Tivo Case

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TiVo 2007 Case Analysis

After seven years of loss-making, and in the face of new competition and a changing environment, TiVo must now craft a strategy propelling them into profitability and securing a position with a sustainable competitive advantage. According to Exhibit 3, The Home Entertainment Ecosystem, TiVo’s future and ability to be profitable depends on two factors. Factor 1: Their ability to be successful in stand-alone DVR sales within retail stores Factor 2: Their ability to form partnerships with program distributors such as MSOs (multiple service operators) and satellite networks, such as Direct TV, for DVR mass distribution First, we will explain why each factor is important, and the challenges TiVo faces related to them. Then we will provide alternative strategies and, finally, provide our over-all recommendation. Factor 1: In 2006, accounts managed by a satellite operator made up nearly 70% of the all TiVo accounts, and yielded about 20% of all revenue. Also, the average revenue per unit (ARPU), per month, for TiVo owned subscriptions is about eight times higher than TiVo-Direct TV subscriptions. Assuming less than 30% of the accounts are TiVo owned subscriptions (from stand-alone DVR sales), and contribute less than 80% of the total revenue, we can conclude that TiVo needs to increase its stand-alone DVR sales in order to generate more revenue and profits. However, there are some challenges TiVo could face in terms of stand-alone DVR sales. The current target segment for stand-alone DVR sales are U.S analog cable subscribers, estimated at 35 million in 2007. Whether this number could potentially decrease is not mentioned in the case, but if consumers in that segment shift toward digital cable, it could have a negative effect on TiVo’s ability to sell stand-alone subscriptions to this segment. Another challenge is the threat of substitute products. There are currently no products that are directly, and exactly, substitutes for DVRs in terms...
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