Tivo

I. From the consumers' standpoint

1. What is TiVo?

TiVo is an entertainment service that uses a technology that provides an easy-to-use interface between the huge channel line-up and what people really want to see on their TV. The idea behind TiVo is to offer consumers the possibility of being in charge of what the see when they see it. The physical TiVo unit is a set-top box that interfaced between the broadcast feed and the television set.

TiVo offers its consumers a variety of features:

a. The chance of recording up to 30 hours of programming.

b. The possibility of rewinding, pausing, or fast forwarding a live or recorded TV show.

c. The Electronic program guide (EPG) which allows the consumer to see:

* Previews of shows available for recording

* A TiVo produced magazine

* Network showcases where networks promote their best shows

* On-screen TV guide

d. The Season pass: consumers specify their favorite shows and TiVo automatically records all episodes.

e. The Thumbs button: with the "thumbs up" or "thumbs down" button customers indicate how much they like or dislike the shows they are watching.

Furthermore, TiVo is an "intelligent" digital VCR. Consumers may program it but by developing a user profile TiVo also makes suggestions about programs the consumer might like to watch and records them automatically. Through a telephone connection it gets nightly updates on the schedules and incorporates feature upgrades.

2. What factors facilitate its adoption?

A. Ease of usage: through the remote control the consumer is able to decide what he wants the service to do. It does not require any specific skill to use it.

B. Extensive distribution system: As of October of 1999, TiVo's set-top boxes are available in major consumer electronics stores across the nation such as Best Buy, Circuit City, and Sears.

C. High household penetration of TV sets: the United States accounts for 102 million TV-watching households and potential TiVo customers.

3. What factors make adoption difficult?

A. Difficulty to explain TiVo's advantages: consumers have to use the product to understand the many features available.

B. Inconsistent positioning: is it 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.

C. Required knowledge of the product by retail sellers: TiVo often requires from salespersons, in depth explanations and demonstrations. Due to the high turnover rate (50%) in consumer electronics stores, training is ineffective .

D. Consumers concerns about privacy: many consumers may feel the interactive exchange of information is a trespass on their privacy.

E. Price: currently TiVo's price is very expensive for consumers who just want to try the experience of controlling what they watch.

4. Who is TiVo best suited for?

A. Consumers with high interest in particular shows or type of shows.

B. Working consumers for whom it is difficult to follow their favorite shows.

C. Kids

II. From the networks, advertisers, and cable/satellite companies' standpoint

1. What do they want TiVo to be?

Networks, advertisers and cable/satellite companies view TiVo as a threat to their industries, just like they did when the remote control was first introduced to consumers. Instead, they should start to see the many advantages that TiVo has to offer. Networks would be able to know in advance how a show will be received, they will also be able to determine audience sizes, produce new shows depending on consumer preferences, market advertisement slots more effectively, and of course they could be featured in some of TiVo's offerings. For advertisers, the same positive effects apply, they would not need to spend so much money on prime time shows, they could air different commercials for target audiences at different times of the day, and they would also have the chance to identify which commercials are being well received and which not. Overall, TiVo can reduce many costs for these two industries while increasing their value with all the information TiVo will provide them with.

2. What are Microsoft's potential strength's and weaknesses in this market?

Strength Weaknesses

The 1 million subscriber base of its subsidiary WebTV Too high-tech for consumers to use

WebTV's current offering of internet and television Price hasn't been defined yet

Possible alliance with DirectTV to offer a bundle package Lack of knowledge of the market

UltimateTV offers more features (watching or recording two shows simultaneously, pay-per-view movies, and 30 second skip) The 30 second skip might create confrontation with the advertising industry

Strong distribution system Monthly fee for service

Brand name already established and recognized

Deep pockets to finance the new venture

III. TiVo's Action Plan

1. Description and characterization

TiVo's main objective for the upcoming fall and Christmas season is to increase their market share while building brand equity. To attain this goal, the have focused on three elements: product, price and communications.

TiVo is working towards an alliance with DirecTV to bundle their "30 hour box" set with DirecTV's receiver and with this reach more of the 102 million TV-watching households. TiVo has also decided to lower the price of the "30 hour" box from $999