Marketing Management - 1 IIM PGPMX 2018 - 20

Assignment

On

TiVo, TV my Way

A Case Study Analysis

Dr Sunil Patil Vinod Singh

Roll No.22 Roll No.22
PGPMX B1 2018-20 PGPMX B1 2018-20

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

For the purpose of the case analysis of the case ‘TiVo’, we need to address the following issues:

1. Situation analysis from consumer's point of view:

a. What is TiVo?

TiVo is a digital video recorder (DVR) developed and marketed by TiVo

Corporation and introduced in 1999. Following are the features offered by TiVo

 TiVo provides an on-screen guide to scheduled broadcasted television programs.

The features include “Season Pass” schedules as it records every new episode of
a series, and “Wish list” searches which allow the user to find and record shows
that match their interests by title, actor, director, category, or keyword.
 TiVo also provides a range of features when the TiVo DVR is connected to a
home network, including film and television show downloads, advanced search,
personal photo viewing, music offerings, and online scheduling.
 TiVo has a unique function of pausing and replaying live TV as well as an array of
flexible recording services. With TiVo, beyond its many advanced features, if one
owns the TiVo black box and subscribes to the TiVo service one could really
control what program one watched and when one watched this program.

b. Factors facilitating its adoption

Before we get into the factors facilitating TiVo’s adoption, we would like to share one
survey done in term of satisfaction level with owning a TiVo product.

Customers who owned TiVo seemed satisfied with it

 Customers who owned TiVo seemed satisfied with it.

 72% of owners claimed that TiVo had made TV viewing “a lot more enjoyable.”
 90% said they would recommend it to family and friends.
 Early adopters were raving deliriously in the online forums of TiVo's website.

Following are the factors facilitating TiVo’s adoption.

 TiVo allows pausing live TV when someone is interrupted by the phone.
 TiVo can record 30 hours of programming without the hassle of buying a tape or
video cassettes thereby no issue of its storage in the family room. Moreover,
because it is recorded digitally on a hard drive, the recording quality is superior to
a VCR, and there is no degradation over time.
 TiVo is intelligent as it automatically detects and records the shows that one love
and also make suggestions to one.
 TiVo allows to Pause, Rewind, Fast forward. Pause again. It also shows in slow
motion.
 With TiVo’s, one is in control and watch anything one want when one want to
watch it. This is due to fast-improving hard disk technology which provides an
easy to-use interface between the confusing hundred plus channel line-up and
what people would actually want to watch on their TV, at any given time of the
day.
 TiVo is available at favourite electronics store, for a price little more than a VCR.

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

 TiVo has cute brand identity which gives gracious face to the machinery. Also,
TiVo is a friendly-sounding name.
 TiVo was in an electronic segment where 71% of consumers were influenced by
friends or relatives. This consumer behaviour will turn out in favour of TiVo
because 90% of TiVo owners said they would recommend it to family and friends.
 Programming the recordings is very easy. With just a telephone call to TiVo
headquarters every night, consumer can download feature upgrades and update
programming schedules.
 TiVo’s electronic program guide (EPG) options, also facilitated TiVo’s adoption by
allowing viewer to watch live TV and “Now Playing.” It also previews shows that
could be scheduled for recording with one push of a button and a TiVo-produced
video magazine. It helps to view a set of networks showcases where networks
promoted their best shows and lastly to watch an on-screen TV guide.
 One of the unique features of TiVo’s remote was thumbs up and Thumbs down
which helps viewers to indicate how much they liked or disliked what they were
watching, effectively revealing their preferences to the service. Subsequently,
TiVo would suggest television programs that viewers might want to watch. Over
time, the suggestions get better and better. Pressing the thumb buttons was so
rewarding in terms of useful programming suggestions, that TiVo owners became
extremely addicted to it after a while. Not only did the thumb buttons lead to
programming suggestions: TiVo would also proactively record programs that
agreed with the viewer‘s preferences, if sufficient hard drive space was available.
 TiVo’s fast-forwarding feature helped subscriber to run through 90% of
commercials due to its digital technology, @ 3 times, 18 times, or 60 times of the
normal speed. TiVo made skipping commercials easy by the fast-forwarding
service. And as the viewer won’t be able to stop the fast forwarding on a dime,
TiVo automatically rewinds about 10 seconds once the viewer stops it. This is very
cool because it works out just right.

