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LUC WATHIEU

TiVo in 2002: Consumer Behavior
It was March 2002, and TiVo was still alive and kicking.

Launched in 1999 as a bundle of revolutionary features that every TV user should instantly embrace, TiVo (creator of the personal video recorder or PVR) had a surprisingly slow start (Exhibit 1). Lack of awareness was first accused for the lackluster sales, but as the marketing team wasexploring ways to create the buzz, they realized that there was a more profound problem of defining and communicating a clear unifying and relevant meaning for TiVo. This problem became even more pressing as software industry leader Microsoft announced the launch of competing product UltimateTV. The idea that emerged was that TiVo might grow stronger and pre-empt competing products in the mind ofconsumers if it was positioned as a smart and friendly service that could improve their lifestyle. This was the framework under which most of the marketing decisions at TiVo (including their popular television campaigns) were made in the later part of 2000 and 2001. There were now 380,000 TiVo subscribers, with recent quarterly growth rates of 36% (latest), 22%, and 21% (see Exhibit 1). Microsoft’sUltimateTV experiment (available only to satellite television subscribers through provider DirecTV) resulted in a failure; after accumulating less than 50,000 subscribers, the UltimateTV unit of Microsoft was disbanded. ReplayTV, an early competitor, had withdrawn in 2001 before re-entering the market a few months later with redesigned high-end PVRs and a promise to pursue the mass market with moreaffordable units soon. TiVo, introduced initially in standalone black boxes branded Philips and Sony, was now available bundled with satellite television receiver DirecTV (sharing the same platform) and with a special model of AT&T cable receiver. Other key events included the introduction of a two tuner system (allowing users to record a program while watching a different channel) and the recentlaunch of TiVo “Series 2” (supported by DirecTV) which allowed consumers to control and organize not only television content but also digital materials downloaded from the internet, their video cameras, and other audio equipment. DirecTV’s commitment to TiVo now included financial responsibility for customer acquisition costs. Best Buy was now the exclusive retailer of TiVo. The monthlysubscription for owners of standalone TiVo units was increased to $12.95 per month (vs. $9.99 for DirecTV customers). But not all the news was good. The number of subscribers was still much lower than initially forecasted, and the profile of subscribers remained quite narrow, raising questions as to whether TiVo would ever have universal appeal. Penetration into the broader consumer market would____________________________________________________________

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Professor Luc Wathieu and Research Associate Mike Zoglio prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2002President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,photocopying, recording, or otherwise—without the permission of Harvard Business School.

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REV: JULY 26, 2002

502-062

TiVo in 2002: Consumer Behavior

determine whether TiVo had the potential to become a key player in the television broadcasting industry, challenging (or adding value to) the conventional value chain involving networks, content...
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