TiVo Tries To Heat Up Sales with New Services

In the doldrums of January, how could it be hard to sell Tahiti? Perhaps that was TiVo's (Nasdaq: TIVO) thought when it named the strategy it unveiled at the Consumer Electronics Show in Las Vegas this week. "Tahiti" is the umbrella term for the company's plans for a host of premium services designed to compete against the ever-encroaching DVR boxes from cable and satellite TV providers.

The company announced a high-definition TiVo box, a partnership with Microsoft (Nasdaq: MSFT) for TiVoToGo, expanded content over the Internet, and an embrace of CableCard, which eliminates the need for a set-top cable box.

TiVo is working overtime to convince consumers to buy into their product, but analyst Michael Gartenberg of Jupiter Media told TechNewsWorld that despite the innovation, the company faces an uphill battle.

Expanded Offerings

Its partnership with Microsoft -- which announced at CES that it would be developing its own standalone DVR platform -- gives TiVo an ally in its battle against the cable and satellite providers. It also will give users more flexibility to watch content in more places.

TiVoToGo allows users to transfer content to a Windows XP PC. Once on the computer, the shows can be downloaded onto hand-held devices. The high-definition-compatible DVR, complete with CableCard slot, is due on the market in early 2006, TiVo said.

"I think Microsoft probably needs TiVo as much as the other way round, given the former's ambitions in TV and the latter's ongoing need for market leverage," said Todd Chanko of Jupiter Research.

Little Market Penetration

TiVo and its partners still have a lot of ground to cover. Only 4 percent of U.S. households now have a DVR, even though the product has been on the market for about six years, Gartenberg said. That's compared to a 55 percent penetration for DVD players.

"The question is who is willing to pay for it and how much are they willing to pay?" he said.

Part of TiVo's problem has been its fee structure. Consumers must pay both for the box and for a monthly or lifetime service fee. The lifetime fee of $250 is not transferable and refers to the lifetime of the single purchased box. Cable and satellite companies generally give away the box and charge an extra fee for the service, although their services are not as comprehensive as TiVo's.

But How Does It Work?

"TiVo's vision is comprehensive but complex," Gartenberg said. "It offers more functionality, but it's more difficult to explain what they're offering. They have to educate the market on why they want these services."

Another problem TiVo might have is the complex nature of the technology.

"Expanding functionality based on broadband penetration and people having home networks is shaky," he said. "These things are fairly complex. They're going to have to figure out ways to tame the underlying technology so it's more accessible to the average consumer."