Tivo Inc, Case Study

Tivo Inc, an assignment

1.0 Introduction

The case is about the introduction of Tivo, a new service that provides the TV viewer the flexibility to watch what they want when. The product is expected to change the way people watch TV by offering them the flexibility in programming, skipping commercials, pausing live TV and recording programmes for future viewing.

In addition, the service offers captures the subscriber's preferences and can automatically record programmes that are considered to be in this category.

To obtain this service, the subscriber has to buy a Tivo set top box and the Tivo service. The box is installed between the broadcast feed and the television set and is able to store up to 30seconds of live programs before sending to the TV. Although this introduces a delay in the signal, it ensures that the viewer is able to rewind and pause live TV, skip commercials, etc.

While the product provides great benefits to the subscribers, and in fact 72% of the early adopters find the product very great, there are a number of concerns too.

The Television and the cable network operators are concerned with the possibility of this service becoming a threat to their industry, similar to the concerns they had during the introduction of the remote control.

Advertisers are also concerned that that if users must skip adverts, it will be difficult for the producers of consumer goods to drive their sales.

These concerns are however addresses by the possibility of taking advantage of the new technology to effectively reach the consumers.

2.0 A statement if the problem

The market penetration of TiVo has been very poor. Fourteen months after its introduction only 0.04% penetration has been achieved out of the total of 102million TV watching population. This is also reflected in the poor revenue position of the company. Exhibit 3 shows that the company recorded a loss every quarter since the introduction of the product in September 1999 and has been getting worse.

3.0 Issues from the case

3.1 The Product

TiVo is a combination of a set top box and service. Users will have to buy a box and subscribe separately for the service.

The product allows the user a lot of flexibility in watching TV with the following benefits:

* Alternative to VCR; no video tapes needed and longer recording time.

* Better recording quality due to digital technology.

* Ability to pause live TV and replay instantly without missing subsequent programs. This deals with the possibility of distractions while watching favourite programmes. Distractions could be baby crying, a phone call from the boss, etc, which are so important and cannot be avoided.

* Automatic recording of favorites programs; season pass feature. Users don't have to rush home to watch their favourite programmes. The flexibility this offers is such that the user can watch these programmes at his or her convenience.

* Capability to skip commercials fast.

* Intelligent; ''thumbs-up'' and ''thumbs-down'' buttons that helps the system customize programming and suggests programs consumers might be interested in. Flipping through the maze of channels on a receiver can be very tedious process. By having the system customize programs based on users' preferences, it is possible to directly see what one would like to watch without spending tme to search.

* The Electronic Program Guide (EPG) that allows consumers to access previously recorded programs and to access TiVo's magazine.

Despite these wonderful features, TiVo was not without problems. Principal among these was poor sales which may have been caused by several factors that will be discussed in the various sections.

The wonderful features, described above, were not easy to explain to the public, hence to sell the product, it typically required a demo.

Also the product did not enjoy much support from manufacturer's reps which made it difficult to send urgent messages to the distribution partners.

In tests carried out, navigating the menus and channels was confusing; changing channels would freeze the pictures.

3.2 The Price

* The typical prices for the TiVo hardware was $499 for recording up to 14 hours and $999 for 30 hours recording. This included the ability to pause, replay and fast-forward live TV. The subscription service of $9.95 per month, $99 per annum and $199 lifetime would allow the user to record programmes and provide access to preferential programming.

* No reference point for deciding on the price. Being a new product there was no basis for deciding on the price. It was fixed arbitrarily. It turned out that the price of the boxes became higher than most TV sets.

3.3 The Promotion

* Inconsistent positioning: It is difficult to determine if the TiVo product is a personal video recorder, a digital video recorder, a personal digital recorder, an intelligent video recorder, or on demand TV. The mass media campaign utilized has not been effective in positioning the product in the consumer's mind. This contributed in inability to sell the product as originally expected.

* Very little awareness. There was very limited media campaign and even the message carried by the limited campaign was not clear enough to promote the product. The promoters of the product also expected the early patrons to advertize the product by word of mouth, but this was not happening.

* Requires extensive explanation and in-store demo before sale.

3.4 The Place

* Outlets for the boxes are national chains like Circuit City, Best Buy and Sears.

* High turnover of salesmen.

Because the product requires in store demos there is a great need for salesmen in the stores to achieve this. However with 50% turnover of the salesmen, training and retraining of salesmen becomes difficult.

* Variance on how it was sold also adds to the inconsistency on how it is perceived.

3.5 Other issues

* Competition

Two major companies, Replay Networks and Microsoft