TiVo Requiem Part 2 - Laggy, Underpowered, and Costly

This is the hardest post for a TiVo fan like me to write. 

TiVo was never a market share leader in the DVR space - at least not after the cable companies started offering their own barebones DVR service. 

But they were a thought leader, and a features leader, and the competition wasn't close. 

For consumers, the choice was clear - pay your cable company to rent a lousy UI and basic, ugly DVR, or pay a little bit more to buy an elegant, cutting edge solution from TiVo. 

And then that status quo completely fell apart. 

It's hard to believe, but by 2010, TiVo hadn't updated their on-screen user interface for a full eight years. That's an eternity in the tech space. I can't think of an analogous situation. 

And part of TiVo's problems began when their vaunted UI started to look long in the tooth. 

But the underlying issues actually started a few years before that. (And in keeping with the theme of this blog, there are some lessons for Apple in this case study.)

Niche Products, with Negative Profit Margins

2006 was a great year for TiVo, in terms of their products and technology. The Series 3 was a shining example of what TiVo could be. Light-years ahead of the competition. 

There was one nagging issue, though. TiVo wasn't making any money. 

2006 wasn't a great year for TiVo's market share. No one could afford it!

The Series 3 was expensive. Sure, it was a customer experience that could not be recreated with competitors products.... but at an $800 pricetag - PLUS monthly service costs - it wasn't going to be a mass-market device. 

TiVo reacted to this negative cashflow issue in 2 ways. 

1. They stopped selling lifetime service. Product Lifetime Service wasn't available at any price. 

This ensured that TiVo would have a monthly revenue stream, and would ultimately make more money per box sold. But it fundamentally changed TiVo's relationship with its customers. 

Yes, we "owned" our TiVo equipment. But how valuable was that "ownership", when the box couldn't function without a monthly $15 payment? With a stroke of a pen, TiVo changed their buyers to renters. It felt different. And we didn't like it. 

2. They released a cheaper version of the Series 3 in an attempt to increase their market share.

In the summer of 2007 - just six months after the release of the Series 3 - we got to meet the "TiVo HD". 

It had a smaller hard drive than its predecessor, the Series 3. (A 160 GB drive, allowing for only 20 hours, vs. the Series 3's 250 GB drive and 32 hours.)  The metal casing had been replaced with plastic. It had no OLED screen on the outside to say which channels were being recorded. It wasn't THX certified. They even took away the Glo Remote. 

But it was only $300. So that was nice. 

Of course, by this point, they'd also dropped the price on the actual Series 3, to $500. So the Tivo HD's value proposition was somewhat muted. 

And a few months later, they stopped selling the Series 3 altogether.  

Tivo's UI was 6 years old at this point, but it still offered a vastly better experience than the cable companies' DVR. But by discontinuing the Series 3, TiVo unambiguously showed that they were getting out of the "high end" DVR space. 

Innovation vs. Patent Litigation

There's no question that TiVo has been one of the most innovative technology companies of the last 15 years. They invented the DVR space and ruled it for almost a decade. 

But during the reign of the TiVo HD - which dragged on for 3 long years - TiVo seemed far more focused on filing patent lawsuits than in creating great DVRs. 

This may have been the right call, in terms of creating shareholder value. These suits ultimately gave TiVo the leverage it needed to force competitors into licensing contracts. They also resulted in cash infusions that may have kept TiVo running. 

But - as a director of litigation for a major consumer electronics company once told me, "We aren't in the 'winning lawsuits' business. We're in the business of making and selling stuff." 

Even when the courtroom stakes are incredibly high, you can't take your eyes off the primary function - making and selling great stuff. 

For TiVo to justify its margins, they'd better be making and selling the best DVR stuff on the market.  And from 2007 through 2010, their lead was shrinking.

The TiVo Premiere

By 2010, TiVo finally made their next move. The TiVo Premiere. 

It was announced at a swanky presentation at 30 Rock in NYC, with Kenneth the Page from "30 Rock", for some reason. TiVo called the Premiere the "One Box" that you'd need in a home theater - it would be your cable box, music box, movie box, and web box. 

The "TiVo Search" interface, which had been floated in beta to all Series 3 and HD boxes, became the new TiVo UI. 

It was a flash-based interface, with all kinds of colorful graphics, and an inset live TV window. 

It was pretty. But there were problems. The ads across the top of the screen were context-based -- and needed to load *from the internet* every time you moved to a different menu. Which led to constant, constant "spinning blue circle" loading screens.

The Premiere had a dual-core processor, but only utilized one core for at least the first year after launch. 

When you're charging hundreds of dollars more than your competition, you'd better be pretty great. Ultimately, the Premiere was an unsatisfying experience. 

And to make matters worse, TiVo's competition was about to make the next great leap forward. 

Competitors Catch Up (and then Take The Lead)

For years, the one thing you could count on from TiVo was that you'd have a cutting-edge home theater experience. It may not have been perfect, but it was light-years better than the competition.

And then in 2012, that wasn't the case anymore. 

But first, let's look at what TiVo's competitors - primarily Comcast and DirecTV - had been up to. 

For years, Comcast offered what was just the lousiest UI in the biz. Ugly AND nonresponsive. And with 20% of the screen dedicated to ads!

It was as though they'd expressly designed it to look cheap and annoy their customers.

TiVo announced a joint venture with Comcast back in 2006. Soon, Comcast would be deploying a TiVo UI to work on our existing Motorola boxes!

Here's a AVSForum thread with a start date of May, 2006, talking about how beta testing would start that July. There were delays that went on for years. There was a brief beta test in Philadelphia or Boston, IIRC.  I'm not sure that this product was ever actually released. 

In retrospect, the idea of grafting a new UI onto the laggy, horrible Comcast Motorola boxes may have been a bad idea. 

Later, TiVo offered Premieres through certain cable companies - here in Chicago, it was RCN. 

But there comes a point when you just have to stop waiting on TiVo to innovate. Comcast went back to the drawing board and completely overhauled their product, resulting in the excellent "Excalibur" Xfinity UI.

At the same time, satellite TV owners were lamenting the end of the "DirecTivo". DirecTV and TiVo ultimately announced that they'd be renewing their partnership.... but then DirecTV made the entire conversation moot with their incredible new UI.

And both Comcast and DirecTV were offering whole-home DVR solutions - something TiVo didn't have. 

We'd reached the point where cable and satellite providers simply didn't NEED TiVo anymore. Their own products were superior, both in form and in function. 

And, most distressingly for TiVo, in price. Why would a consumer spend hundreds of dollars upfront, and pay TiVo a monthly fee, for the opportunity to bypass these excellent new interfaces?

In the next post, we'll discuss TiVo's new products, the TiVo Stream and TiVo Mini - and their potential way forward.