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.
The Business 2.0 website offers daily editorial features and columns, in addition to resources that give readers an opportunity to research issues and network with people who have similar interests. Visit the Business 2.0 website here.
Anyone that think TiVo is great hasn’t trued EyeTV from El Gato Software… Apple will never buy TiVo…
Mac Genius said, “Replay-TV is/was the RC Cola to TiVo’s Coke.” Not a good analogy. Coke has a better tasting product than RC. ReplayTV had a much higher-end product than Tivo: remote programming over the Web, broadband connections out of the box, internet show sharing, automatic commercial skip, download recorded shows to your PC or Mac. In fact, RTV should appeal more to Mac users based on its higher capability and cleaner interface rather than Tivo. In my opinion, Tivo owes its success to two things: establishing their name as a verb earlier than RTV, and the business model of selling hardware at low-cost to suck consumers into monthly subscriptions rather than RTV’s original plan of charging more for the boxes, but including free service. Consumers balked at the higher RTV prices, even if it made more economic sense in the longer term.
That said, I don’t think Apple will acquire Tivo. They could have gotten RTV for less, but I don’t think they need the technology, which is straightforward enough. They also don’t need the Tivo brand either if they are going to market an Apple-branded box.
Heywood is right, the TiVo files are in encrypted format and they deliberately make them difficult to pull off the TiVo and use in something like Final Cut Express. I’d love to grab shows off the TiVo and pull the original datastream into an editor and burn DVDs, but the TiVo people have expressed worries that they don’t want to get stomped on by the MPAA for “contributory infringement.” I can grab TiVo output with a DV converter but it’s being recompressed and the signal quality degraded, and I have to capture in real time which is a huge waste of time and duplication of effort.
Anyway, I was surprised to learn that TiVo makes no money on hardware, they’ve licenced it all out and Sony or whoever makes the box keeps all the money, all TiVo gets out of it is the revenue from monthly subscriptions.
This makes absolutely no sense. Apple is not exactly flush with cash. They’ve only netted about $24M in the last year. These days, market cap is meaningless (almost universally because it’s nearly worthless – most serious analysts are saying that P/E ratios are still out of whack by a factor of 5 – 10!). TiVo investors (most of whom are large and in it for the long haul) paid pretty close (and much more, for most individuals) to what TiVo stock is worth now (early investors most likely already pumped and dumped their stock before it passed North of $70 several years ago) and they’re not going to take a roughly even trade for investments that may have been made years ago, especially if Apple thinks TiVo is worth anything.
As for the “Oh, Apple can build its own PVR” crowd, guess what – some key TiVo engineers had been shed from Apple when it couldn’t afford to develop anything beyond Macs (and let’s face it, the iPod is nice, but it was a lot less complicated to develop than a DVR would be). The TiVo remote alone is so much better than anything any other company in the consumer electronics market has _ever_ created (and it embodies one or more of _14+_ patents TiVo has been awarded, BTW) – not a remote with more keys than a computer keyboard arranged in a grid. The TiVo user interface is just plain simple, which is what couch potatoes want. Look on%20and%20septugenarians%20(people%20in%20their%2070's%20for%20recent%20high%20school%20graduates%20img%20src=http://www.macdailynews.com/images/smileys/smile.gif)
” width=”19″ height=”19″ alt=”smile” style=”border:0;” /> have learned to use and love a TiVo.
(see part two – 2500 character limit? WTF???
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(see part one below first – 2500 character limit? WTF???
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We’ve been hearing for years now that anyone with a hard drive and a compiler can duplicate a TiVo, including the cable set-top box companies. Guess what, it hasn’t happened, and it’s not going to happen. Replay couldn’t do it (nice for geeks, but creeping feature-itis is not where the big money is going to come from folks like John and Jane Q. Public). Microsloth couldn’t do it, either, despite all the money in the world (or at least most of it
” width=”19″ height=”19″ alt=”smile” style=”border:0;” /> and seven _years_ of development. Yeah, sure, X-Box 2 is going to also be a PVR – while the 13 year olds are playing MegaDoom 3K??? I don’t think so. Go do a Google search for user response to the cable DVR (not very personal, IMHO) trials – they’ve been sending them back because they crash as often as every few hours (usually less than 24 hours), frequently losing recordings, or not making recordings properly.
