THE MESSAGE
Is TiVo NeXT?
The beleaguered personal video recorder company is ripe for an Apple takeover.
By John Battelle, May 2003 Issue
Everyone who has TiVo (TIVO) loves TiVo; it is to television what Macintosh was to computing — a revelation. Which is exactly why Apple (AAPL) should buy TiVo and once again redefine the intersection of culture and technology.
Folks love TiVo for the same reason they loved the Mac in 1984 and the iPod in 2001: It gives control back to the end user. TiVo viewers call the shots regarding when, how, and — soon — even where they watch. Once content or access is purchased, the end user is in charge, just like with the iPod.
But unlike the iPod, TiVo and systems like it are in serious trouble. The culprit is the entertainment industry. TiVo has an abeyant Napster-like quality — and the content business is scared silly that it will not only destroy advertising revenues but become the platform for video swapping on the Internet. Case in point: A coalition of entertainment companies recently sued TiVo competitor Sonicblue into bankruptcy.
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TiVo’s own undoing may come in the form of a recently reported cable service. AOL Time Warner (AOL) (the parent company of this magazine) has realized that its control-based business model will be in jeopardy should TiVo succeed. So last May it neutered its relationship with TiVo (in 2000 it announced plans to invest as much as $200 million with the intent of distributing the services through the now-defunct AOLTV), and it’s now focusing instead on a service currently called Mystro TV. Unlike TiVo, which is an intelligent “node” on the edge of the television network, Mystro would be embedded in AOLTW’s servers, much like pay-per-view. While it would give viewers some TiVo-like features (pause and rewind, for example), Mystro TV decides which programs can be recorded and whether ads can be skipped. And it requires no storage device, thereby exorcising the ghost of Napster. Comcast (CMCSK), the largest cable provider (Time Warner Cable is the second-largest), has rolled out a similar service.
Mystro is a crippled model, one that in the long run could fail for any number of reasons. (Here are two: Since TiVo knows so much about you, it’s a marketer’s paradise. And the technology Mystro employs may not scale.) But in the near term, Mystro could strangle TiVo before it can hit critical mass. If customers know they can buy, with a click of the remote, what seems like a similar service for $5 a month, it’s unlikely that they’ll shell out $299 for a box that’s difficult to set up and may be moribund within the year.
Wall Street has caught on to this fact, and despite healthy subscriber gains, TiVo’s stock, once at $70, is stuck in the single digits. Some pundits are predicting that the company will soon run out of cash.
So it’s time for Apple to step in. Steve Jobs is the only man in techland who can stand up to the content companies on his own terms. Not only does he understand the entertainment industry — his other company, Pixar, is a Hollywood hit machine — but he also deeply understands the consumer. Apple’s “Rip. Mix. Burn.” approach has captured the essence of how consumers feel about music: It’s theirs.
Beyond that, Jobs used the iPod to help curb music piracy: The device is wedded to one computer at a time, making tune theft more trouble than it’s worth.
TiVo should find a soft spot in Jobs’s heart for other reasons. In January, TiVo announced that upcoming devices would use Apple’s Rendezvous networking technology to allow TiVo-equipped TVs to play music and display photos stored on a Mac. Also, TiVo is similar to Jobs’s erstwhile NeXT Software — an expensive and risky endeavor, but eerily prescient. When Jobs returned to Apple, he brought NeXT with him, and its core technologies are burrowed deep into OS X, the elegant operating system at the center of Apple’s new “iLife” media strategy.
Jobs could do the same with TiVo. With a depressed market cap and nearly 625,000 customers, TiVo is a steal. Jobs would have to unwind some messy licensing agreements, but he’s done that before. His next step would be to apply Apple’s design elegance and create an “iTV” device that integrates with Macintosh OS X, the Internet, and your cable or satellite box. Talk about a revolution. Once Apple turned on the marketing and PR offensive, we’d have one hell of a Hollywood drama unfolding. And with Jobs in the lead role, it’d be awfully fun to watch.
John Battelle directs the business reporting program at UC Berkeley’s Graduate School of Journalism. He founded the Industry Standard and was a co-founding editor of Wired.
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