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Case 2 PDF
Case 2 PDF
Case
Presentation Outline
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Company Background
Market Discussion
Competitive Picture
Situational Analysis
Strategic Direction
Company Background
Product, Technology, Partners,
Investors, Government, Lawyers
and Customers
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monthly
$4.99 (recently reduced from $9.95) or
lifetime $249
The TiVo Service represents whats been billed as the Personal Television
Industry. Watch what you want, when you want!
PVRs are designed and developed by Tivo, licensed for manufacture and sold
in retail channels as a consumer electronic device.
Seasonality anticipate large growth of annual new subscribers during the
holiday shopping season.
Sponsored content delivers charter advertising and sponsorship revenue.
However, revenue by this source has been relatively insignificant.
Examples: Short films, Counting Crows Debut of Album
Company Background:
Technology/R&D
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On-staff engineers
Technology Risk
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Continued investment in the improvement and addition of features and functionality of current
products as well as design of new platforms
Technology Risk can be devised in home on a PC with a large hard drive and video card or a
competitive technology solution. Overall, many competing solutions
Manufacturing Partners
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MANUFACTURING PARTNERS
Hughes Network Systems
Manufacture, marketing and distribution of personal video recorders that enable TiVo
Service in the United States
Sony
Manufacture, marketing and distribution of personal video recorders that enable TiVo
Service in North America
7 year deal to pay royalties on Sony video recorders incorporating TiVos technology (part
when shipped and another part when activated)
Given the right to sublicense mfg. in Japan
Quantum
Supply agreement for hard disks
Revenue sharing of subscription fees for devices with their hard disks
Philips
Manufacture, marketing and distribution of personal video recorders that enable TiVo
Service in North America
Awarded a subsidy by TiVo for each unit sold (part when shipped and another part when
activated)
Ceases mfg. TiVo recorders Jan 31, 2002
Thomson Multimedia SA
Manufacture, marketing and distribution of personal video recorders that enable TiVo
Service in the United Kingdom
Subsidy on a monthly basis for each unit sold
Service Partners
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SERVICE PARTNERS
AOL investment ($200 Million)
3 year agreement to allow AOL TV subscribers access to TiVo services
AOL was issued equity for their investment
Discovery Communications and NBC
$8.1 Million in the form of advertising and promotional services
Additional $5 M paid to NBC for promotions
DIRECTV
Market, sell, and support the TiVo Service
To collaborate on R&D and utilize a portion of DIRECTVs satellite network
Issued 3M shares for marketing services
Revenue sharing of DIRECTV/TiVo subscriptions
Comprises a healthy portion of TiVo subscribers
AT&T Broadband
Market, sell, and support the TiVo Service in Boston, Denver and Silicon Valley areas
Revenue sharing of subscription fees and advertising
BSkyB
Market, sell, and support the TiVo Service in the United Kingdom
Best Buy
exclusivity agreement to sell only TiVo branded Series2 digital video recorders (expires February 2003)
Creative Artists Agency
Marketing and promotional support of the personal video recorder
Given 67,122 shares of preferred stock as compensation
Research Partners
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Research Partners
Lieberman Research Worldwide
Nielson Media Research
Develop ways of improving and measuring promotions and viewer
behaviour
First ever DVR-based panel established in August 2002 with
Lieberman
CPUs
MPEG2 encoder/decoder
secure microcontroller semiconductor device
program guide data
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Consumers
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Advertisers
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Customers
Community development is good for loyalty and insight to help feature
development
Hacker community may be beneficial (as de facto imitators) to he lp promote
TiVo as a platform
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Company Background:
Sales & Gross Margin Growth
Total Sales
40.0
30.0
$US Millions 20.0
10.0
-
Beginning
exponential
growth?
Oct
2001
Jan
2002
Quarter
Gross Margin
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Market Discussion
Market Dynamics, Market Growth,
Government, Legal Situation
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TiVO
Electronic
Instruments
Communications Equipment
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Households
300
250
200
150
100
CAGR 29%
50
0
2001
2002
2003
2004
2005
2006
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15
Households
200
180
160
140
120
100
80
60
CAGR 40%
40
20
0
2001
2002
2003
2004
2005
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Government Influence
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Copyright laws
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There is a real threat that the govt will alter the copyright legislation and
create a barrier for TiVo. Consortium of broadcasters are lobbying for these
changes.
