TiVo, Case Study Example

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Case Study

Executive Summary

In 2005, TiVO faced a deteriorating competitive climate: Although TiVO was arguably the original innovator in the DVR space, a previous collaborator, DIRECTV, decided to build its own in-house device- a move that would significantly impact TiVO’s customer base and revenues.

In order to deal with the shifting commercial climate, the TiVo CEO decided to overhaul the company’s operating strategy. The main change was to shift the company’s niche from that of a pure “DVR” firm to a “home entertainment” company.  Indeed, although TiVo had built up a loyal customer base, the aggregate number was quite small (3 million) and being threatened daily by competitors. TiVo decided to become a “middle niche” DVR player: This would put it above the lower DVR players that were competing on mere volume; TiVo also did not want to compete with the high end DVR players (essentially computers.

TiVo’s move towards an entertainment company rather than a mere DVR subscriber has been a half success.  The firm has succeeded in expanding market share to a greater customer base from its original position in 2005- this effort has largely depended on striking deals with cable and content providers.  The company, however, has also run into numerous challenges emanating from the internet including Hulu and You Tube- consumers do not have to purchase TiVo in order to access television shows  with limited commercials.  Thus, the CEO’s strategy to push out of its original niche was correct: Without that move, there is only a small probability that Tivo would be operating today.

TIVO CASE QUESTIONS

There was profound upheaval in the DVR business that lead to TiVO’s change in strategy.  First, the founder of TiVO and the second-in-command decided to retire.  Second, DirectV, previously a cooperator with TIVO, decided to build its own in-house DVR device.  Finally, as a result of the first two and other factors, Tivo’s stock dove to a three-year low.

TiVo’s problems are not necessarily with the product itself.  In general, the TiVO platform is easy-to-use; there are no dramatic problems with user friendliness.  The lose of DirecTV, however, could have a palpable impact on Toms business.  First, TiVo only had three million total customers in 2005- many of those through the partnership with DirectTV.  Indeed, DirectTV accounted for roughly 66% of TiVo’s customers in 2005.  In addition, DirectTV’s bid to develop its own DVR business was a harbinger of further competition from other firms.

Scalability is a problem with the TiVo unit: That is, without being an easily scaled product, there is a limited market for further sales. TiVo essentially chose the HMO option because its other businesses were being cannibalized.  On the plus side, this move would allow for a larger market; on the downside, the firm would likely face new and more competition.

The main issue is that TiVO could lose market share from either the top-end or the lower-end.  That is, customers might move to another cheaper or higher value platform.  The multi-prong strategy will probably force TiVo to take their off the main business.  That is, having a firm market position in one area is better than having a small market position in a number of different niches.

TiVo has essentially changed toward providing services for cable companies as other companies began to canonbalize their business.  I wouldn’t say their plan worked: But they are still in business.

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