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Tivo, the leading provider of digital video recorder (DVR) technologies and services
in US was founded in 1997 by Ramsay and Barton. With the entrance on tivo in the
industry the competition had increased to more than dozen competitors by 1998.

But despite having the strongest brand, the most differentiated product in terms of
features and one of the largest installed bases at that time, Tivo reached the Inflection
point in 2003.

In the case will discuss the reasons which led to this situation for Tivo and what
strategies can be adopted by the company to overcome this stage.

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The analysis of the external environment i.e. the industry in which Tivo operates can
be explained using Porter¶s 5 forces model.

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The risk of entry into this industry was low, which can be observed by the fact that at
the time when the company was founded in 1997, that time it was the sole provider of
DVR service but eventually it has increased to more than dozens including Comcast,
AOL Time Warner, etc.

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The tivo faces tough completion from the company named Echostar, which is quick
eating away tivo¶s share in DVR segment. Also there are the companies like Comcast,
Time Warner and Cox which are into providing Digital Set top boxes with built-in
DVRs and their own services.

    



Tivo had a limited buyer base. There existed improper brand awareness, as a result
many consumers were confused as to what Tivo DVR was and what it can do. The
buyers precieved the tivo¶s product to be expensive. As such the company was forced
to produce more cheaply, by reducing the number of parts.

     


The suppliers of components for Tivo, such as Cable, Satellite, Computer and
consumer Electronic Companies were in position to enter the market by producing the
product similar to Tivo at affordable Price. Also Motorola which was the leading
provider of cable set-top decoders, started shipping DVR- equipped boxes with two
tuners, enabling users to watch live one show while recording the another.
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Tivo DVR faced major threat from cable operators which controlled the programming
to nearly 67% homes. The Cables were still preferred by many viewers because of its
lower price and convenience of having everything in one box. The another threat
faced by Tivo was from ever upgrading Personal Computers which were capable of
storing and retrieving TV shows, along with digital music and photos.


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To discuss about the internal analysis we will discuss about the Strengths and
weakness of the company.

 


1.c Tivo had the first mover advantage when it entered into this business.

2.c Tivo had audience measurement services which allowed buyers to analyze
viewer behaviour

3.c Tivo designed its product in such a way that cost was low and manufacturing
relatively easy since the unit was outsourced.

4.c Security and privacy was of much importance for Tivo, hence Tivo DVR¶s
microprocessor containing Cryptography software, was soldered into the box.
This made Tivo very difficult to hack.

5.c Tivo users were rabid fans. Almost all (97%) Tivo users were satisfied ± saying
that they would recommend Tivo to a friend.
 6.c Tivo targeted ³Discriminating Enthusiasts´ as it consumer segment. These
consumers age between 25 and 45 years and had household income ranging
from $70000 to $100000.

7.c Families with young children were very fond of Tivo becau se its Parental
Control feature.

8.c Tivo¶s churn rate was very low as compared to other subscription service. Tivo
± 10% p.a. ; Cell phone ± 33% p.a. ; Cable TV service ± 30% p.a.

9.c Tivo had the ability to scale up to 100 million users without changing the
underlying infrastructure.

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1.c Tivo installation was difficult. It was required to be connected to TV and also
phone jack or internet. There were up to 6 cables that needed to be connected
and most users needed help from customer service desk during installation.

2.c Tivo on the technological front could only handle English language, which
ultimately limited the number of subscribers.

3.c The brand awareness was improper as the consumers were confused about
what a DVR did and did not do, i.e., in particular what Tivo product could and
could not do.

4.c Tivo was not good at decision making as a result it reached Inflection point in
2003, after which it was confused as to go for mass market or for product
differentiation.
 
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1.c It should come up new units that combine DVD recorders with DVR hard
drives.

2.c Develop Set top boxes with two tuners, enabling users to watch one live show
while recording another. It will provide the users with more flexibility.

3.c Tivo should go in to have a deal to licen se its software to a major cable
company, since Cable still has the Lion¶s share of the market with 67% of the
market.

4.c Tivo besides providing physical storage should provide its customers with
online storage. This would be beneficial for both ± the company as well as the
consumer. Having online storage would enable Tivo to remove HDD from the
set top box, therey reducing the size and cost of set top box.