A survey as per an independent study, which says a lot about the adoption of TiVo

 62% of TiVo owners watched more TV with the service than without
 31% of the owners said that that TV was their primary source of entertainment as
compared to 16% before ownership
 59% said that they watched programs that were once unavailable to them
because of inconvenient scheduling
 31% decrease in channel surfing.
 Children’s programming and dramas were the most recorded programs followed
by situation comedies.

c. Factors disrupting its adoption

Despite availability in most major consumer electronics stores across the nation, only
42,000 subscribers @ 14,000 new subscribers per quarter were added which is only
about 0.04% penetration of TV-watching in U.S.

 Lack of awareness was a key cause of the discrepancy between the love for TiVo
and its lacklustre sales. TiVo had already conceived this issue and was trying to
implement in its TV and print campaign.

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

 A major problem with the digital video recorder category was that its many
functions which involved pausing and replaying live TV as well as an array of
flexible recording services. These features were not as easy to explain to a non
user.
 TiVo has not much say in the distribution as Hardware manufacturers took control
of retail distribution and in-store communications. TiVo's promotional activities
were restricted to public relations, animating the TiVo.com website (which featured
both a service demonstration and the opportunity to buy the system online) and a
very limited mass media campaign.
 There was a lack of clarity to the press about TiVo. Sample black boxes were sent
out to the press around the time of the launch. Although this led to a fair amount of
publicity for the device and the TiVo brand, there was some confusion in the press
as to how the new product category should be introduced. TiVo was
indiscriminately referred to as a personal video recorder (PVR), digital video
recorder (DVR), personal digital recorder (PDR), intelligent video recorder (lVR),
or on-demand TV.
 There was not enough of media handling as the features were discussed but not
to the advantage of the company. They couldn’t effectively handle the problems of
the first generation device.
 To some user it seems as it was designed for the advertisers. Also TiVo’s
onscreen program guide was confusing, as is the process of navigating around
the unit’s menus. Changing channels caused the TiVo picture to break up or
freeze briefly.
 Some potential buyers were hesitant to buy TiVo, despite the apparent high
satisfaction of current owners as they held opinions that TiVo was reselling and
spying their viewing habits.
 Marketing TiVo often appeared to require extensive explanations and an in-store
demonstration. The manufacturers’ reps could not give TiVo the amount of
support it required. It was hard to convey a sense of urgency to TiVo’s distribution
partners. Moreover, a 50% salesperson turnover rate in consumer electronics
stores made training efforts ineffective. There was a lot of variance in the way
TiVo was sold. “I pitch it as a super VCR.” said a salesman in a high-end
electronics store in the Boston stem
 High cost of TiVo i.e. $999 meant that TiVo was more expensive than most TV
sets, and more than twice the price of a good satellite system. With this service
being so new there was no reference point.

d. Target market for TiVo

Following are the target market for TiVo

 TiVo target market are those viewers who want to see TV shows of their
preferences rather than getting confused with hundred plus channels. TiVo wants
its target customers to choose such as “l wants this specific show, I like “Will and
Grace”, and I want this off the Discovery Channel, and I want that off of HBO, etc.”
 Early adopters were the targets customers. TiVo, as a small company, did not
want to waste marketing money on unlikely prospects. Thus, much of the pre-
Christmas 1999 campaign was conceived with the early adopter theory in mind.

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

 TiVo target consumers were those who were not able to view their favourite
program at the time when it is aired live. TiVo just records for them and later they
can watch the same at their convenience. TiVo facilitated them create their own
TV network.
 TiVo was targeting children so as to create a TV network just for the kids.

2. Situation analysis from the point of view of the following

a. Advertisers

Advertisers attempted to take advantage of audience size of 25 millions, spending

much of the $52 billion in television advertising in the United States for prime time
space.