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Legal Situation
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TiVo
Intellectual Property
n Standards
n Consumer Class Action
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Competitors
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Replay TV
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Intellectual Property
Seven patents for pausing live television
Five lawsuits (StarSight, Pause Technology, SONICblue - x2,
Command Audio)
Standards
Consortium of broadcast and cable companies threaten to require
personal television operators to obtain copyright or other licenses (e.g.
Time Warner & Fox Television
Consumer Class Action
TiVo faces Class Action lawsuits stemming from IPO practices and
potentially misleading advertising
Replay TV (Competitor)
is being sued for harming the potential market and value of copyrighted
material.
Replay TV allows users to skip commercials while TiVo only allows
fastforward.
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Competitive Picture
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lMany
lIncestuous
lEchostar
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12,000
10,000
8,000
6,000
4,000
2,000
TiV
o
SO
NI
Cb
lue
Op
en
TV
ND
S
0
Ec
ho
sta
r
Number of Employess
Competitor
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Strategic Analysis
SWOT, Product Life Cycle, Porter,
SPACE, Value Chain Analysis,
Vulnerability, Product Matrix,
Technology Check, Financial Ratios,
Advantage Matrix
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Competition Summary
- Incumbents are big and theres potential for a fierce fight since personal TV
strikes at the core of the incumbents business model.
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Strengths
Partnered with many large established players for
quick entry and development in the US and UK
High customer growth rates
Still able to attract fresh capital (I.e. Oct 2002)
Multiple potential revenue streams
Opportunities
High market growth
Sponsored content
Market research data
Electronic commerce
Replay is drawing most legal attention
Weaknesses
Single suppliers for key product components
Over reliance on partners
Separated from customers by partners
Partners squeezing pressure on value chain
Cannot make financial obligations without further
injection of cash
Threats
Established players in traditional markets are
entrenched and will implement defensive
strategies to protect their market share (eroding
traditional strategic segment barriers)
Legal challenges
Legislative agenda could restrict opportunities
Low barriers to entry (technology is easy to
replicate)
Many competitors many are heavy weights
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TiVo Lifecycle
Tivo has entered the growth phase of the PLC
Introduction
Growth
Maturity
Decline
Sales are increasing at high rate, many new entrants, not yet
profitable, low barriers to enter, recent price reduction for
subscriptions
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Porter Analysis
Pay TV/Set-top Boxes (OpenTV, NNDS)
Pure PVR Co.s (SonicBlue)
Broadband Internet
Multimedia Giants
Traditional Broadcast TV
Electronic Manufacturers
Personal
Television
Industry
Satellite
Consumer
Cable
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Although typical for pressure to be coming from vertical areas, the market
dynamic is coming from all sides on the Personal Television Industry.
Not only is there pressure from all sides but these players are directly getting
into the Personal Television market or indirectly through ownership of another
player.
This is a market in transition.
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SPACE Analysis
Companys
Financial
Strength
High
Low
High
Companys
Competitive
Advantage
Defensive
Environmental
Stability
Industry
Strength
Low
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Broadcasting
Delivery
Software
Equipment
Customer
Broadcasting
Delivery
Software
Equipment
Customer
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These are the four primary areas of the market where TiVo participates
Broadcasting & TV, Communications Equipment, Software and Programming,
and Electronic Instruments.
TiVo is striving to influence the whole value chain rather than focus on their
component where they excel. They are essentially trying to implement a
convergence model at the intersection of these industries.
-Broadcasting with sponsored content
-Although not trying to replace the Delivery channel, they are branded the
TiVo service to the end consumer
-The software to receive signals, record, and adapt to viewer preferences
-Equipment by designing and outsourcing the manufacturing of the box that
houses the software and large storage device.
-They are also getting into the feedback loop by conducting viewer panels and
collecting viewing statistics.
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Defenseless
Endangered
Financially reliant on
AOL and others.
Rely on others for
manufacturing.
Vulnerable
Prepared
Low
Low
High
Ability to React or Retaliate
Source: Rowe et al.
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High
Dogs
Stars
Maturity
Low
Low
High
Relative Market Share
Although products in the growth phase are typically classified as Stars, TiVo
has not yet accomplished significant market share. There are other players
with a larger subscriber base. For instance, EchoStar has grown a larger base
by offering the service for free to subscribers (they just have to buy the
equipment).
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Technology Check
Technology Success Potential
High
Outsource or
acquire capability
Technological
opportunity is
present.
Grow/Protect
The companys
technological
ability is
differentiated
by features.
Fair
Outsource
Maintain
Low
Low
Average
Company Technology Ability
High
Source: Rowe et al.
