Tuesday, August 17, 2004

Apple buy Tivo before it is too late!

Apple should buy Tivo…NOW!

Tivo now has the “beleaguered” title and the death knells are coming fast and furious. I have always admired Tivo rabid fans. They remind me much of my fellow Mac users. I think this is one of the reasons why I believe Apple should acquire Tivo. Sounds crazy but in reality it is not. Apple is quickly becoming a player in Audio and Video Production. They have the #1 legal download service and portable player. Purchasing Tivo allows them to fast track into the hot DVR (Digital Video Recorder) market. Here’s how.

Tivo

Tivo is a great system with the best User Interface hands down. They have a great name and 1.6 million rabid users. What’s the catch? They are small and the large cable operators are encroaching fast into their area. Tivo’s have weaknesses as well. They must sell their hardware at a loss to entice users. This means all of their profit comes from either selling a lifetime service to their guide data or paying a monthly fee of $12.95. This means that if you stop paying the monthly fee you have a useless paperweight. The lifetime service is the better deal but now that $299 Tivo is now $549

Apple to the rescue

How can Apple parlay an acquisition of Tivo into something profitable when Tivo is having problems profiting? By taking Tivo and building upon it. If Tivo wasn’t totally useless without the monthly or lifetime fees it wouldn’t have to sell at a loss to. This is the first thing Apple would fix. After the acquisition Apple would keep things similar for a year or so while they revamped the Tivo system. The UI would remain relatively the same but instead of using Linux to run the Tivo Apple would replace it with a new Quicktime capable of running Set Top Box (STB). This opens up a whole new world for Tivo. Now “any” file that plays in Quicktime now plays on the Tivo. Just that easy the Tivo now supports iLife. Songs purchased from the iTunes Music Store now play along with your Garageband tunes. iPhoto files are supported and of course even your own iMovie creations. PC files would work of course because of Quicktime. So now we have rid the Tivo of its most glaring weakness, obsolescence. But how would Apple handle the subscriptions? . Mac

. Mac is Apple’s answer to dealing with the guide data. Currently Apple charges Mac customers $99 a year to subscribe. This gets them a mac.com email address, web space and other sync features. Apple would create .Mac for Tivo. This would give them the guide data and even some website space and if they are Mac users they would get the Mac specific features available to that platform. This would be $120 year or the Lifetime amount of $250 would still apply with no web space.

Future

Ok so now we know what Apple can do how will they make money? Well Apple will give Tivo the financial backing they need to withstand and persevere against the large cable operators rolling out substandard DVR for cheap. Apple would gain 1.6 million new .Mac users bringing the total to 2 million users. Apple now has inroads into broadcast recording. This is huge because now that the FCC has mandated that Cable Cards must be offered from the large cable operators the door has been opened for Tivo to get on more TV sets. Cable Cards are being built into TVs and STB so that an encrypted HDTV signal can be decoded “without” the need for the cable operators own STB. What do you lose by not going with the operators STB? Not much really: you lose some of the video on demand features but I think many of us know that Apple will have a say in that someday as well as Netflix and Blockbuster. Cable Cards will allow the next Tivo to access all your favorite paid channels and record them in glorious HDTV. No more crazy hookups either.

This deal would simply make too much sense. Apple has the infrastructure setup to parlay this into something big. iPods and Tivo capable multimedia STB from Apple could be a huge hit.

2 comments:

Eug said...

Interesting idea, but I'm not sure it would be a wise financial decision. Market share is nice, but really only if it makes you money...

ASDavis said...

I said that Apple should create something like the TiVo. It's the type of market that Apple should definitly get into.