Marketing Management: TiVo Case
Memo#1
TiVo Case
Marketing Management
Cheng Zhang
QUESTION ONE: Briefing the CEO
TiVo is adding subscribers at healthy pace, but faces some serious issues that need to be resolved if the company is to move forward or remain viable. I believe there are three crucial areas that we should address: revenue enhancement, marketing, and research.
The first issue is revenue enhancement - to generate positive cash flow. Due to competitive pressures and the general inertia potential customers have toward becoming subscribers, we cannot necessarily increase our subscription fees. We need to create additional revenue streams from what we already have and do. A quick analysis of our financials will suggest the urgency with which we must address revenue.
Without offering a solution, we can see the difficulty in generating positive cash flow by making some assumptions (unrealistic) and then seeing how the existing figures are impacted. Here are the assumptions: 1. That TiVo cease all Research & Development. 2. That all Marketing Parties (the majority of marketing expenses) are eliminated. 3. That costs (such as Cost of Services) do not increase. This is definitely unrealistic, because we see this cost increase as the number of subscribers increase. 4. That General and Administrative Costs do not increase. Again, very unrealistic. We see these costs increase as the number of subscribers over time increase.
With the above assumptions, what does the cash flow picture look like using the most recent company financials: January 2002 (Jan-02)?
Revenue: $6,753
Cost of Services: ($4,830)
Sales and Marketing: ($2,649)
General and Administrative: ($4,486)
Interest Expense and Other: ($1,845)
TOTAL COSTS & EXPENSES: ($13,810)
Net Gain (LOSS) ($7,057)
The above analysis puts our financial picture into perspective; if we do not increase costs, if we cut out the majority of our marketing expenses, if we eliminate all
TiVo Case
Marketing Management
Cheng Zhang
QUESTION ONE: Briefing the CEO
TiVo is adding subscribers at healthy pace, but faces some serious issues that need to be resolved if the company is to move forward or remain viable. I believe there are three crucial areas that we should address: revenue enhancement, marketing, and research.
The first issue is revenue enhancement - to generate positive cash flow. Due to competitive pressures and the general inertia potential customers have toward becoming subscribers, we cannot necessarily increase our subscription fees. We need to create additional revenue streams from what we already have and do. A quick analysis of our financials will suggest the urgency with which we must address revenue.
Without offering a solution, we can see the difficulty in generating positive cash flow by making some assumptions (unrealistic) and then seeing how the existing figures are impacted. Here are the assumptions: 1. That TiVo cease all Research & Development. 2. That all Marketing Parties (the majority of marketing expenses) are eliminated. 3. That costs (such as Cost of Services) do not increase. This is definitely unrealistic, because we see this cost increase as the number of subscribers increase. 4. That General and Administrative Costs do not increase. Again, very unrealistic. We see these costs increase as the number of subscribers over time increase.
With the above assumptions, what does the cash flow picture look like using the most recent company financials: January 2002 (Jan-02)?
Revenue: $6,753
Cost of Services: ($4,830)
Sales and Marketing: ($2,649)
General and Administrative: ($4,486)
Interest Expense and Other: ($1,845)
TOTAL COSTS & EXPENSES: ($13,810)
Net Gain (LOSS) ($7,057)
The above analysis puts our financial picture into perspective; if we do not increase costs, if we cut out the majority of our marketing expenses, if we eliminate all