Industry Standard founder predicts Apple will take over TiVo

The upcoming May issue of Business 2.0 magazine will feature an editorial by John Battelle, founder of the Industry Standard, predicting that Apple will take over TiVo and the reasons behind the potential acquisition. The issue is due to hit the newsstands on Monday, April 28th. Here are some selected excerpts of the soon-to-be published editorial (not yet available online):

The beleaguered personal video recorder company is ripe for an Apple takeover.

Everyone who has TiVo loves TiVo; it is to television what Macintosh was to computing: a revelation. Which is exactly why Apple 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.

Battelle then describes why TiVo is in trouble, saying TiVo has a “Napster-like quality” and outlining how the entertainment industry is “scared silly” of the TiVo technology.

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.

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  1. As long as Apple can get a liability waiver from the TV/Movie goliaths, they should do it. Many of these companies are struggling & burdened with debt, and if a bigger company bought TiVo they could find themselves the target of some messy copyright related lawsuits by companies looking for cold, hard cash. Apple’s $4.5 Billion cash reserve could dasappear faster than Napster in such a case.
    The concept is great, but maybe Apple would be better off by making their own and not taking on such liability exposure. If they can make this music thing fly, a video device like TiVo would be a logical next step.

  2. Guys, get a clue. Why buy this company when Apple can simply create their own PVR software and connect a cable to the back end of a Mac? TiVo brings nothing to the tabled that Apple can use to justify the cost of the acquisition. And once Apple had it, what would they do with it? There’s little value add for the Mac platform, unlike the case for music.

  3. Can someone explain the line: “TiVo has a “Napster-like quality””, with the fact in mind that Tivo does not provide a method to extract video from the hard drive, and that without what has been called major “geek modifications”, you can’t do it?

  4. Heywood Jablome,

    TiVo lets users completely ignore commercials, which of course, are what pay for the programming. Programming=content. Content for free via TiVo. How long do you think advertisers will pay millions to sponsor programs if their ads can be skipped?

  5. Unlike Jal, I see the advantages of a subscriber base of 625,000 people. I haven’t been this excited about Apple in years. I truly hope they buy Universal Music Group and would love it if they made this prognostication come true. Advertisers will continue to spend millions on shows that end up getting their commercials bleeped. They’ll simply switch their strategy to product placement, product demonstrations within the story, and other non-traditional ways of communicating their benefits to consumers.

  6. Why would Apple buy TiVo when they could make a similar product themselves? Branding! Why do we drink Coke and Pepsi instead of generics? TiVo has a name, and a well-established customer base that is not wedded to one computer platform.

    Regarding the commercial-skipping issue, has anyone watched TV lately? Product placement will replace ads entirely in 10 years. Did anyone see the Frasier episode with Bill Gates babbling on about Windows XP? Or the Friends episode all about Pottery Barn? How about the incessant commercial plugs in reality shows like American Idol and Survivor? Cast Away plugging FEDEX? Anyone who thinks it’s possible to skip all the commercials now has their head in the sand.

  7. Jal…

    You may be right…but what you forget is that TiVo may have patents. The aquisition will allow Apple to “own” the patents and pick up the existing customers and the “shop” operation. They wont have to start from scratch. Too much R&D…it would be cheaper to take over something that already exists. While this is a cool idea…I don’t see it happening.

  8. Yeah, this coming from a guy that ran an on-line mag that went under. I want him giving me advice on what is good for my company (granted the Industry Standard was a site I visited almost daily). Just becuase Apple Computer, Inc. has lots of cash, they do not have to go spending it willy-nilly of floundering technology.

  9. But don’t forget Steve has said…

    “And I’ve got to tell you, the Internet is a place you go when you want to turn your brain on, and a television is a place you go when you want to turn your brain off. I’m not at all convinced that the twain will meet”.

    That was said before HDTV was largely around, but surely Steve wouldn’t be interested in compressed NTSC. Either way, it would be interesting if TiVo went to Apple.

  10. My TiVo is only two weeks old and I really love it. Apple buying TiVo would be a huge boost for them in the broadcast arena and they would not get rid of the TiVo name or Logo, their just to good.

    I would love for Apple to buy TiVo, it could only get better in their hands.

  11. The value of an Apple-branded DVR is arguable, but if we grant, for the sake of argument, that Battelle’s proposal has merit, several questions spring to mind: (1) SonicBlue just sold ReplayTV, which is every bit as good as TiVo; why didn’t Apple buy that? (2) Why wouldn’t Apple buy El Gato (makers of EyeTV) instead, much as they bought the company that made SoundJam, the predecessor to iTunes?

