Tivo Case Study 050910

 A Case Study on TIVO:

Prepared by, Ng Eng Chong

Questions: 1. Draw a supply chain (or value net) that traces the various stakeholders Involved in the TiVo value chain ch ain and their respective exchanges. From this, what insights do you get about the relative value v alue that each stakeholder adds in this process? 2. For TiVo, describe the six factors that affect customers’ purchase decisions (see Chapter 7, Table 7.1). What are the t he most salient for Tivo Adapters ? 3. What are TiVo’s core competencies? Is the company effectively leveraging these in its current strategy? 4. To what extent is the TiVo business model affected by network externalities? What are the implications for its business model? .  o are e ey compe ors ac ng o ven s compe on, w a are the pricing implications? 6. Does TiVo’s pricing strategy make sense? Why/why not? 7. Do you believe that TiVo’s business model is sustainable over the long term? If so, why? If not, why not? If not, what recommendations do you have for this company? 8. Why has TiVo apparently not been successful in “crossing the chasm”? What will it take for TiVo to penetrate the mass market?

(1) Traditional Value Chain: Stakeholders: Film/Movie/video makers, Producers

Delivery Stakeholders: DVR manufacturers Software vendors, Retailers

Content Producers Stakeholders: TV stations, Cable TV station

Satellite

Broadcasters

Video Recording Hardware

Customers

Cable OS Platform

Broadband

Stakeholders: Broadband service provider 

 Application Services

 Advertising Stakeholders: Advertisers

In the traditional value chain where the value delivery component is vertically disintegrated, the values added by the stakeholders is as follows : (i) Film/Movie/video makers, Producers: Create contents in form of video/animation/music video/animation/music which is sold to broadcasters (ii) Broadcasters such as TV stations and Cable TVs: Sell broadcast time to advertisers and package contents into fixed TV schedule. (iii) Advertisers: Buy the TV time slot to market their products or services to the mass viewers. (iv) Broadband service provider: Provide the necessary infrastructure to deliver the broadcasted content in EM or wired signals (v) Display makers: Build display devices such as TV monitor to convert the signal from the service provider into pictures and sounds (vi) DVR manufacturers: Build devices to record live T V in digital format and provide subscriptions to access exclusive broadcasted programs (vii)Software vendors: Provide OS platform and application software for display monitor and video recorders (viii) Retailers: Sell the TVs and DVRs independen independently tly to consumers. E.g The company that m anufactures video video recording hardware do not do any broadcasting.

Tivo’s Value Value Cha Chain: in:

Broadcasting

Delivery

Video Recording Hardware

Customers

OS/ Application software

*optional  Advertising

*optional

Tivo’s ivo’s business model mod el is vertically integrated, combining several components into a DVR box. Tivo delivers However, T broadcasted content branded as Tivo service, makes recording equipment that houses software and large storage device, and provides software features to skip the advertisement in the recorded media. med ia. There are many big players in the traditional business model market and Tivo’s vertical integrated model mod el threatens the value of the stakeholders such as broadcasters, advertisers, and other DVR manufacturers.

(2) 6 factors that affect’s customer purchase decisions:

(i) Relative advantage: The benefits of adopting Tivo technology compared to the other’s DVR service providers. (ii) Compatibility: The extent of the th e media format recorded by Tivo whether it is standard and viewable in different devices such as mobile phones, laptops and pcs. (iii) Complexity: The consumer usage model of Tivo DVR technology whether it’s user friendly or difficult to use. (iv) Trialability: The extent where Tivo DVR can be tried on a limited basis or it can be returned if users are not satisfied with the product. (v) Ability to communicate product benefits: The ease and clarity of the benefits of using Tivo DVR can be communicated to the users. Observability (vii) : The benefits of Tivo is observable to everyone. The most salient factors for Tivo adopters is relative advantage. Tivo faces competition from cable and satellite operators ree to the consumers. It’s a very disruptive marketing which bundled the DVR box in their plans and the DVR box is given f ree to Tivo who is selling the hardware at a premium cost. Secondly, Tivo Tivo hardware has compatibility problems with the cable cards provided by the cable TV providers. Its hardware which supports Multi-stream cable cards causes a lot installation issues to the consumers in US market. In different countries where Cable cards are not supported, s upported, Tivo has problems to penetrate into new market without modifying their hardware.