TiVo has been very smart to avoid the capital-devouring nature of build-it-in-house, except for the few thousand a month it probably sells via its WWW site (which are probably built very close to just-in-time for demand during the non-holiday season). Ask Philips how much they had to write off for consumer electronics in the last couple of years. Even Sony hasn’t exactly had stellar sales across the board recently. Licensing is the way to go – let some big foreign conglomerates depend on their governments to keep them afloat while we invest in the R&D that results in great products like TiVo.
To paraphrase Bart Simpson, “Apple isn’t going to do it. Nobody’s going to see them do it. You can’t prove a thing.”
Mike, thanks for the math check. I also made one other error…it’s probably not responsible to assume to that all 600K TiVo customers would purchase a Mac. Typical buy-through rates would put it under 10%, I guess.
doesn’t the new ipod (april 28) play video?
I could download my favorite TV shows recorded on TiVo and watch it anywhere!
all on a device that I can fit in my pocket?
WHERE DO I SIGN
You “can’t do it” guys haven’t really dug into Tivo. It’s just a slim linux os with a video board and a hard drive. And it’s open source. It’s already been hacked to allow telnet, ftp and http access with a custom web server that allow access to all of the hidden functions and content. You CAN extract the video streams from the Tivo files; they’re just encapsulated with Tivo data; not encrypted.
As far as crashing goes, most of it occurs to those who’ve messed up a hack. And it is still a young system that’s going to have some growing pains. But my experience has been carefree and great.
Joe Blow – last time I checked Apple had a couple Billion in cash.
(this is Part Deux – see Part Uno above)
And, yes, Apple does have $6,269,000,000 in total assets, but I don’t think they’re going to sell their office buildings ($605 million property, plant and equipment), short-term investments ($1,850,000,000 – usually held in reserve to shore up potential cash shortfalls), or borrow against net receivables ($674 million they are owed, but haven’t received/collected yet). I don’t know what their $338 million in “Other Assets” and “Other Current Assets” are, and the rest of their assets are tied up in long-term investments, goodwill (yeah, right
” width=”19″ height=”19″ alt=”wink” style=”border:0;” />, inventory (historically a weak area, but they’ve gotten better at keeping parts-to-products down to something like 11 hours within the factories, and a few days in the channel), and the ever-inscrutable “Intangible Assets” ($31 million). That doesn’t leave much to buy TiVo, if it’s going to take $500 million, or more.
I won’t even bother doing an analysis of the rumors of the buyout of Universal from Vivendi! I do expect them to announce some kind of media licensing deal with Vivendi/Universal (and probably other media congloms), which could be paid for with a combined cash/stock/profit-sharing deal. Expect to see something that looks an awful lot like the .Mac trial/switcheroo (remember, it was initially free with no up-front notice that they would eventually charge for it – I don’t begrudge them the income, but they could have been a little more transparent about it).
Anyway, as Dennis Miller always said at the end of his rants, “That’s just my opinion. I could be wrong.”
(this is Part Uno – see Part Deux below)
Bill3OH – As of the end of Dec 2002, they had $2,612,000,000 in cash on hand. That sounds like a lot of money (as U.S. Senator Everett Dirksen is alleged to have said, “A billion here, a billion there, and pretty soon you’re talking about real money”), but look a little further down the balance sheet, and you will note that total liabilities are $2,153,000,000. Now, Fred Anderson has proven to be a pretty good CFO, but even he will tell you that spending your cash on high-risk investments with no idea if/when the Return on Investment (ROI) will occur, in an as-yet unproven market, is not the way to keep your job as CFO. Let’s not forget that it wasn’t that long ago that Apple was on the brink of running out of cash, and had to trade its intellectual property for (only
” width=”19″ height=”19″ alt=”wink” style=”border:0;” /> $150 million – from Big Bad Billy Gates. Besides, TiVo has burned through something on the order of $400 – $500 million of investor money since it went public. Those still invested (the aforementioned probably majority long-haulers – only about 15% of the ouststanding shares appear to be in the hands of short artists, based on historical price/volume trading behavior in TiVo stock) are going to want at least that amount back, and probably (a lot, if they’re smart) more, in either (almost certainly) cash or a very solid stock, which IMHO would _not_ include Apple’s (don’t get me wrong, I’m an original and all-time Mac, iPod and TiVo customer/fan – but we’re talking about real money here, something that the large investors generally prefer, the late 90’s bubble notwithstanding – most of which was fueled mostly by clueless in-duh-vidual investors who had no business in the markets).