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TiVo adds 1-year contracts

Dave Zatz pointed us to this new part in TiVo's service agreement:

WITH RESPECT TO ANY NEW TIVO SERVICE SUBSCRIPTION ACTIVATED ON OR AFTER SEPTEMBER 6, 2005, YOU AGREE TO SUBSCRIBE TO THE TIVO SERVICE FOR NO LESS THAN 12 MONTHS (THE "SERVICE COMMITMENT"). IF YOU FAIL TO MEET THE SERVICE COMMITMENT BY CANCELLING YOUR SUBSCRIPTION TO THE TIVO SERVICE (OR IF TIVO TERMINATES YOUR SUBSCRIPTION TO THE TIVO SERVICE DUE TO A BREACH OF THIS AGREEMENT), YOU AGREE THAT TIVO MAY CHARGE YOU A $150 EARLY TERMINATION FEE, AND YOU AGREE TO PAY ANY SUCH EARLY TERMINATION FEE.

This fits with their August 2005 investor call where they announced they would be moving to a mobile phone-like retailing strategy.

On the one hand, I kind of like this.  I would rather see TiVo's retailing for $50 with no rebate instead of $200 with a $150 rebate.  By adding a service commitment they can get rid of rebates, although I should emphasize that I have not seen anything that says TiVo is ending rebates.

Still, I'm hopeful that they're replacing one customer hassle with another, less annoying one.  I'm constantly surprised that friends with $300 mobile phones think a $50 TiVo is too expensive, I think the rebates have encouraged people to think of them as $200 boxes.

On the other hand, this is much less customer friendly.  People hate mobile phone contacts but everyone goes with them because they're going to be paying for the service anyways so they might as well save $100-$200 on their phone.  The mobile phone companies are some of the least-liked business around, I know TiVo will lose a few evangelists over this.

Also, like I said, I'm simply speculating that this will end annoying rebates.  They could simply add this on top of the rebate system (which TiVo employees have defended).  That seems like a net-loss for consumers since someone who didn't like their TiVo would be out $50 before, now they're out the full $200.

by George Hotelling September 25, 2005 in TiVo

Comments

As far as I know, TiVo still has the 30-day money back guarantee on the hardware, and if you cancel the service within 30 days you don't have to pay the early termination fee. So nobody will be out $200 unless they keep the thing for more than a month before deciding they don't like it.

I agree that it would be nice if TiVo went to the cellular phone model and dropped the rebates. But the precedent is there for keeping the rebate: DirecTV's "free" DVR is only free after a $100 rebate, and requires a 2-year service commitment.

Posted by: Boxer at Sep 25, 2005 5:48:13 PM

My understanding is that the profits from box sales all go the box manufacturers and the retailers, so when TiVo gives a rebate they are effectively taking a loss in the hope that they will have long term subscribers. The mechanics of dropping the box price to $50 would be interesting, because TiVo would have to subsidize the manufacturers as well as the retailers. With the current rebate system, TiVo takes on all of the risk.

Posted by: Don at Sep 26, 2005 7:05:27 AM

Will they eventually rope all the prior to Sept. 6 2005 subscribers into this new agreement?

Posted by: BIll at Sep 26, 2005 7:23:22 AM

They cannot legally rope all prior to Sept 6, 2005 subs into this. They could if you signed a new agreement for some reason.

I still think Tivo should be giving these boxes away for free from their website. Cut out the retailer's profit margins and just give them away for free with a one year commitment. A year is enough time for people to become tivo addicts and enough time for tivo to develop their HME tech.

Posted by: Tyson at Sep 26, 2005 7:57:48 AM

I am actually surprised that they were able to charge a $150 early termination fee. That is nearly the cost of the full year of service!

Anyone that cancels with 11 months left in their contract would be spending more on the cancellation than they would if they just paid the monthly fee.

Cell companies charge about the same for early cancellation, but their monthly fees are problably about 3 times as much.

It seems a little excessive to me and I wouldnt be surprised if they got some legal pushback.

Posted by: Tyson at Sep 26, 2005 7:59:43 AM

My only comment is this: In the history of western civilization has there ever been anybody who did not like Tivo? (other than Rupert)

Posted by: Thor at Sep 26, 2005 8:49:45 AM

The $150 early termination fee simply recoups the $150 rebate. Why would there be legal probems with that?

Posted by: Don at Sep 26, 2005 9:49:17 AM

I spoke to customer service this morning... the termination fee is even for starting new service on an old box. Meaning, if you want to either restart service on a old box or you start service on a used box you got from someone else you will have to agree to the one year service. So, apparently, TiVo is not just trying to recoup the $150.00 rebate. Maybe this is the overriding factor but they feel that the "used" TiVo market is too small to worry about alienating. The customer service rep did point out that $50 is a small price to pay when considering a used TiVo. If you use a used TiVo under the new plan you could end up having it break on day 31 and be liable for the next 11 months.

Posted by: Steve at Sep 26, 2005 12:51:31 PM

I also want to mention that customer service did say there was a way around the 30 day trial period... you can have someone purchase a gift subsciption which would not force the new user to agree to one year until the gift amount is used up. Can anyone confirm this as actually wortking?

Posted by: Steve at Sep 26, 2005 12:59:46 PM

I also want to mention that customer service did say there was a way around the 30 day trial period... you can have someone purchase a gift subsciption which would not force the new user to agree to one year until the gift amount is used up. Can anyone confirm this as actually wortking?

Posted by: Steve at Sep 26, 2005 1:01:40 PM

I wonder, will this mean people will come to hate TiVO the company as much as they hate their cell providers? After all, I love my phone but every cell provider I've ever dealt with sucks, and ANY change to the service ropes you in to another year of the contract.

Posted by: IK at Sep 26, 2005 11:48:47 PM