What TiVo needs to do to make the Wall Street boys happy (and survive)

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TiVo can’t catch a break. The company just rolled out its next-gen platform and then finally ended a long court battle with Dish Network, causing its stock to surge to new heights. This all happened within the last two weeks. But then last night the company announced its sad Q4 2009 financials.

You already know the problem. TiVo is having a real tough time signing up new customers and retaining current ones as content providers keep pushing their low-price DVR options. The company only managed to net 46k new subscriptions in the last months of 2009, bringing the total headcount to roughly 2.6 million. That’s down from the 4.36 million subs TiVo had in January 2006. TiVo ended up losing $10.2 million during the fourth quarter even though revenue improved 16% to $68.5 million.

It’s sort of sad, actually. DVRs have lost their magic the last 10 years as cable companies offer cheap alternatives with smaller feature sets and none of the trademark TiVo charm. But TiVo can’t die yet. I’m not ready to live in a TiVo-less world. The company must work on these three items in order to survive the next decade.

1. Show consumers why TiVo is worth the premium

It’s hard to describe why TiVo is better than your average cable DVR. You have to use it to really appreciate the differences, but that shouldn’t stop the company from advertising. When was the last time you saw a TiVo ad on TV? Or a celebrity plug it on a talk show? The last plug I can remember was way back when Rosie O’Donnell used to talk about it on her show.

Get TiVo in the public view. Have demos on Best Buy and Sears end caps. Get it it into Walmart so Jim Bob and Lucy can experience the difference. People need to see and feel the DVR, which is something you can’t do via the Internet.

I can tell you from my Circuit City days that many people already think they have TiVo. But they don’t. They have a cable companies DVR. It’s just like Xerox and Kleenex. TiVo needs to do a better job educating while demonstrating its product.

2. Work with more content partners

Did you know that Comcast offers TiVos in some markets? It’s on Comcast-owned equipment, but it runs the TiVo software. Subscribers pay a slight premium, but they get all the joy of a TiVo along with the content from Comcast’s OnDemand without the traditional up-front cost. This is a win-win-win.

But what happened to DirecTV? TiVo used to be the only DVR option for the satellite provider and consumers still want it. It’s rare that someone doesn’t leave a comment on one of our TiVo posts inquiring when the new DirecTV TiVo is coming out.

The Conax deal is a prime example of this. It will increase brand recognition while showing consumers what makes TiVo special. Of course content companies might not want to pay the premium involved, but the recent Dish Network ruling might make them think twice.

3. Redo the pricing scheme

Currently you either have the option of buying a $299 or $499 TiVo and then deciding whether you want to pay $12.95 monthly or $299 for the life of the box. That’s fine, the company needs the revenue from these subs while covering the cost of the equipment. But why not offer pricing a like cell phone companies do, by having in-contract and out-of-contract prices.

The in-contract price would give customers a lower upfront cost but require them to pay the $12.95 monthly fee. There could even be an ETF involved to ensure that the company doesn’t lose money on hardware. (I know, I’m evil) But the TiVo Premiere XL could be offered for $299 with a one-year contract or $199 with a two-year contract. Consumers are used to this type of pricing strategy anyways. Cell phone companies have been doing this for years.

The out of contract price could be the current prices with the standard Premiere going for $299 and the XL for $499. But then customers wouldn’t be tied down with a contract and free to cancel anytime. The lower in-contract price would no doubt open the DVR up to new markets and get it into more homes. That’s the goal, right?

Don’t count TiVo out just yet. I don’t even think the company deserves to be kept on deathwatch. The new Premiere hardware is fine even though it’s nowhere near as good as it could and should have been. It still has the tools and magic to get the job done. There are plenty of new markets and areas where TiVo can expand and grow. But the key is getting TiVo in back in the public’s eye and showing them why it costs a lot more than their cable-provided DVR. Show them why TiVo is TiVo.

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