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Om Malik on how to save TiVo

Om Malik is in the TiVo Deathwatch camp, and he has some opinions on how to save the company (via Waxy):

TiVo should basically give away two million of these devices in next one month - hit the 5 million subscriber mark. That’s $65 million in monthly revenues (assuming everyone pays $13 subscription fees.) At those numbers the company can do $750 million in annual sales.

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Next cut back on marketing completely, ala Apple in lean years. Stop pushing the service - and turn TiVo into an exclusive club, a BMW among PVRs.

First, I'd like to point out that there are plenty of Apple and BMW ads on TV.  I think that establishing a premium brand requires lots of marketing, turning the product into a lifestyle choice is a lot of what marketing is.  Apple's turnaround was launched with the iMac and the commercials with it.

Contrary to establishing a premium brand, the iMac was an attempt to make Apple's accessible to any home user - i.e. the "3 steps" commercial.  I could imagine something similar to this for a Series 3 TiVo with cable card support: "Step 1: plug into TV, Step 2: plug in cable card, Step 3: Jeff Goldblum laughing."  (Note: I haven't even read the phrase Series 3 anywhere, but if they announce one in the next 2 years I'll point to this post as evidence that I knew first.  How else could I know that 3 comes after 2?)

As for giving away 2 million TiVo boxes, if we assume (i.e. perform a rectal-number extraction) that they cost $100 per unit - which is probably a low estimate - then a company with $88 million in the bank is spending $200 million to give away their product.  This seems bad, but if they're given away with the cell phone free-with-contract model, then TiVo could make back the cost of those units within 8 months (again, assuming a cost of $200 million).

TiVo has done give-aways before, but never to that extent.  In 2000 they had an essay contest where they gave away 14 hour Series 1 units at a rate of 10 a day from mid-September through Halloween.  More recently they gave away 2000 Series 2 units to people in the Bay Area that Comcast had led to believe were getting a PVR.  Giving away 2,000,000 units would be several orders of magnitude larger than anything like it in the past.

Om picks up on the fact that if TiVo stops trying to nab new subscribers with advertising, investors won't be thrilled. 

Of course, no growth in subscribers means Wall Street isn’t going to like it. To that, I say screw them. How about taking the company private. Leveraged buyout! Small, company, which can become profitable. I know there is one gentleman who reads my blog, and is a tech buyout guru who could pull it off. Slow growth and profits versus certain death - well I take the former.

Add on a one time loss for 2 million TiVo units (2/3 the size of their current subscriber base) and people will reminisce about the "good times" when the stock (which has a 52 week high of nearly $13) was at $3.85.  A low stock price would certainly make it easier for the company to go private, but it also makes the company a prime target for takeover.

by George Hotelling February 20, 2005 in TiVo

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