  12. jepher,

    Replay-TV is/was the RC Cola to TiVo’s Coke. El Gato? Even you had to explain what they make. Sounds like a frozen burrito company. BRAND, jepher, BRAND – costs million of dollars to create and perpetuate – that is what makes TiVo worth it – the brand name. Regular people know sort of what TiVo is, at least, so Apple doesn’t have to spend lots to explain. Get it, yet?

  13. “(1) SonicBlue just sold ReplayTV, which is every bit as good as TiVo; why didn’t Apple buy that?”
    Sonic Blue’s assets were just won by DM Holdings at auction sale due to SB’s bankruptcy, a failing company/product with less than 60,000 subs.

    “(2) Why wouldn’t Apple buy El Gato (makers of EyeTV) instead, much as they bought the company that made SoundJam, the predecessor to iTunes?”
    Tivo’s rep for stable products, name recognition and numerous key patents, none of which El Gato (makers of EyeTV) enjoys.

  14. Guys, good feedback, but try to separate the idea of it being “cool” for Apple to buy TiVo from the business benefit. Guys like fred Anderson who are helping Steve manage the bottom line and make Apple credible on the street are going to look at what will be gained from the acquisition. TiVo has about 43M shares out, valued at about $5 each. That mean an acquisition will cost at least $215M, even discounting for speculative value. What’s to gain?

    Branding? Apple’s brand equity is worth 100’s of times more than that already. Apple is on par with Coca Cola, Disney, etc, all international recognised brands. TiVo might be mistaken for a car the likes of the Ka in Europe.

    Customer base? A high percentage of TiVo customers are Apple users anyway. And even if not, that’s only about 600K customers. Say each one of them purchased a Mac averaging about $2K. That’s only $1.2M revenue perhaps every 3 years. Balanced against depleting corporate assets by nearly a quarter billion dollars doesn’t make sense.

    Patents? TiVo’s patent is simply on how they do their time shifting to pause live TV. This patent can be circumvented a number of ways legitimately. Why more companies have not done it is because TiVo’s revenue model is questionable (that’s why the company is in trouble) – are they a box business or a service business? Additionally, TiVo or any other comparable company has never managed to penetrate households to a critical mass.

    So the real question is, what would be gained by Apple to offset the cost of acquisition that wouldn’t be worth it for Apple to do by itself or simply license from Tivo?

    It still makes sense for Apple to do this on their own or infuse cash into TiVo to keep them running and simply license any needed patents (if any) to create their own “Apple-like” solution. Even Sony continues to license TiVo to create their own boxes. That benefit (really all you need) is not worth the corporate overhead for them to acquire and run that company.

  15. $214 million / 600k customers = about $358 per customer.

    While I love the idea, the payoff on straight value is hard to make up. The question is, for $214 mill, could Apple design and make bullet proof a TiVo like device–probably. The question is that how long would it take to produce, resolve issues of patent, and get mindshare. I think that Apple is desperate for a new solution/killer app. The cost of time for Apple is more than $214 million. So, if you look at the strict payoff, it’s a bad idea. But if you look at the position and size of Apple and the cost of sales shrinking, it costs Apple to NOT have something new, different + insanely great.

    An Apple TiVo is a much better idea than buying UMG. The convergence of Apples products is better served as a content facilitator than as a content provider. I am dying for a device to aggregate (bring together) all my media, and then serve it up wherever and whenever I want. This is similiar to what the Moxi device will be brining forth–and I’m guessing that they have a lead-time over Apple. So the question isn’t IF someone has a TotalEntertainmentDevice, but when.

    And that is more important than how much.

  16. “TiVo lets users completely ignore commercials, which of course, are what pay for the programming. Programming=content. Content for free via TiVo. How long do you think advertisers will pay millions to sponsor programs if their ads can be skipped?”

    They’ll pay forever, because the new marketing ploy is product placement within movies/TV shows. They pay just as much if not more to have the actors use their product for one second on air than for a 30 second commercial slot.

