TiVo needs a new philosophy

I’ve written quite a lot about TiVo for several reasons – starting with the fact that I’ve been a big fan. Moreover, the PVR application is ripe for innovators in areas from content to home networks. But I’m afraid TiVo is nearing the crisis stage as a business. And note that I don’t own the stock, I never have owned the stock, and I don’t intend to buy the stock in the future. I just want a company – an experience – that I cherish to thrive. To do so, TiVo must take some bold steps.

TiVo’s latest financial announcement prompted this post. As you may have read in your local or national newspaper last week, TiVo’s fourth quarter marketing push failed to deliver the desired results. The company did cross the 3 million mark in total subscriptions. And the 698,000 subscriptions added in the fourth quarter sounds good. Unfortunately, 447,000 of the new subscriptions came via DirecTV. As I covered in “PVRs and MPEG-4 arrive from DirecTV,” TiVo makes far less on DirecTV subscriptions and DirecTV is poised to launch its own PVR.

The fact is that TiVo is in a bind with its stand alone receivers. The company should have added a second tuner to support simultaneous recording long ago. The company now faces PVRs from satellite and cable companies that can record two shows at once. Moreover, the PVRs built into cable and satellite boxes deliver superior quality because the video is delivered and stored digitally. TiVo’s stand alone receivers must encode an analog signal that’s received via cable or a digital set-top box – even if the original video was transmitted digitally. The encode operation results in an inherently lower-quality picture.

Despite being a huge fan, I had to advise my Mother and Sister to go the cable-company PVR route recently. You don’t have to buy a box up front with cable, and you get more capability in terms of recording features. The cable PVRs being sold in my area are HDTV capable. The HDTV-capable TiVo boxes still start in the $1000 range.

Still, TiVo offers a user experience that’s unmatched by other PVRs. But unless the company is close to licensing that software/service layer to a bunch of cable companies, it had better find another way to stay in business. As I stated in “Can TiVo get PVR/DVR right?” the company needs to break open its technology suite and business model.

What TiVo needs to do is offer the software and services layer independent of hard-disk-based boxes. They can still sell boxes, and hopefully dual-tuner PVRs. But they need to offer their technology in other ways. For instance, why not license the TiVo software/service layer to TV makers. A TV could come TiVo ready. The content could be stored on a TiVO box connected via a wired or wireless network, or on a PC-based home media server.

In a comment to a previous post, a reader suggested that the content owners would sue TiVo if they unbundled the technology. Presumably, the content is more secure from would be bootleggers when it’s store inside the TiVo box. But digital rights management can solve that problem. TiVo should take both the potential legal risk and the potential risk to its current way of doing business. If they don’t take drastic action, there’s soon not going to be anything to protect anyway.

I give the company a little credit for recent announcements. The portable-media plan I covered in “TiVoToGo: Transfer shows to notebooks” would be outstanding if it worked with DirecTV or older stand alone TiVo receivers. The company has also opened up the software architecture via the TiVo Applications Platform. Presumably third-party software developers will now be able to offer everything from music libraries to multiplayer games for TiVo boxes. And perhaps an open software platform would have worked had it been offered several years ago – perhaps it would have made TiVo the PC of its era. But today, TiVo has lost any chance of being the center of the wired home. The path to success can only come via unbundling and licensing where the TiVo experience can be embedded in far more products. I’d certainly pay an extra $50 if my next TV came with “TiVo Inside.”