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Comments by YACCS
Friday, March 11, 2005

Think TiVo

Save TiVo!
Just when it's on the verge of creating the Perfect Machine -- streaming TV, music, movies and the Web through one stylish box -- TiVo is facing doom. Unless a certain company decides to think different

By Farhad Manjoo

The trouble is, the company's efforts may come too late to save it. Many of TiVo's rivals are also looking to build similar Perfect Machines; and without comparable engineering and marketing resources, the company's new initiative, however innovative, faces an uphill battle. What TiVo needs, says Josh Bernoff, an analyst at Forrester Research who follows the company closely, is a huge ecosystem of users and software developers willing to take a chance on its new features. But that won't happen if TiVo looks like it's on the rocks. There's only one man who can save TiVo now, Bernoff and others say: Apple Computer CEO Steve Jobs.

Bernoff's call for Apple to buy TiVo is at once crazy and inspired, and for several weeks now, TiVo-watchers online and on Wall Street have been debating its merits and adjusting their bets on its likelihood. In an open letter to Jobs, Bernoff notes that the success of the iPod has transformed Apple from a computer maker into a consumer electronics firm. But the real money in consumer electronics is in TV, not music, Bernoff says. At about $350 million, TiVo would be a cheap purchase for Apple. And if Apple pumped some resources into marketing and developing the product, it could turn TiVo into the iPod for TV. "TiVo-branded Apple products could generate hundreds of millions in revenue in the next few years," Bernoff writes.

The alliance could also make for some great technology. At the moment, no company, not even TiVo, has quite perfected the Perfect Machine. Many firms are trying hard, and have achieved only satisfactory results. Microsoft's 2-year-old Windows XP Media Center Edition, a specialized version of its operating system that can connect to a TV and record television shows and serve up music and photos through a remote control, has attracted a small but growing following, and the company is devoting significant resources to the product. A host of small tech companies are also releasing innovative media-center machines designed to make it easy to manage all your media from your TV, and there are thrilling efforts by hackers and hobbyists working to turn Linux and Mac computers into media centers. Even me.

The thing people call a "media center" seems to be in just the same place that MP3 players were about three and a half years ago, just before Apple released the iPod. Nobody quite knows what they should look like, or how they should function, or what features they need to have. But it's hard to see how Apple and TiVo could go wrong if they joined forces. As Bernoff writes in his memo to Jobs, "Think different. Buy TiVo."

I think I would approach this warily, since I have not drunk kool aid lately.

First, TiVo has some serious enemies in the TV world, who hate it's capabilities.

Second, if you go into the TiVo business, you're in that business, not another way to drive people to Macs. But given Jobs relentless drive to beat Microsoft, I would bet that his TiVo would be yet another way to drive people to Macs, would fail in doing so and leave another opening for Microsoft.

I think TiVO is a perfect kind of technology for Apple. It doesn't need to be tinkered with, is OS neutral in that on one cares what it uses, and it can be made elegantly and cheaply.

But my question is if Apple takes over the company, will they rebrand it, leave it alone and improve features, or will they try to turn it into a Mac, a product most consumers don't even know exist.

I think the iPod has the company at a crossroads. It has been a wild success, the most successful product since Jobs returned to the company. The iMac and follow ons drove users away, with a nearly 3 point drop in market share since 1996. The iPod, now OS neutral, makes Apple a lot of money. But it is a singular success. Sony is hamstrung by being a music publisher, something which wasn't an issue when the Walkman came out.

I think Apple would have to admit that they have two businesses: computers and consumer electronics. Their computer business is profitable, but niche with a 3 percent market share and declining sales in key markets like education. They clearly can continue to be a niche computer maker. The iPod is the company's new profit center, dominating it's market. The problem is that it isn't a locked market. One day a company, and Creative is trying like hell, and has a real in with key demographics via their PC add on market, will surplant the iPod. TiVO is. No one is going to make a TiVo clone that anyone cares about.

Apple needs to develop new profit centers which gets the company wider popular acceptance. Apple can do TiVo well, if they see it as an independent market. But Jobs history here isn't encouraging. The iPod was Mac only until people started hacking software to get to work on Windows. Then Apple gave up the ghost and made it Windows compatible. A similiar mistake with TiVo would be a disaster. A New Tivo should fit seemlessly into a network.

But if Jobs comes into TiVo with the goal of developing new models and supporting the company as is, it could work extremely well and drive people into Apple stores. Apple's philosophy would be a match here, Easy to use, easy to set up. Things people don't care about with computers, they care about with consumer electronics. The way to kill TiVo is to do what they did with the early iPods, tie it to the Mac. If they largely leave it alone and improve it where they can, it could actually get people to reconsider Apple for computers as well.

My main concern is the Apple Echo Chamber. If they make a white box TiVo, they might as well not bother. For once, they need to listen to people who don't think Apple is "insanely great" and focus on their needs, not the latest communique from Cuptertino. If you want to sell consumer electronics, you have to get past the fanboys and listen to the people who make the decisions. You need to talk to the same people who have PS2 and Xboxes, Large screen TV's and fragboxes. You speak their language, you will expand your base. You listen to the echo chamber, and TiVo will croak.

posted by Steve @ 1:25:00 AM

1:25:00 AM

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