TiVo Inc.
which is headquartered in San Jose, California was founded in the year 1997 by two former executive of Silicon Graphics Inc. named Ramsay and Jim Barton who were working on a joint venture with Time Warner to create the first large-scale interactive TV system. The company is part of the large Consumer Electronics Industry and it is a market leader in producing Digital Video Recorder (DVR) technology and services. The company enjoyed being the strongest brand since it provided products with unique features such as ability to pause live TV, fast-forward through advertisements and replay during a show.Since their inception in 1997, the company has embarked on a journey of success and innovation and there has no turning back. They introduced new features such as ‘TiVo’s Season Pass’ and their ‘Electronic Program Guide’ but the journey did not stop there.
In 2002, they launched TiVo Series2 which had more memory and a faster processor so that more services like digital music and ‘Video on Demand’ could be provided. They also launched a DirecTV/DVR set-top box in collaboration with largest US satellite operator, DirecTV.The next year, they launched their first premium service application, the Home Media Option which allowed users to view digital photos, listen to digital music, and also schedule programs for recording. The main problems that the company faced during its expedition were the constant competition not only from other DVR manufacturers but also cable operators, DVD-R, and other content providers which meant that the company had to always been on a look-out to introduce new features and reduce cost.
Moreover, they also found it very difficult to reduce the cost because the design of their product required expensive hard disc and MPEG components which were integral to their product design. Another problem with the design was that it only supported English language which meant that only a limited number of customers could be targeted and it also required additional engineering work that resulted in additional cost. Management:The vision of the organization was not just to be leader in the DVR technology. They wanted to be the ultimate entertainment portal for a household and to get there they pursued their mission of low cost, better features and taking care of all sorts of entertainment. What helped the organization most to achieve their mission was their participative management style, for example, when it came to deciding on the future strategy, everyone was involved in the decision process and there was no one-man show.Another thing that helped them a lot was their focus on their core competency which was their DVR technology and they encashed their core competency to get into related businesses and this focus gave them a competitive advantage to them.
Financial: Between the year 1999 and 2000, they had a net loss of $444,000 and $1,247,000 respectively which is quite normal for any star-up since during initial years, the investment is high and it is only during the next four to five years that this investment pays off.From the year 2001 onwards, the revenue grew from $359,000 to $ 96,010,000 but the revenue decreased again in the year 2002 to $72,996,000 but this increased again in 2003 to $98,448,000. The profit margin for 1999 is -110. 6% which then reduces to -106. 7% in 2000 which then reduces to -79. 7% 2001.
In 2002, the company’s profit margin is -2. 6% which means that as the company is maturing, it is getting better and better but still the company has no made any profits.It is in the year 2003 that the company starts to make the profit and margin was around 39%. The loss was 207.
7% between 1999 and 2000 which then reduces to 90. 9% in 2001 but the company has not made any profits yet. In 2002, the loss again increases by around 700% which is because their operating expenses are very high. Then in the next year, the net loss decreases by 40% which means that in five years, the company has earned no profit which can be attributed to their high operating expenses.
Marketing: TiVo’s core product was their DVR technology and using that the company had many features to offer to their consumers from recording programs, making ‘Wish list’, allowing customers to opt-in for commercials. They also launched new products such as TiVo Series2 and Home Media Option. They distributed their product not only directly to the end-consumers but they also sold their services and technology to Original Equipment Manufacturers and licensees which helped them to increase their customer base.The company faced a very stiff competition and they did not only compete with the DVR manufacturer but also with cable providers and other content providers.
This is because they are competing with everyone in the related business. Their target audience was those who were comfortable with technology but not very technologically savvy people. Their focus was on people between age 25 and 45 years old who are married and had household income between $70,000 and $100,000. David Yoffie, 2004) Those families that had children really preferred their products because these features prevented fights between siblings and spouses; moreover, it also allowed the parents to keep a check on their children since the products had parental-checks.The company had an initial cost for the product plus an additional monthly charge. Many new comers came in the business and tried to compete by not having any additional monthly charges but could not survive in the market since the cost of the system was so high that it was not at all affordable which is why TiVo’s pricing strategy really worked well for them.
One of the biggest problems the company had was to convince the people to use their services and moreover, they had to make people understand what their product actually was since most people were confused about their business. To advertise their product, they started with a 30-second advertisement which it aimed at telling people all the features of TiVo but then it was not feasible so then their ad started focusing on what TiVo can do for them.SWOT Analysis: Their strength was in their infrastructure they had built which they could use and create partnerships with others and embark on new journeys. Another strength is the amount of data they collect about consumers. The weakness is that the cost of their product is very high because of which it is very difficult for them to gain competitive advantage. The opportunity for them is to create partnerships with cable operators and work in collaboration with them and create better products.
They can also use the consumer data and provide to advertisers and earn revenue from that.The biggest threat for them is whether people will want to switch from their regular boxes to the TiVo products. Recommendation: They should reduce their expenses by trying to produce their components in cheaper countries which will help them to increase their profit. They can also try to start new marketing campaigns so that people can be educated about their product and what the product is all about. They can send to people’s home the leaflets which contain details of all their products and features and also the cost of the package.
