TiVo Is Well-Known but Not as Well-Owned

Debra Baker tells people she has TiVo. But she really doesn’t.

The 33-year-old New York tax consultant has a variant, a digital video recorder offered through her cable company. She didn’t know what “DVR” stood for until she got the device.

“I thought DVR was Time Warner’s name for TiVo,” she said.

So, like many others, Baker simply uses the leading DVR brand as the catchall term for the new love in her lounging life: a machine that lets her easily record her favorite TV shows and watch them whenever she wants.

It’s a flattering curse for TiVo Inc., whose technology records TV programs without the hassles of videotape, letting users pause live TV, do instant replays and begin watching programs even before the recording has finished.

But as more clones crop up, the pioneer that helped popularize DVRs is in danger of becoming marginalized.

“TiVo was the proponent of ‘time-shifting’ TV, and their name is synonymous with it, but everyone else in the world that puts together a set-top box is doing the same thing and that’s not helping TiVo,” said Mike Paxton, an analyst at technology research firm In-Stat/MDR.

The key ingredients of a DVR are a hard drive to store video, an electronic programming guide to facilitate recording and software to tie together the technology and give the user navigational control.

DVRs are primarily reaching the mass market through cable companies, and TiVo has yet to get its software, including its widely touted user interface, into their DVR-equipped set-top boxes. They are instead using unbranded DVR software from their longtime set-top box suppliers, Scientific-Atlanta Inc. and Motorola Inc.

“The cable train has left without TiVo on board, and I don’t think they’re coming back for TiVo,” said Sean Badding, an analyst at market research firm Carmel Group.

TiVo’s code also is missing from Panasonic’s combination DVD recorder-DVR and Mitsubishi Electric Corp.’s upcoming HDTV receiver with a 120-gigabyte DVR. Sharp Corp. is building DVR capabilities directly into some of its LCD TVs, again without TiVo.

At the end of 2003, more than a third of the 3.5 million U.S. households with DVRs had TiVo’s software and services, according to Forrester Research. More than half of those came though TiVo’s partnership with DirecTV Group Inc., which has been offering DVR features with its satellite service for years.

But as DVRs gain in popularity -- Forrester predicts nearly half of all American households will have a DVR by 2009 -- TiVo may be hard-pressed to hold on to its leading market share.

Time Warner Cable was the first cable operator to launch a DVR, in July 2002. Just 18 months later, 370,000 customers were paying an extra $4.95 to $9.95 a month for the service. Comcast Corp., Charter Communications Inc. and nearly every major cable operator all plan to widely deploy DVRs this year.

“If Time Warner hadn’t come out with a DVR, I would have considered a TiVo by now,” said Robert Meyer, a 42-year-old finance portfolio manager in New York.

Dave Watson, a Comcast executive vice president, said choosing Scientific Atlanta and Motorola’s technologies was simply the fastest path available to deliver DVR services. Comcast did a brief test with TiVo in 2000 and remains “in touch with TiVo, but there’s nothing specific beyond that,” Watson said.

TiVo, based in Alviso, Calif., has knocked on the cable industry’s doors for years -- and admittedly changed its blunt take-my-TiVo approach to now a more flexible tactic of designing its software around the cable industry’s needs.

“It’s a kinder, gentler TiVo now,” TiVo President Marty Yudkovitz said. “It’s about building what your customer wants.”

But why should cable companies pay more to get TiVo’s technology and brand name when they already have apparently good enough DVR features from their entrenched partners?

TiVo’s co-founder and chief executive, Mike Ramsey, says TiVo offers a better experience than clones, including ways to automatically record shows based on keywords on a wish list or entire seasons’ worth of specific shows whenever they pop up on the schedule.

“This brain-dead knockoff stuff is not going to work,” he said. “People’s expectations are going to rise. They’re going to hear about TiVo’s WishList or Season Pass, and they’re going to want it.”

But customers of cable’s offerings seem satisfied.

Baker, a TV addict who never owned a TiVo before, considers her new cable DVR system “the greatest invention” -- and easy enough to use that she didn’t need an operating manual.

Baker and her husband also appreciated the lack of upfront investment costs to get the cable DVR.

Time Warner installed the digital cable box for the Bakers and charges $8.95 a month. TiVo charges subscribers $12.95 a month or $299 for the life of the unit, on top of the $150 or more to get the stand-alone equipment.

With all this competition from cable companies, now is a critical time for TiVo to turn its No. 1 brand into real sales, Forrester analyst Josh Bernoff said.

An additional threat also may be lurking if DirecTV decides to instead use the xTV DVR technology from its new sister News Corp. company, NDS Group. News Corp., led by Rupert Murdoch, bought a controlling 34% stake in DirecTV last year.

TiVo executives are confident their deal with DirecTV is secure, but allying with cable remains a top priority. Getting into cable boxes would give TiVo a broad footprint to help drive TiVo’s advertising business, which Ramsey sees as key to TiVo’s future.

But even without a cable deal, TiVo is thriving and aims to become profitable by the end of 2005. TiVo also estimated that it would more than double its subscriber base to almost 3 million subscribers by the end of January. The company has earmarked $50 million in marketing and promotional rebates.

“This is it. This is their shot to get a whole lot of new subscribers before cable DVR subscribers really take off,” Bernoff said. “And we’ll see if they’ll be a hitting a dribbler back to the pitcher or a home run.”