May has been a difficult month for TiVo. On May 18th, the company filed the following report with the SEC:
On May 14, 2010, the United States Court of Appeals for the Federal Circuit in Washington, D.C. granted EchoStar’s request for an en banc hearing by the full Court of Appeals. This order vacated the March 4, 2010 decision by the Court of Appeals to affirm the United States District Court for the Eastern District of Texas’s finding of contempt of the District Court’s permanent injunction against EchoStar regarding EchoStar’s on-going infringement of TiVo’s U.S. Patent No. 6,233,389.
On May 25th, the company also reported a wider than expected loss. Both of these events are a crucial factor that question the long-term sustainability of TiVo.
Today, nearly every cable company is offering their own DVR product and an increasing number of set-top boxes are being released into the market with DVR and web media capabilities.
Part of the problem with TiVo is its lack of consumer-facing unique features. Most consumers simply want to record their shows and skip commercials. For that functionality, they can easily and more cost effectively acquire a DVR box from their cable company. TiVo currently costs $12.95 a month plus CableCARD fees charged by the cable provider. While this fees varies, the net amount for each TiVo is roughly $15.95 per month. When you have more than one TiVo box, it gets very expensive.
Similarly, TiVo charges users an exorbitant amount for accessories that should come with the box. For example, the TiVo wireless card is almost $100. Again, when you factor in multiple devices, it’s a real expense and not an investment.
With higher costs, installation fees and technical challenges, its no wonder that TiVo continues to lose subscribers.
Recommendations for TiVo:
- TiVo’s products are vastly superior to most DVRs. While this is a differentiating factor, TiVo needs to emphasize their features and how they’re better than everyone else.
- TiVo should consider reducing subscription fees. While this is a risky suggestion, TiVo should test various price levels.
- Tiered service — Netflix has mastered the tiered service model and it works well for them. If customers aren’t willing to pay $16/month for advanced DVR service, reducing the price along with service would be an interesting approach.
