TiVo's Recent "Paradigm Shift" Likely to be Unsuccessful
New report from The Diffusion Group suggests that TiVo's latest strategy to focus on courting Cable TV players likely to fall short.
Dallas, TX (PRWEB via PR Web Direct)
July 20, 2005 -- A new report from The Diffusion Group, a leading digital
consumer and new media research consultancy, proposes TiVo's new plan to seek
"mass deployment" of the TiVo service through cable service providers, while
likely to help boost revenue, will do little to generate profit. According to
TDG's new report, "Can TiVo Survive? A Case Study in the Perils of
First-to-Market Innovations," former CEO and co-founder Mike Ramsay warned board
members and fellow executives in January 2005 that licensing deals with digital
TV operators would not be the best way to grow TiVo's business. In fact, said
Ramsay, "…the economics are not very attractive."
"A key reason for
TiVo's recent shift in leadership was disagreement regarding to what extent TiVo
should be courting video service providers," said Scott Kipp, research analyst
with The Diffusion Group and author of TDG's latest report. "As DirecTV phases
out shipments of TiVo DVRs, TiVo will be forced to come to terms with an
increasingly competitive market flooded by free DVRs from video service
providers. Although 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."
Kipp cites two specific challenges with this
service provider-centric strategy. First, TiVo will have limited control over
end users and likely end up with gross revenue of around $1 per subscriber per
month. Similar to how DirecTV controls its subscribers, cable operators will
seek to retain control of the DVR and not let TiVo download movies to the
set-top boxes. Video service providers will not cede control of this aspect of
their business to TiVo, thus relegating TiVo to a secondary position in such
relationships.
Second, cable companies are planning to base their
set-top box implementations on CableLab's JAVA-based OCAP standard while TiVo
features a proprietary Linux-based implementation. Yes, these differences can be
overcome, but significant integration effort is required for compatibility at
the application layer. TiVo will have to thoroughly redesign their software to
work with OCAP, changes which many in the cable industry doubt that TiVo will
undergo given its stubborn ways and proprietary leanings. It will take several
man-years of software development to make its DVRs compatible with the cable
industry.
"This is not to suggest that relationship with cable,
satellite, and IPTV video service providers should not be an important component
of TiVo's strategy," continues Kipp. "However, to generate sufficient profits,
TiVo will need to focus a tremendous amount of energy on its primary or
standalone subscribers who pay $12.95/month to TiVo for its full service and
unique user interface. VSP partnerships will help generate some revenue and
certainly get the TiVo brand in front of many consumers. However, in order to
grow revenue and profits TiVo will need to leverage these relationships to sell
its stand-alone hardware and service."
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 The Diffusion
Group (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
www.tdgresearch.com.
Contact:
Andy Tarczon
214-677-9723
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Source : http://www.prweb.com/releases/2005/7/prweb263947.htm