Tivo in 2005 strategic inflection lt4 rev 01

TiVo in 2005: The Way Forward

By LT4Anurag, Azlan, Carl, Goldy, Jen, Medel

Outline of presentation– DVR Business –Brief Intro• Consumer perception and profile• Trends• Competition

– Strategic Issues/ Challenges• Causal Factors• Way ahead – objective• Strategic Options • Org. Capability assessment , prioritization

TiVo’s Business• Personal TV provider for DVR technology (Software/service and

Hardware)

• Providers of unique services to the advertising industry for promotions and audience research – only available from TiVo

• Business model – Standalone sales online and thru national CE retailer -Ex. Best Buy etc.

– Licensee of DVR technology to the industry -Ex.Toshiba etc.

– Partnership with MSO’s (Cable TV and/or Satellite TV) –Ex.DirecTV

– Revenue -> combination of direct sale revenue, subscription fee, license fee and research/advertising revenues

• Over 3M subscribers as of 31st Jan 2005

• Competitors: EchoStar, Replay TV, NDS, Open TV, Scientific Atlanta, 2Wire, Akimbo even MS, HP, Sony and IPTV from telcos.

• Board members are NBC, Coca Cola, Sony, Omincon and Discovery

Consumer’s perception & Profile• Not clear on the usage– What TiVo could do and What TiVo could not do– Half of market analyst used PVR and rest DVR

• Customers were surprised on monthly fee• Average customers not grasped the concept

• 97% of TiVo users were very satisfied• Enthusiast– Comfortable with technology– Married, 25-45– Monthly Income: 70k – 100k– Families with young children (parent control feature)

TiVo subscriber trend and forecast

2005 2009*Total Household 105 114*DVR Market 8.4 (8%) 45 (40%)TiVO Share in DVR (36%) 3 16* Estimated, total household growth 2% per annum assumed

US TV Household and DVR Market

Competition

Competition Comparison

Core Issue/Challanges

• Significant net losses since inception• Threat of survival

Causal Factors• High payback period –new product new

market (single product –only service till 2001)

• Introduction of Hardware (initial investment, longer payback) in 2002

• Emergence of formidable competition-low margin /pricing pressure

• Limited Market -8mn as of 2005 (36% share)

Way ahead…Objective

Financial Turnaround by generating significant additional revenues to achieve sustained

profitability

How ?Strategic Options ?

Strategic Options

Is it the question of either of above or all (majority) of above with prioritization?

# Options + - Priority1 Aggressively pursue the stand-alone

business>97% customer satisfactionHigher ARPU (~$8.7)

Higher SAC ($182) 1

2 Focus on OEM deals with other cable companies, and possibly other telcos

Ready market - opportunity for alternate revenue offerings

$1 ARPUPotential competitor (once develop OFC network)

3

3 Become a content distributor Diversification, alternate revenue stream

Not core competency

4

4 Seek new market, outside US High growth opportunity in fastest developing market like India, China

Organizational capability ??

2

Further challenges …• Market- How to increase usage/adoption?• Future regulation relating to copyright law or evolving

industry standards and practices that could adversely impact the business

• Positioning – Mass market or niche?– Identity -“DVR business” or “entertainment service business”

• Organizational Capability– Financial leverage– Support function capability building for expansion

(do we have capability to scale the business?)