CASE NOTE

ANALYSIS ON
TIVO
Group Members:

1. Sachin S Hanwate PGP/14/238

2. Mangesh Patil217
3. Amit PGP/14/193
4. Nilu Khed PGP/14/221
5. Bhuvaneshwari PGP/14/206
6. Sravya PGP/14/243
  Problem Statement:

To expand market penetration and to capture market with an effective marketing campaign.

 Analysis:

One of the major challenges TiVo is facing it has introduced a product in market which intends to change
the TV viewing habits of people. After 14 months of launch it was it able to capture only .04% of market
which included 42000 subscribes out of 102 million TV viewing people.

 Strengths
 Great product filled with a lot of features and innovations.
 First in the market benefit.
 TiVo holds the key competency and for hardware and distribution they partnered
with Sony and Philips. They got product reliability and effective distribution through
outsourcing.
 Loyal customer base. 72% people said TiVo made TV viewing more fun for them
and 90% people wanted to recommend TiVo to their family and friends.

 Weakness
 Since all the features are new , these are difficult to digest for target customers.
Even the salesmen find it extremely time consuming since people find it difficult to
understand the features
 Presence of many glitches in the TiVo experience .Due to which the company got
negative marketing through press and media .
 Did not segment market well . It is targeting only rich people .
The price of a TiVo box is too high to suit only rich people.

 Opportunities
 Partnership / collaboration with Direct TV can happen and this will boost the sales
of both shareholders
 Talks with AOL for internet browsing on TV

 Threats
 Tough completion from competitors Replay TV & UltimateTV.
 Since entry barrier is less easy entrance of new competitors. For instance Jovio a
startup is planning to launch a service similar to TiVo.
Current analysis:

1. Price:
a. Following was the pricing:

Price
“14-hour” box $499
“30-hour” box $999

b. Additional usage charges:

Plan Price
Monthly $9.95
Yearly $99
Lifetime of unit $199

c. Tivo was more expensive compared to most TV sets and more than twice of good
satellite systems.
d. Conventional VHS video recorders continued to sell at rate of 60mn units per year,
sometimes priced at prices below $100.
2. Product
a. Telescoping
b. EPG(The electronic program guide)-A menu of options included option to watch live TV
& gave access to:
i. Previews for shows that could be scheduled
ii. Tivo produced video magazine
c. Season Pass-Allowed to specify users shows to record
d. Downloadable upgrades
e. Thumb buttons in remote
3. Promotion
a. Hardware manufacturers took control of retail distribution and in-store communication.
b. Promotional activities were restricted to public relations, animating the TiVo.com
website which featured both service demonstration and opportunity to buy system
online.
c. Very limited mass media campaign
4. Market penetration Facts
a. Since 14 months of launch captured 42000 subscribers,with rate of 14000 subscribers
per quarter. With 102 mn TV watching viewers in America that was just 0.04%
penetration.
b. Even though TiVo sold limited no. of units by May 2000,prediction was that category
sales would range between 350000 and 800000 units by year end 2000 with between 30
mn and 55 mn units in use by 2005, which comprises of 25% to 45% market penetration
upto 2005.
 5. TiVo’s marketing plan
a. Product
i. Joint equity venture with DirecTV
ii. TiVo was also in talks with Internet provider and entertainment company AOL
about probable product implications.
b. Price
i. Drop price of 30 hour recorder from $999 to $399.
c. Communication
i. TV ads used for raise awareness, interest, curiosity and to promote TiVo brand
identity.
ii. Print ad for more details on features and benefits.
6. Distribution network
a. Partnership of consumer electronics brands SONY and Philips.
b. Available through Best Buy, and electronic chain.
c. Also available through another retailers Circuit city and Sears.
7. Problems faced
a. TiVo’s personal television displayed some serious glitches as changing channels caused
TV picture to break up or freeze briefly.
b. Marketing challenge of changing human behavior on mass scale.
c. TiVo’s ability to shift programming and skip advertising was concern for television
networks and advertising industry.

Recommendations:

1. Promotions
a. Provide incentive to customers recommending to other customers.
b. Catchy phrases to be used more elaborating on user friendliness of the product.
c. Convince networkers and advertisers about opportunities brought by TiVo’s ability to
track consumer viewing pattern.
2. Product
a. Provide” HELP” menu to understand the features of the product in the EPG
programming.
b. Should also spend on research in areas such as E-mail, Internet surfing, interactive
learning and personal video recording.

How would Competitors adjust to TiVo’s marketing plan?

1. Replay networks
 a. As Replay networks marketing efforts largely concentrated upon newspaper advertising
and educating salespeople, they should also think about another marketing ways
through TV commercials, promotion based on the features and benefits.
b. Add features in their current product to be competitive with TiVo and Microsoft’s
Ultimate TV.
2. Microsoft’s Ultimate TV
a. As TiVo and Replay TV has first mover advantage over Microsoft’s Ultimate TV and
market will be much more penetrated by these competitors. They should start with
demos and promotions of the technology and pricing. As they are charging same
amount of $10 per month same as TiVo but additional services such as E-mail, Internet
surfing, Interactive TV and personal video recording, they can also market value addition
in the product having same charges as others.
b. Also considering the fact that Other’s have also researched about advancements in
technology ,they can think about using their existing distribution channel of Operating
system for promotion of this product.

Revenue Forecast
Following is the Results for predicted performance of company as stated:

1. “Even though TiVo has sold limited no. of units by May 2000,industry experts believe that
category sales would range between 350000 to 800000 units by year end,with anywhere
between 30 mn and 55mn units in use by 2005”.
2. Also for prediction of Dec-00: Statement used was”it was agreed that quarterly marketing
expenses could be tripled if the marketing plan was deemed capable of leading market share in
the upcoming fall”.
3. Assuming those two conditions and tripling marketing expenses following figures were
obtained.

Table 1.1 Predicted output of Dec-00 and Dec-05 considering 55mn subscribers up to Dec-05.

Predicted Predicted predicted

May-00 Jun-00 Dec-00 Dec-05
No. of user 32000 48000 350000 55000000

Revenue 424000 719000 13779500 2750000000

Revenue per user 13.25 14.97916667 39.37 50
Costs & Expenses
Cost of services 4168000 4988000
Research & Development 4678000 5679000
Sales & Marketing 9180000 11384000
Sales & Marketing related parties 4547000 5349000
General & Administrative 2691000 3631000
 Stock based compensation 969000 919000

Loss from operations 25809000 31231000 93693000 936900000

Interest income 1824000 1907000 2998652 299865200
Interest Expense & other 70000 112000 209905 20990500

Net Expenses 24055000 29436000 90904253 658025300

Profit -23631000 -28717000 -77124753 2091974700

Table 1.2 Predicted output of Dec-00 and Dec-05 considering 33mn subscribers up to Dec-05

Predicted Predicted predicted

May-00 Jun-00 Dec-00 Dec-05
No. of user 32000 48000 350000 33000000

Revenue 424000 719000 13779500 1650000000

Revenue per user 13.25 14.97916667 39.37 50
Costs & Expenses
Cost of services 4168000 4988000
Research & Development 4678000 5679000
Sales & Marketing 9180000 11384000
Sales & Marketing related parties 4547000 5349000
General & Administrative 2691000 3631000
Stock based compensation 969000 919000

Loss from operations 25809000 31231000 93693000 936900000

Interest income 1824000 1907000 2998652 299865200
Interest Expense & other 70000 112000 209905 20990500

Net Expenses 24055000 29436000 90904253 658025300

Profit -23631000 -28717000 -77124753 991974700