Sure they’ve struggled from the beginning on the business end. And yes, they have gone through an innovative ‘dry spell’ over the last couple of years and lost their way a bit.  But even with all of that,  they are still the iPOD of the DVR world. When it comes to usability and elegance, they are the standard all others are measured against.

 

TIVO seemed to regain their focus over last 6 months with some interesting additions like the upcoming ‘KidZone’, the ability to download podcasts, online movie ticket purchases, a creative advertising  deal with KFC, remote programability via Yahoo, and TIVO Mobile with Verizon.  They clearly would like to move into more sophisticated online services like digital video rental, location independent viewing, and more.  

 

So what’s wrong?...

 

I believe that they have totally misread the market with their just announced pricing model for the current hardware platform.  They have come out with a brand new scheme that will bundle an 80 hour Series 2 TIVO as part of one of three plans:

 

 

As a part of this new pricing structure, they have also quietly eliminated the lifetime subscription plan, taking that option off the table all together. If you want a new TIVO, you have to choose one of those plans.

 

As good as the current TIVO is, it is still a single tuner DVR that can only record non-premium cable programming in standard definition.  It’s biggest appeal is to someone that just has a TV connected to their cable wire.  No set top box. No premium channels. No ‘movies-on-demand’.  Just the basics.  

 

And that is the problem!

 

This is exactly the wrong profile of customer that TIVO needs to grow its business.  Why?

 

 

 

So What should TIVO do?  Two things...

 

First: Move away from selling hardware to the low end of the market. Partner with providers to license the TIVO software on set top boxes, and create a software only version that can run on PC’s and Macs with any built in tuners they have.  Most people feel the monthly fee is a rip-off when online channel guides are plentiful on the net, so just drop it.

 

Second: Focus hardware efforts on the high end of the market.  Produce boxes with multiple tuners, HD recording, cable card support, digital audio, and HDMI connections - TIVO Series 3 is a good start. Build in a wireless access point/cable modem - bring the internet right into the TIVO box to open up IPTV opportunities- and let also it be a MANAGED wireless access point for the consumer.  Add ‘Sling-Box’ like capabilities and ways to connect and share with the ‘software only’ TIVO’s.  Extend the ‘Media Access’ capabilities to all media - not just photos and music.  Add community aspects to the system - ratings/tell a friend/group tagging.  Become the one sane voice when it comes to DRM and just say NO!  Be equally happy to sync with iPods or Creative Zens - openness really matters.  Build up relationships with systems integrators through organizations like CIDEA that really cater to high end users.  

 

Focus on owning the high end.

 

The opportunity to generate revenue and find a return on continued innovation is far superior in this part of the market.  Many of the ideas that have been coming out of TIVO recently could all continue. Only now they would be focused on a more technically savvy audience with more disposable income.  

 

Time is running out.  TIVO needs to take a real hard look at itself and decide what it wants to be when it grows up.  It won’t get another chance.