 TiVo created an enormous opportunity for what they humorously called “couch
commerce,” claiming that “couch commerce will have the convenience of the
internet with the emotional motivation of the television.” Advertisers like P&G and
General Motors were actively working with TiVo on defining the advertising
formulae of the future.
 TiVo could help advertisers to both track and predict the television audience.
Moreover, advertisers could be informed of how many people fast-forwarded
through their commercials and learn about the aggregate profile of those who did
not. Old marketing techniques were good at identifying successful shows, but the
actual viewing pattern of commercials inserted in those shows remained largely a
mystery. TiVo will help to demystify this viewing pattern.
 Advertisers would be shipping TiVo’s hardware with preloaded advertisements
that viewer would watch while the unit was setting itself up during installation.
 TiVo’s most inventive concept was that of telescoping ads. Instead of 30-second
commercials, ads could be made up of a sequence of many shorter screens which
users could select, based on specific categories or even on the basis of brand
names, on an opt-in basis. TiVo's fast forward and rewind features would make it
easy to find the relevant part of any telescoping ad.

Having shared the opportunity, there were also serious threats for advertiser by TiVo.

 TiVo’s data showed that subscribers were fast forwarding through 90% of
commercials. TiVo never promoted that one can fast forward the ads but fact was
that it was getting fast forwarded.
 TiVo has blurred the timing of commercial space as a 2:45 A.M. slot might be as
valuable as it is at 8:15 P.M. This restricts the advertiser to continue charging
premium for his prime commercial space.
 TiVo’s ability to shift programming and skip advertisements was a source of
concern for both television networks and the advertising industry.
 The conventional way that advertising agencies sold media space to marketers,
on the basis of reach is being jeopardized.
 TiVo was determined to uphold at least two principles that constrained the
degrees of freedom for advertisers:
o Consumers should remain in control at all times, i.e., they should only be
exposed to commercials on an opt-in basis

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

o Data about individual viewing patterns would remain inaccessible except in

aggregate format.

b. Networks

Networks schedule their most popular shows in “Prime Time.” the broadcast time
between 8 P.M. and 11 P.M., with season premieres typically drawing audiences larger
than 25 million viewers.

 Network leaders, such as CBS, NBC, Discovery, and The Walt Disney Company
were equity investors in the company, with NBC and Discovery represented on the
board of directors. These and other networks were also involved as “programming
partners” so that they could be featured in the different services TiVo offered.
 The networks (or TiVo directly) air a number of different versions of the same
commercial (for instance, there could be three different versions of the same car
brand promoted at the same time), and the unit’s preference engine would retain
only the one that best applied to the viewer. This will also strength the relation with
advertiser.
 Networks could benefit from TiVo’s ability to track how many people were
scheduling a show for future recording. Network showcases would prove
particularly useful in that respect.
 With TiVo, networks could adjust their launch strategy as they can monitor the
behavioural response to their campaign. Now they need to wait until the day after
the premiere to verify the effectiveness of its promotions.
 Networks could also establish audience size and characteristics in advance, in
order to market advertising slots more effectively.
 TiVo were supposed to bring new opportunities to television networks. The season
pass, for instance, guaranteed that viewers would not miss any episodes of their
favourite show, increasing regular network viewership and loyalty.
 The thumbs buttons could provide networks with aggregate feedback on their
shows’ degree of success.
 The network showcases were potentially more effective than monthly pamphlets
sent in the mail, and they made it easy for viewers to commit to a show
immediately, on impulse.
 Movie channels would not need to schedule movies at different times of the day to
maximize their chance to meet interested viewers.
 TiVo's viewing suggestions based on the preference engine would give the
networks additional chances to match their shows with the most interested
audiences.

Having shared the opportunity, there were also serious threats for Network by TiVo.

 TiVo’s ability to shift programming and skip advertisements was a source of

concern for both television networks and the advertising industry.
 TiVo certainly raises big questions for the networks, who essentially are
aggregators of programming content. Consumers can choose the specific show
and would not care about who’s aggregating the shows.

