Working to Create the Market?
TiVo, Inc. Founded in 1997. Based in
Alviso, CA, USA. (Silicon Valley). Revenue was $4.1M in most recent quarter.
Traded as TIVO.
What Is the Market?
In 1997 the
founders of TiVo, Inc. set out to create a new market, personal television
control systems and services. The television content market was (and is)
saturated, as was (and is) the market for video recording. However, there was
no market for personal control of the content. The concept - create a way for
owners to take control of their television experience, recording shows while
they watch other shows, and eliminating commercial interruptions even while
watching TV "live." The product set - personal video recorders. The company,
however, makes its revenue from subscriptions (a user pays a monthly fee for
programming service) and from licensing the technology. Sony and others are
license holders. With around a quarter million customers/subscribers, the
company is running at a revenue rate of about $20M per year.
TiVo Working To Create That Market?
The most successful and
repeatable path to creating a new market is to solve a specific problem that is
strongly felt by your prospective customers. If the problem is substantial,
customers will work to resolve it. Another path, somewhat harder to follow, is
to pick a less critical problem and then reduce the cost of solving that
problem to the customers to the noise level.
TiVo does not solve a
very real problem for TV viewers. It is certainly more convenient to use (after
the learning curve) than a VCR, but passing commercials and tailored recording
of TV shows are not solutions to critical problem for most viewers. For
viewers, TiVo is a solution looking for a problem.
Perhaps in response
to this, TiVo's sales strategy has become more focused on problems faced by
channel partners. Instead of selling directly to the end users, the company is
selling to channels that use personal control of television as a competitive
advantage. For companies like DirectTV, TiVo is a sales tool. The product
solves a problem for hardware companies and for satellite broadcasting
As long as the customers of companies such as Sony,
DirectTV, AT&T, and Phillips feel strongly about the problem, or the
channel and TiVo combine to discount the product so far that it feels
inexpensive, the channel strategy will work. However, if the end users do not
place a high value on the problems to be solved, the channels rightly will look
elsewhere for the right competitive advantage.
What Is the
To DirectTV and the other channels, an opportunity to
differentiate the product. For Sony, this represents a chance to dabble in a
new path for home entertainment and perhaps set top boxes. For a very loyal
group of consumers, this represents a way to control their viewing experience.
The model fails however because that group is not significant in size.
Is the New Market Working?
A critical factor for success in
existing markets is the skill of the supplier to handle basic operational
requirements. If the product does not work, can't be shipped on time, or if
customer service is inadequate, cost cutting will not overcome the deficiency.
These operational skills are less critical in new markets, but they are still
important. A gating factor to TiVo's success will be basic operational
competence. We are not suggesting that the competence is lacking, but if that
competence is missing the new market may fail.
interactive television seems to be about making television a more rewarding
entertainment experience. For many of us, that is a nice feature, but it is not
a serious problem. TiVo is not likely to create a new market.