Strategic Inflection: Tivo in 2005
Strategic Inflection: TiVo in 2005
Tivo's consumer perception of its patented features and level of service could not be better. Tivo also had the first-mover advantage being the first company to enter the DVR market and still has a highly differentiated product that matches customer perception. There are network effects derived from current users promoting the brand via world-of-mouth, these references are vital to gain a significant consumer base in the mass market.
The key issues TiVo faces is making any of the business models that the company has explored work. When going directly to the consumer it faces a really high Subscriber Acquisition Cost (SAC) and; when partnering with cable and satellite networks the problem becomes one of profitability with decreasing Average Revenue Per User (ARPU) within this channel.
I like the statement made by Mr. Ramsay "We're not really in the DVR business" TiVo is not a recording device but a home entertainment device and there it lies the whole business model problem; the company hasn't been able to define whether it is a hardware manufacturer, software vendor or advertising channel. My personal decision would be to become an Operating System Platform or Software (+ hardware design-only) Provider; this has enormous implications.
As the word platform denotes there is a large user base required and therefore the key business metric to monitor is ARPU irregardless of the distribution channel the company may possibly choose. There the second piece of strategy could lie, SAC has to be near to zero as the revenue streams become the profit driver, networks and cable companies should be provided free software licenses to TiVo functionality to embed in their boxes. ARPU should be increased via value added services as Pay Per View and Advertisement (Ad/Entertainment) distribution. Customized content that reaches TiVo users ahead of other content distribution channels adds value to the user and the content producer
Tivo's consumer perception of its patented features and level of service could not be better. Tivo also had the first-mover advantage being the first company to enter the DVR market and still has a highly differentiated product that matches customer perception. There are network effects derived from current users promoting the brand via world-of-mouth, these references are vital to gain a significant consumer base in the mass market.
The key issues TiVo faces is making any of the business models that the company has explored work. When going directly to the consumer it faces a really high Subscriber Acquisition Cost (SAC) and; when partnering with cable and satellite networks the problem becomes one of profitability with decreasing Average Revenue Per User (ARPU) within this channel.
I like the statement made by Mr. Ramsay "We're not really in the DVR business" TiVo is not a recording device but a home entertainment device and there it lies the whole business model problem; the company hasn't been able to define whether it is a hardware manufacturer, software vendor or advertising channel. My personal decision would be to become an Operating System Platform or Software (+ hardware design-only) Provider; this has enormous implications.
As the word platform denotes there is a large user base required and therefore the key business metric to monitor is ARPU irregardless of the distribution channel the company may possibly choose. There the second piece of strategy could lie, SAC has to be near to zero as the revenue streams become the profit driver, networks and cable companies should be provided free software licenses to TiVo functionality to embed in their boxes. ARPU should be increased via value added services as Pay Per View and Advertisement (Ad/Entertainment) distribution. Customized content that reaches TiVo users ahead of other content distribution channels adds value to the user and the content producer