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20

c. Cable / Satellite Companies (Broadcast Communication Channel)

TV content distribution has been performed mainly in real-time over broadcast

communication channels (cable, terrestrial, and satellite), which, have some particular
advantages and disadvantages. The major advantage of broadcast delivery is the
achievement of a wide population reach with a zero marginal cost for each additional
viewer.

 TiVo will take care of the investment for infrastructure, the scarcity of the available
spectrum, and the cost of airtime during prime time. This cost makes the
distribution of content unprofitable, unless there is a critical mass of viewers for
that content. These are certain disadvantages with broadcast communication
channels
 Multichannel pay-TV operators broadcast content over cable, or satellite links.
They are not so much depended on advertising revenues, because they receive a
monthly subscription fee for each set-top box (STB) installation. Still, content
distribution through multichannel TV offers an inflexible bouquet of channels and
content delivered through a fixed broadcast schedule. Multichannel will be
adversely affected as now TiVo will disrupt the TV channel behaviour to a more
qualitative (how the TV channel is going to be packaged), rather than quantitative
(how many TV channels will be available).
 The Satellite television providers like DirecTV have an opportunity to become
equity partner with TiVo. This would give better experience to the customers.

3. Situation analysis from the competitor's point of view

a. Microsoft Potential Strength in this market

In March 2000, Microsoft announced that it would augment the services of its one-
million subscriber WebTV subsidiary with a digital video recording device called
UltimateTV
 Microsoft major strength were its one-million subscriber WebTV subsidiary of
Microsoft with a digital video recording device called UltimateTV.
 WebTV’s existing set top boxes allowed TV viewers to send email and surf the
internet on their TV screen.
 The UltimateTV box flexibility could be bundled with satellite television thanks to
leading provider DirecTV. This was meant to provide consumers with a unique
combination of access to electronic mail, internet surfing, interactive television, as
well as personal video recording.

b. Microsoft Potential Weakness in this market

 No early mover’s adoption advantage since the launch was expected in Fall 2000,
i.e TiVo had time to adopt to market.
 Microsoft plan of partnering with DirecTV was not yet announced, whereas
DirecTV had already approached TiVo for partnership, and also there was
possibility DirecTV would become equity partner in TiVo

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)
Marketing Management - 1 IIM PGPMX 2018 - 20
 The price of the UltimateTV box, bundled with DirecTV or sold separately, was not
yet announced.

 Microsoft’s product announcements and marketing communications emphasized

UltimateTV's technological advances, which was not yet clear to the consumers.

1. Threat of New Entrants– Medium to High • Capital requirements high for brand new hardware • For
software, capital requirements are low, hence threat higher than for hardware • Cost disadvantage is
independent of scale • Thus easier for small companies to jump into the mix and for broadcast
companies to produce their own equipment and compete directly Bargaining Power of Buyers – High •
Switching inconvenient for consumers • Increase in competitors since company inception • Majority
unable to differentiate product because of poor marketing efforts • Consumers don’t emphasize on high
quality for this product • The extra features valued by a small niche market within their consumer base
2. 10. Power of Suppliers – Medium • Many suppliers in the foreign market to give hardware • High
competition among suppliers • Low concentration of suppliers Threat of Substitutes – High • Competitor
environment highly fragmented with slight product differentiation • The home computers, with decreasing
prices, can be turned into DVR. Thus no evident product differentiation • Competition from the PVR,
DVR, PC segment high • Customers prefer products at lower prices and requiring no additional steps
Porter`s Five force Analysis (contd.)
3. 11. Competitive Rivalry – High • New industry • Two major competitors: ReplayTV, UltimateTV •
ReplayTV: Initial distribution very limited • Comparable features, Priced $200 higher than TiVo • Higher
commission to sales representatives, better salespeople education • UltimateTV: Combination of
electronic mail, internet surfing, interactive TV, personal video recording • Technologically advanced
features • Launch in fall 2000 • New competitors: Personal TV hardware in the TV set, free service by
Jovio Porter`s 

Jointly Submitted by:

Dr. Sunil Patil (Roll no: 22) Vinod Kumar Singh (Roll no: 25)