What Happend to What Rogers Promised?


If you put your thinking into the extremely narrow perspective of ‘Given that SAC is so high, they need more sub revenue over the life of the box;’ and accept that higher sub fees, and lower subs will actually overcome higher SAC spending, lower ancillary revenues (ads & DOD), and other corporate expenses, you might rationalize TiVo’s current strategy.

But that wasn’t and isn’t the only choice.

One alternative would be to expand the view to saying they could sell S2ST boxes for $299 (or maybe $349 or $249) (other boxes for commensurately more) with service included, generate revenue from other business lines like advertising and DOD transactions, and speculate if that would work better.

Then you could think about charging higher service fees than $12.95/$6.95 for a year or so on a premium box above the S2ST instead of charging a “box fee” and speculate about whether that could work better.

Then you could think about having both options available, and what that might yield.

Then, low and behold, you’d actually have what Rogers advertised to the financial community last year – all up-front and no up-front options – instead of almost having none of those, except for no up-front on the S2ST.

Why might all that work better than what TiVo is doing now? Well, first TiVo was doing much better before they got into this whole bundle mess; second, that kind of all-upfront/no-upfront pricing should lead to accelerated unit sales based on what other successful companies have done. That would have led to opening up the DOD and ad business lines. More subs would have brought more interest, and more importantly, better sub growth would have drawn more attention. There are lucrative potential returns to the DOD and ad lines of business.

Instead, TiVo has gone the other way, sinking deeper into the mess they created for themselves. Their strategy is going to hold back sub growth, choking off the other potential revenue sources, all for the vague hope of a better NPV on each sub from service fees alone.

Let’s look at a few issues with the current plan:

TiVo doesn’t offer low rates anymore for subscribing an old box with its SAC cost already sunk.  Selling a low end S2ST is probably TiVo’s worst option for itself. Allowing old boxes to be re-subed may be one of its best – other than selling an S3.

There is incentive to discard a box at the end of its service commitment and get a free/cheap new one. As for these disposable boxes…this is TiVo’s dirty little secret. Guess what churn will be when everyone does that… 3%, 5%? Not that that will actually happen to that extent, but…  A really poor deal for TiVo on the NPV of a sub. Did someone say NPV was going up?  😉

TiVo’s plans cost much more than before, choking unit sales. I quantify the dollar amount of the additional commitment in my reviews, and that ability (option) to decide not to continue after year one is worth something – a bit different to each person. So is the loss of the ability to re-up for only a year at a decent price (12.95/6.95) instead of 3 yrs (or 1/2 yrs at much higher prices.)

So what happens next? Well, maybe TiVo stops subsidizing the boxes so much which will further clamp down on sales. Maybe they’ll start blowing money on advertising, which has never done much for them. The former would respond to the disposable box mistake which was compounded this quarter; each new strategy is in part a fix to a mistake in the previous one by making a greater mistake.

The dark clouds are forming over TiVo. There is little time to find people who can fix this mess and save the company.


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