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Tivos Last Stand?

PVR Software Developer Struggles By Charlie White
Tivo's Last Stand?Personal Video Recorders (PVRs) have ridden the wave of PC innovation and plummeting costs over the past few years. Fueled by lower prices for large, fast and quiet hard drives and cheap MPEG-2 technology, what would have cost $20,000 five years ago can now be bought for a mere $199. But the boxes havent caught on with the American public at the rapid rate analysts predicted last year. One of the original PVR makers, ReplayTV, faltered and was bought by SonicBlue. Microsoft has entered the fray with its UltimateTV with limited success. But now Tivo, the bellwether of the PVR industry, is in trouble. What has happened to Tivo, and why hasnt the PVR market taken off into the stratosphere?

According to published reports, if Tivo doesnt get an infusion of cash soon, it will run out of money by February, 2002. Even though the struggling company started out with deep pockets and an annual ad budget of $100 million, so far its only been able to attract only 225,000 subscribers. That equates to a startling $735 spent to attract each customer to the platform. And, even though 700,000 PVRs of every brand have been sold so far, thats far short of analysts predictions of 3 million sold by the end of 2001. Ominously for Tivo, coaxing consumers into the PVR arena is going to be even more difficult for the company this year, with its current ad and sales budget slashed to only $13 million. Now the company says it will rely on word-of-mouth advertising to persuade consumers to try the boxes.

Given the current state of affairs in the US, that could prove to be a hard sell. At this point, grieving and frightened consumers are reluctant to buy anything except the bare essentials. Also working against Tivo are a lack of understanding about what its product can actually do, ingrained viewing habits of the couch-potato set, high cost of the equipment compared to VCRs, and limited capabilities of the software. On the plus side for Tivo, the companys stock shot up a few months ago when the company was awarded patents on much if its recording technology. But analysts say Tivo may not have the money to defend these patents in court against rivals Microsoft, SonicBlue and others.

Lack of Understanding
In its first television advertisements, Tivo took a characteristically silly approach to introducing its product, a practice that was echoed throughout the community of dot-com upstarts who were awash in cash two years ago. Although viewers laughed at the commercial (a football viewer freezes the video just before a potentially game-winning field goal is kicked, runs down to the neighborhood church and prays, then runs back to push the pause button again and sees the ball go through the uprights), it did little to explain all the capabilities of this would-be revolutionary device. Lost on potential customers was the ability to get a "season pass" to all their favorite shows, to find shows featuring their favorite actor or director, to have shows picked out for them by software that watches and learns their preferences, and automatically stream all these recordings onto a VHS tape. Beyond that, those who did understand the system balked at Tivos practice of sending personal viewing information back to Tivo on a nightly basis.

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Related Keywords:DTV Professional, Personal Video Recorders, PVRs, MPEG-2 technology, ReplayTV, SonicBlue, Microsoft, UltimateTV, Tivo,

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