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TiVo Will Die

Thu Mar 18, 2004 5:32 AM ET

Jim Louderback - PC Magazine

It's always hard to write an obituary, especially when the subject is still alive. It's especially hard for me, because I love the little guy like a brother. But, alas, TiVo ( news -web sites ) will die.

I was one of the first reviewers to get my hands on an early TiVo box. I compared TiVo with ReplayTV ( news -web sites ), and although I really wanted to like ReplayTV, TiVo won my heart over.

It wasn't the cutesy mascot, although that helped. Rather, it was the drop-dead simplicity and ease of use that even the first version evinced. And to top everything off, TiVo came with the world's best remote control ever, even more astounding for such a fiendishly complex device. Shaped like a dog bone, it was simple to use, easy to understand, and a pleasure to hold.

The Wall Street Journal 's arbiter of tech—Walt Mossberg—still thinks ReplayTV was better, and we've argued over the brilliance of the remote. But the acid test, for me, was when I plopped TiVo down in front of my computer-averse wife. She took to it like a duck to water. So much, in fact, that I soon purchased another one just so I could watch what I wanted to see.

But TiVo today has a problem—and it's not what you think. Most folks point to TiVo's inability to convince consumers just how cool the product is and why they need one . Yes, it's hard to describe why a personal video recorder (PVR) is better than a VCR—until you use one. Give a TiVo to your friends for a month and you'll have to pry the remote out of their cold, dead hands. ReplayTV faces the same challenge, but that's not where the real threat lies.

Instead, a convergence of three separate trends is conspiring to kill off TiVo.

Three Horsemen

Moore's Law. The first one, ironically, derives from the same technology that enabled TiVo to live in the first place: Moore's Law. As chips got powerful enough and hard drives cheap enough, the PVR was inevitable. But now the raw materials are cheap enough to put hard drivebased video recording into just about anything.

It's not just cheap components. Television delivery has changed, too. The original TiVo was designed to suck in an analog TV signal, via either antenna or cable. It also included analog S-Video and composite ports for set-top boxes, which aside from DirecTV and Dish Network were mostly analog, too.

Fast-forward to today. Nearly half of what the industry calls multichannel homes (those with cable or satellite) receive their TV in digital form.

And that's bad news for standalone PVRs like TiVo and ReplayTV. Satellite providers Comcast, DirecTV, and Dish—and companies that offer digital cable service—have spent oodles of cash buying up the best available MPEG compressors to convert analog feeds from broadcast networks, ESPN, HBO, and the other cable networks into compressed digital bits for home delivery.

It's a generational thing. Even with digital cable or satellite services, the broadcast signals spend little time in digital form. Within the home, a set-top box first converts everything to analog (the box doesn't know whether you have HDTV). Then, if you're using a standard TiVo, that data is reconverted into digital form (MPEG) for time shifting and storage. But the data undergoes one more conversion back to analog, so it can play on a traditional television set.

Just as in the old audiocassette days—where if you copied your best friend's mix tape, a bit more hiss came along with each generation farther removed from the source—the two-step analog-to-digital conversion causes noticeable and annoying artifacts. And as TVs get bigger and cable companies squeeze more channels into the same space, those blocky artifacts will become worse and worse.

So what's the solution? Stay digital all the way. TiVo realized this early on and swung a deal with DirecTV to build a combination PVR and DirecTV tuner. With the DirecTiVo, the fat digital bits from the satellite go right onto the hard drive and aren't converted to analog until they squirt into your TV.

Good first step. But since DirecTV had TiVo, archrival Dish Network decided to develop its own PVR/receiver combo. The Dish Player still lacks some of the basic show-finding features TiVo has had for years, including wish lists and season passes. It's also buggy, as well-known usability expert Bruce Tognazzini details in his blog . But because the picture is better than an analog TiVo's, Dish customers have flocked to the Dish Player in droves. For TiVo, this has caused enough concern that the company has filed a lawsuit accusing Dish Network of intellectual property violations.

And now the guys who make digital cable set-top boxes have gotten into the game. Motorola and Scientific Atlanta both make combo receiver/recorders for cable. And they're cheap, too: Viewers can't buy them but can typically rent a box for just $6 a month. That's half the cost of TiVo's monthly service charge after you've bought a TiVo unit for $300 or so.

I've played with most of the cable combos, and while they lack TiVo's elegance and usability, they work well enough, and the picture quality is noticeably better than with standalone recorders. Let's look at the next TiVo killer .

HDTV. The next fatal problem for TiVo is high-definition TV signals. 2004 will be the year America embraces HDTV. The Super Bowl looked tremendous in HD, movies are amazing, and in May, when ESPN begins broadcasting SportsCenter in HD, the contest will be over.

With the world moving to HD, here comes TiVo—a year late—with its own HD PVR. Scheduled to ship in March, the DirecTV combination HD receiver and PVR will cost a staggering $1,000. Cable, again, is about to trump TiVo. Motorola and Scientific Atlanta are readying their own HD set-top boxes, which will again be free to use and will cost about $10 a month to rent.

A legitimate TiVo alternative, the Digeo Moxi, offers everything TiVo does and comes with the first decent PVR remote since TiVo. Expected monthly rental: around $10. You could enjoy a Moxi for eight years and still not burn through the out-of-box price for the upcoming HD TiVo.

Even so, TiVo could happily go on losing money for the next ten years, based on its lucrative agreement with DirecTV. But alas, you have to paint Rupert Murdoch as public enemy number three in this tragic tale.

Murdoch's DirecTV. The problem is that Murdoch is a rapacious cost-cutter, squeezing margins and hunting for profits at every turn. He has already moved to consolidate the fractured DirecTV set-top market—where more than ten consumer electronics vendors build their own branded boxes—into one (presumably cheaper) look and feel. The next step will be for Murdoch to oust TiVo in favor of a lower-cost and less useful but cheaper PVR. And when that happens, you can kiss poor TiVo goodbye.

Of course, Murdoch could purchase TiVo lock, stock, and barrel—though it's doubtful. But there's one sliver of hope for the beleaguered PVR vendor, and that's software licensing. Unfortunately, the low price that TiVo's software would command won't translate into any sort of positive return on equity for shareholders. So that kind of licensing is probably not going to happen, either.

Of course, I should have seen this coming. Over the years I've observed that the more arrogant and less responsive a company gets, the more likely it's about to fail. Oddly, when the going gets tough, most companies don't do a gut check and rededicate themselves to service. Instead, they circle the wagons and go into a preventive defense—and search for someone to sue.

In the early years of TiVo, I'd get instant service. TiVo even gave me the name of a special ambassador—a strategy meant to ensure that the company got a fair hearing in the press, on the Web, and in other public forums. Today my inquiries go unanswered—or even worse, I never receive a promised response. Hold times on the help lines are interminable: It took me over half an hour last week to determine why the company had charged me $14. And I'll wager that Dish Network is not the first company or the last to be sued for IP rustling.

It's surely not the product designers' fault. They've built a great new category and an incredibly useful and usable product. But a few dumb decisions, coupled with intransigent corporate arrogance and overweening lawyers, have doomed TiVo to death. I'll surely miss the poor guy when he's gone.

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