help them get those
mainstream folks who just care about the basic DVR functions."
Wooing Advertisers
TiVo also is working hard to recruit advertisers. Though TiVo doesn't
have the reach of traditional TV, it does have the ability to gauge how
effective the ads are by tracking how many viewers watch them and for
how long. And it can play with the advertising format in ways
traditional TV cannot. For example, it can store ads of longer duration,
say five or 10 minutes, on the device's hard drive.
"We're starting to see some industry acceptance of DVR as an ad
vehicle," said Tim Hanlon, senior vice president of Starcom MediaVest in
Chicago, a subsidiary of Paris advertising agency Publicis Groupe. "And
TiVo gets full marks for creating some of the most innovative
advertising platforms."
At the same time, TiVo still lacks the broad reach advertisers seek.
"Scale brings you to the table," Hanlon said. "Right now, they're a
niche company."
But TiVo has an advantage ‹ a small army of fans.
Rafofsky has persuaded dozens of people to get TiVo, including his
father, his sister, a niece, two stepbrothers, his in-laws and five
buddies from high school.
He has received glossy fliers from Comcast, his cable company,
advertising cheaper DVRs. Each time, he said, he tosses them in the
trash.
"To some degree," he said, "I'd feel like I'd be selling my soul if I
switched.
-end