Q & A About TiVo’s Business


What about TiVo management’s comments that the subs acquired under the new pricing plans have a higher net present value than those under the traditional plan despite the higher SAC?

TiVo’s management has absolutely no idea what the NPV of the bundles is going to be. Its all a guess based on assumptions. Those assumptions, like most of what TiVo has done with their business, are unlikely to work out as favorably as TiVo “hopes.” Its all a convenient spin for 12-18 months which will be followed by some new story. This is a scenario that has been repeated time and time again.

What about TiVo’s claim that the new plans are an easier sell (as shown by the increase in online sales relative to retail), and an overall improvement? 

I don’t agree that there is net improvement. Change in channel mix has resulted in weakening retail sales to a greater extent than the improvement in direct sales. It is definitely possible to put together a marketing strategy with the numbers I advocate. Best Buy and Circuit City are not joining the bundle plan because they know what they are doing. It is TiVo that doesn’t, and to listen to them is to go awry.

All planning goes awry in the real world. How can you say TiVo’s planning for the S3 launch was poor? No battle plan ever survives contact with the enemy.

As far as the planning, there is typical imperfection and there is gross imperfection. TiVo consistenly leans toward the later. No battle plan of TiVo’s has ever survived the enemy.

If TiVo ever has a good QTR, I will write it up as such. If they have two, I’ll start to change my perspective. If TiVo ever announces a good strategy, I’ll write it up that way and change my assumptions. I was high on the marketing concept last year, I only became negative when the actual plan was revealed to be seriously flawed.

Does TiVo face any serious competition for dual tuner CC SA HD-DVRs in the next two years, or can TiVo just cherry pick the market until it releases a reduced cost Series3?

The competition against dual-tuner CC HD SA DVRs is fierce. Two years from now is a Lifetime. But I don’t accept that TiVo will take 2 yrs to reduce prices to competitive levels anyway. I think TiVo will push sales with lower prices much sooner, but I think their sales goals (and/or results) will remain ridiculously low.

Won’t selling the Series3 for $800 reduce SAC?

$800 will push SAC down, but the influence of the S3 will be small. I expect about 90K Gross Adds this QTR, with 10% or less being S3s. With the poor performance of TiVo $tore, I expect large expenses related to returns, etal. Many direct sales at $800 will otherwise be shifted to retail @ around $500; big difference. 

You talk about escalating SAC, where do your figures come from? What allowance to you make for increased ARPU on the bundle sales?

Q1 & Q2 SAC are up $80 & $100 over last year (with the $100 being a full QTR of the current maketing strategy.) We are looking easily at $60-100 more than the $308 of 3Q06. No reason not to figure $40-60 more than 4Q06’s $157.

That leaves us with FY07 SAC over $250 vs $191 and $182 in ’06, ’05.

It also means $100 more than an alternative strategy of getting SAC below $150 with higher sub adds for the sake of a short-term couple extra dollars per month from new Subs. The $100 is a big and risky investment and, together with lower Gross Adds, reduces the opportunites for other revenues (ie. Ads, TiVoCast)

(SAC is an average; it averages SAC from various sales channels. Ultimately we don’t have the data to calculate the higher SACs vs marginal ARPUs for each channel.)

Hasn’t some marketing already started, and won’t it to ramp up significantly through the Holiday Season?

That’s the right timeline for advertising based on TiVo’s comments, and I’ll take them as given for now. If they really go big, they’ll drive up SAC more than S3 sales help; if they don’t, Gross Adds will suffer and hurt SAC.

Whatever they do, they’ve maneuvered themselves into a strategy with much higher SAC, and I don’t think the hoped for higher ARPU will compensate in the long run.

What do the Series3 shortages suggest about TiVo meeting their sales plan?

The evidence suggests extremely poor fulfilment and other planning by TiVo. There never was an actual global shortage. There are more retail locations than S3s to be sold this QTR, therefore it should be expected to often find individual locations without product. At no time was it not possible to get a Series3 shipped out from somewhere (and at favorable cost) within a day. There was alot of double ordering in the first days. There has been plentiful availability for at least two weeks.

The tragedy is that TiVo will meet their sales goals. 😉


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