  17. perhaps jobs and the engineers have it all figured out for the next 10 years. there are too many anti mac people out there, for foolish reasons. mac’s digital hub may eventually appear to the consumer to be a non- computer that has a transparent interface designed for non computer people that handles all their multimedia. a wifi tablet remote/small touch sensitive lcd tv/ mpeg4 video recorder streaming directly to hard drive that does 640×480, but also 2 megapixel stills/ itunes with pay per song net download/ i photo/ imovie/ wireless airport(old version) built in/ wireless keyboard capability/ the camera lens is detachable and wireless/and like the pay per song tunes, a pay for individual background soundtrack audio samples, video fx, transitions,etc. with monthly updates to stay fresh,all with interactive training modules built in. apple could break into the homes of many uncreative pc users without them even knowing. there are millions of pc users that do only rudimentary tasks on their pc’s, that could start using more right brain. the unit could be sold for about a grand and easily sell several million units a year.

  18. “… 600K customers. Say each one of them purchased a Mac averaging about $2K. That’s only $1.2M revenue perhaps every 3 years. “

    I believe that should be $1.2B as in billion not M as in million.

  19. Curtis’s future vision is a good one, however the current role of the computer as digital hub has serious drawbacks, namely that it’s on a computer: that is a multipurpose computing device that is primarily design to do work. Series 2 Tivos are now fully networked devices and the �Home Media Option� that allows the Tivo to connect to music and images on a computer and then play them back on a home stereo or TV. It is becoming the �missing link� convergence device. If we move the content to the Tivo and use the computer for creation or manipulation of the content, then the Tivo comes the digital hub; a much more reasonable model. Tivo�s now have a USB port, add firewire and I could connect my digital source to the Tivo, download the content into a simple iPhoto type software that allows me to view and edit images, then connect to the content with Photoshop on the Mac to work on them. The same with DV except I could watch it from the Tivo without having to dump it back to tape or DVD.

    As far as Tivo itself goes, I�ve had one for over a year now and it is truly great. It makes television and the subscriptions to feed it (cable/SAT) much more valuable. It�s not about skipping commercials, it�s about watching what you want to watch when you want to watch it. In fact, even when I�m watching recorded shows, I often don�t fast forward thru the commercials because I�m usually doing something else at the same time or just because I like to watch them. My four year old has even learned how to rewind the program and cue it up (pause it) just before an ad then come running to get me �Daddy, daddy, come here. We gotta get this�. It�s an advertisers dream come true. Remember that Tivo announced after the 2002 Super Bowl that the segment most replayed in slo-mo by Tivo users was the Brittany Spears Pepsi commercial.

  20. It was my understanding that Tivo wanted to become the ultimate Nielsen service. After all, the software reports your viewing habits back to Tivo with incredible accuracy and specificity. (This has many poeple on the Tivo forums very worried.) With that information Pepsi knew to do more ads like the Spears one, and for the other guys that didn�t get watched, well, they learned to hire Brittany Spears. Once they put a �Buy Now� button on the remote, they�re set. I also thought their plan was to license the technology to television and decoder box manufacturers. After all it really does make the televisions and cable subscriptions much more valuable to users and if it came built into the devices we would normally have, Tivo would have a larger and more valuable sampling space.

    Whether Apple wants to get into that business I don�t know.

  21. While I can understand and agree with many of the points of this article, the reality is that if Steve did buy TiVo it would have zero benefit to me and would in all probability make matters worse (for TiVo).


    TiVo does currently support UK customers (i.e. you can buy boxes, and subscribe to the EPG – Electronic Program Guide).

    Based on past AND CURRENT experience of Steve & Apple’s broken promises, almost immediately we would see an end to UK channel information being available.

    The evidence for this is the following facts

    1. Despite a promise at the time of iPhoto being announced/launched, Internet printing is STILL not available outside the USA

    2. UK channels for Sherlock are still not available from Apple.

    3. No Apple stores! And boy do we need them (far more than the USA does).

    4. It took well over a year for OS X to support A4 paper size properly in applications.

    In conclusion, Apple’s support for international customers sucks big time, even in countries that speak the same language!

    Rupert Murdoch can teach Bill Gates a lesson or two, Steve has no chance of competing with him.

    [Rupert Murdoch’s Sky Televisions’s Sky+ PVR is whipping the floor with TiVo in the UK]

  22. I’m curious… does this have anything to do with the rumoured stand alone devices being made in Asia for Apple? Hummm… Apple is great at getting stuff of the web, at distributing it wirelessly and now maybe blending it with video/sound data from satelitte and cable suppliers. The mac becomes a data/media server and TiVo becomes the entertainment supplier. These rumoured boxes become the inexpensive devices which allow the consumer to consume entertainment anywhere he or she wishes… wirelessly as long as AC power is nearby!

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