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Losing Money
Very Low
Average
Very High
Liquidity
On the brink
Very Tight
About Right
Leverage
Negative Equity
Too much debt
Balanced
Activity
About Right
Too Fast
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Fragmented
Business
Stalemated
Business
Specialized
Business
Volume
Business
Few
Small
Large
Potential Size of Advantage
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Analysis Summary
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Strategic Direction
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Market Share
Which Standard/Business Model
Survives
Ability to Survive
Avoid Entrenched Players Wrath
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Market Share must create a presence in the market to ultimately cross the
chasm
Which Standard/Business Model Survives the technology to win the battle
over competing solutions will contribute to survival
Ability to Survive financial resources and cash flow
Avoid Entrenched Players Wrath big players already here that can fight hard
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Status Quo
(Vertical Integration via Joint Ventures)
2.
3.
4.
Horizontal Integration
Concentration
Divestiture
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Recommended Strategy
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Anticipate a Merger
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Growth
Maturity
Decline
Pioneer Strategy
First Mover
Advantage
N/A
N/A
N/A
Imitator Strategy
Strong Benefit
Decreasing Benefit
Rapid Innovation
First Mover
Advantage
Steal Competitors
Growth
Limited Benefit
Disruptive
Technology
Introduction
Strong Benefit
Terminate
Incumbents
N/A
Pre-Announcement
Strategies
Financing Strategy
Perceptual Barriers
Standard Setting
Switching Costs
Strategic
Communication
Competitive Games
Strategic
Communication
Competitive Games
Partnering
Strong Benefit
Absorptive Capacity
Strong Benefit
Growth & Learning
Limited Benefit
Cost Only
Limited Benefit
Cost Only
Standard Setting
Cooperate until
technology
legitimation
Standard Set;Market
Segmentation &
Cost
Competitive Phase
Use of Platforms
Limited
Applicability
Strong Aid to
Growth
Critical Component
Of Survival
Relatedness to TiVo
Imitator Strategy TiVo was a fast second to the Personal Television market
after ReplayTV
Rapid Innovation Competitors are coming into the market from all sides to
try and steal away growth
Disruptive Tech Personal Television may be disruptive, however, the
incumbents have identified this potential threat and are positioning themselves
accordingly. Therefore, tough to terminate them!
Pre-announcement TiVo actually pre-announced their product when Replay
TV came out first
Partnering key aspect of the TiVo strategy since they are too small to carry
out the convergence strategy on their own.
Standard Setting A Consortium of broadcasters (incumbents) are trying to
force a standard on the new technology (re: copyright) to reduce disruption to
their existing business model
Use of Platforms Becomes important in the growth phase. This is where
TiVo should be focused on becoming the platform leader.
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Australia Team
Mitch Casselman/John Nadeau
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Company Capability
Managerial
0%
Weak
Strong
100%
Managerial Factors
1. Corporate Image, Social Responsibility
2. Use of Strategic Plans and Strategic Analysis
3. Environmental Assessment and Forecasting
4. Speed of Response to Changing Conditions
5. Flexibility of Organizational Structure
6. Management Communication and Control
7. Entrepreneurial Orientation
8. Ability to Attract Highly Creative People
9. Ability to Meet Changing Technology
10. Ability to Handle Inflation
11. Aggressiveness in meeting competition
12. Other
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Company Capability
Competitive Factors
1. Product Strength, Quality, Uniqueness
2. Customer Loyalty and Satisfaction
3. Market Share
4. Low Selling and Distribution Costs
5. Use of Experience Curve for Pricing
6. Use of Life Cycle of Products and Replacement Cycle
7. Investment in New-Product Development by R&D
8. High Barriers to Entry into Companys markets
9. Advantage Taken of Market Growth Potential
10. Supplier Strength and material availability
11. Customer Concentration
12. Other
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Company Capability
Financial Factors
1. Access to Capital When Required
2. Degree of Capacity Utilization
3. Ease of Exit from the market
4. Profitability, Return on Investment
5. Liquidity, Available Internal Funds
6. Degree of Leverage, Financial Stability
7. Ability to compete on prices
8. Capital Investment, Capacity to Meet Demand
9. Stability of Costs
10. Ability to Sustain Effort in Cyclic Demand
11. Price Elasticity of Demand
12. Other
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Corporate Development
Matrix
High
1. Watch
and Wait
4. Losers
Low
Low
2. Winners
3. Unstable
Cash
Bonanza
High
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Z-Factor
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