What I find annoying with this ‘death watch’ bullshit is that TiVo has continued to meet or beat their projections quarter to quarter. They laid out a plan for fiscal 2005 and 2006, and so far they have been able to execute that plan nearly perfectly. 2005 was all about boosting subscriber numbers, and they said right up front that they would be spending a lot of money, and therefore increasing losses, to acquire subscribers. Because TiVo subscribers tend to be very loyal (yes, some people dump TiVo, but not most users), getting them into the ‘TiVo family’ before they are lured by a cheap cable DVR, etc, helps lock in long term revenue for TiVo. Strike while the iron is hot – build the user base *before* the competition gets intense.
Fiscal 2005 just ended, 2006 is to be about profitability. They will be cutting back on rebates and promotions (so you might want to buy now, before the current rebate program ends). They paid off their long term securities debts at an accelerated pace in 2005, leaving them without that burden for 2006 and beyond. They came out with the ‘night light’ S2 units in 2005, investing in engineering to reduce production costs of the HW. They also started rolling more features into the standard subscription – HMO, TiVoToGo – and now we’re seeing HME in trials and in 2006 we’ll see enhancements to send video back to the TiVo from a PC, broadband video distribution, integration with portable media devices, and more. All integrated into the standard service.
TiVo has said they do not intend to compete on price, but on value. So you may get a cable DVR for $10/month – but it is a DVR. For $13/month (or lifetime, which I think is better anyway) you can have a DVR with more capabilities. Yes, TiVo costs more – with a $99 up-front cost and a few more bucks a month. But TiVo is aiming at people looking for more than just a dumb DVR. They’re looking for a niche for people who want a DVR and other media features, for less money than it’d cost to acquire separate systems for things like streaming music, etc.
They’re also fighting to keep the Cable Card deadline in place so cable companies have a vested interest in improving CC support – which will be good for all users. And they are moving TiVo into higher end machines – focusing more on the growing DVD recording market, as well as HD.
Are there risks? Hell yes. But TiVo has been on a steady course and they keep delivering what they’ve promised – usually beating the street’s estimates too. Most of the death watch stuff I’ve read is crap. People who don’t seem to know what they’re talking about just spouting off. Many companies lose money while starting out, in fact, most do – I’ve seen people say that the fact TiVo loses money means they’ll die. Sure, if they can’t *stop* it – but they’ve said, for a while, that if they stopped spending money on acquisitions and just went to operations with their current users, they’d be profitable. They are already turning an operating profit, the losses are caused by the marketing expenditure to grow that user base. If they’re willing to slow down growth, they can turn a profit overall.
Then there are people who say that because they don’t have a cable HD solution today they’re dead. Which is idiotic. The *vast* majority of the TV viewing market do NOT have HDTV. Only recently have sales of *new* televisions tilted to a majority of HD and HD-ready sets. Until then most new sales were still SD sets – and that’s just *new* sales, which is a drop in the bucket compared to the installed base. People talk about the millions of HD sets, which is nice – but out of context. In context those millions are a very small percentage of buyers. And most of them are in the higher-end, early adopter segment – which is *not* actually TiVo’s target demographic.
Does TiVo need to do something with HDTV – yes, no question. HDTV is here to stay and continues to grow. But they don’t need to have it *now*. Notice that there aren’t exactly a ton of CableCARD (the only way to do 3rd party HD cable recording) DVRs on the market. CableCARD as had a painful roll out with many issues and delays, most vendors have held back. Right now there are a fair number of CC enabled TVs, and that’s about it. Most sets, even most HD sets, aren’t CC enabled. The market is still young with a lot of time.
So it is really the early adopters pissing and moaning that because TiVo isn’t giving them what they want right away that they must be ‘out of touch’ and a dying company. Which is just asinine. If TiVo can deliver HD products in fiscal 2006, as they’ve said, that should be well in time to still catch the market on the start of the growth curve. In the meantime their SD products suit the vast majority of users just fine.
And, of course, people cry doom and gloom over the potential of TiVo losing DirecTV as a channel. First of all, DirecTV has no plans to drop TiVo support. The existing agreement allows them to support users indefinitely, and they’d be stupid to turn off ~2million systems. They’re not that dumb. Even if they did stop selling new units, and even that isn’t clear – TiVo says that when/if the NDS units ship they will do what is needed to remain a competitor – TiVo gets revenue from the existing users. But even if they did lose that, DTV is less than 10% of their revenue. They may be nearly 2/3 of the total subscriber base, but TiVo gets just over $1 a month per user. They’ve said they could lose that revenue base and absorb the loss – of course they’d also be free of any expense of supporting DTV.
It seems like predicting doom for TiVo is the latest fad, and it is damned annoying to see people spouting the same old bullshit over and over.
