Strategic Inflection: Tivo in 2005

Topics: Digital video recorder, TiVo, Revenue Pages: 5 (1384 words) Published: October 16, 2010

The March 13, 2006 Harvard Business School article—“Strategic Inflection: TiVo in 2005” highlights the challenges TiVo faces as financial instability and leadership upheaval are encountered and a new strategic direction must be decided upon. TiVo risks losing the market-leading position that founder Mike Ramsay secured with their first-mover advantage if they do not act quickly to counter the increase in competitive challenges.

The two main problems TiVo faces are, in the short term—successfully delivering a solution to their new potential strategic partner ComCast, and in the long term—deciding what the best combination of four strategic options is. The four strategic options are “aggressively pursue the stand-alone business; Focus on OEM (Comcast-like) deals with other cable companies, and possibly telcos, with the hope of making TiVo into an advertising platform business versus a DVR hardware-services business; Become a content distributor; Seek new markets outside of the U.S., where DVRs were still in their nascent stages (TiVo case).”

According to Ramsay, TiVo “should become ‘the portal to entertainment services in the home… …we’re in the user interface and entertainment services business” (TiVo case), while Tom Rogers, new president and CEO maintains that “TiVo could extend its brand and technology to the ‘mass market’” (TiVo case). Both of these goals, along with improving investor relationships through increased earnings and refusal to conform to analysts’ negative forecasts, are within TiVo’s means, given careful scrutiny of their strengths, weaknesses, opportunities, and threats.


General Environment:
There are several factors that should play into the decision-making process, the most relevant of which I will highlight. The Federal Communications Commission’s (FCC) upcoming decision will affect TiVo’s ability to successfully support premium services with a two-way cable card. TiVo also is in an industry that is rife with potential litigation due to several factors: patents protecting various processes, ability to bypass advertisements, and copyright issues, to name a few. Another thing to take into account is the rapidly changing technological environment. To retain strategic competitiveness, TiVo has to be flexible with its’ offerings, responding quickly to changing customer needs, and this ability might be hampered if FCC rulings are not in TiVo’s favor. TiVo should be ready for this eventuality and have a plan B in place.

Industry Environment:
TiVo was at the frontier of the DVR business; but the technology was not hard to replicate (low barriers to entry), and competitors have successfully copied the technology. While TiVo’s products are differentiated with special features, the competitors have lower subscription fees, therefore somewhat undermining this advantage. There is a high growth potential in this industry, with DVR penetration relatively low at 8%, but doubled in the last year (Exhibit 3, TiVo case). However the rivalry is fairly intense, with TiVo’s partner DirecTV owning one of TiVo’s direct competitors, demonstrating the volatility TiVo must be prepared for.

TiVo draws revenue from four different offerings; TiVo DVR, Showcases, Audience research services, and DVR technology. TiVo is also a well-established brand with existing customers, receiving high satisfaction rates, granting them a good reputation, and also opening the door for word-of mouth advertising, which is a highly successful way to promote their product, without any expense. TiVo’s analysis of user habits could prove to be an area of growth for them, if they collect information that is attractive to companies.

TiVo is quite dependent on distribution partners, which could be a great downfall, especially since their strategic alliance with DirecTV has proven unsuccessful. There is also some confusion about the offerings of their DVR product,...
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