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TiVo’s Struggles Won’t Stop Growth of DVR Category

Mar 10, 2003  •  Post A Comment

The digital video recorder service TiVo last week released its fourth-quarter report for 2002. Although TiVo has reduced its losses, the company is still having problems getting new subscribers. After nearly five years of existence, TiVo could be a year or more from reaching the 1 million mark.
TiVo, which enables viewers to record shows onto a hard drive and fast-forward past commercials, has generated incredible buzz in Hollywood and Silicon Valley. The DVR service also has a passionate subscriber base, which should help with word of mouth.
So, if you’ll forgive the pun, what’s wrong with this picture?
Well, the company’s lackluster numbers have prompted some analysts to question whether the DVR is here to stay. If TiVo can’t break though, they say, maybe there’s something wrong with the technology. Maybe consumers simply aren’t interested.
Well, too often in this industry and others, people confuse the most recognizable brand with the category. TiVo has struggled, but the technology is moving forward at a healthy pace. In fact, it might surprise you that TiVo is not even the nation’s leading DVR company. It’s EchoStar, the satellite TV service that provides an unbranded DVR service.
Since last week’s report creates even more buzz about TiVo, I want to set the record straight with some predictions about digital video recorders.
The VCR Will Be History
By decade’s end, you won’t be able to find a new VCR at your local electronics store. The DVR will not be in every home by then, but its total conquest of the living room will be just a matter of time. Many viewers will hang on to their VCRs until the bitter end, but most electronics companies will soon begin to phase out manufacturing. Jeff Samuels, a spokesman for Panasonic, says he believes the VCR will be a “total dinosaur” in three or four years.
If you think companies will keep manufacturing VCRs because consumers have videotape libraries, remember what happened with Beta. Millions of videotape owners were left out in the cold when Sony and others ceased production of the Beta VCR.
You Won’t Buy a DVR
Research shows that consumers are tired of stacking box upon box atop their televisions and stringing yards of coaxial cable across their living rooms. And they are equally weary of bringing home a new set-top and spending several hours trying to figure out how to hook it up. This is 2003. Consumers expect a new technology to make their lives more convenient, not less so. This help explains why TiVo has stumbled; people are reluctant to bring home a new set-top to replace the VCR, which works just fine, thank you. In the minds of most, buying a TiVo or a ReplayTV is inconvenient.
However, cable and satellite operators are now offering DVR technology as an extra feature in existing set-tops. You can click a remote or make a phone call to sign up rather than have to trek down to the electronics shop. EchoStar has signed up approximately 750,000 homes for its DVR service, and Time Warner, Cox and Comcast are quickly filling orders. In several years DVRs will be software, not hardware. Then consumers will gladly put their VCRs on the shelf.
Yes, There Will Be a TiVo
That brings us back to TiVo. I predict that TiVo’s marketing effort will eventually pay off. There’s a good chance the DVR service will be bought by a larger company, but the brand should survive.
ReplayTV, TiVo’s chief rival, faces an even greater challenge, however. The company’s parent, SonicBlue, is looking for a buyer-and ReplayTV has been sued for copyright infringement by the studios and networks.
Phillip Swann is president and publisher of TVPredictions .com. He can be reached at Swann@TVPredictions.com.