In this week’s Business Review Weekly, I write about the strategy of bringing Tivo to Australia; reproduced over the fold. It shouldn’t be a surprise that I think it is all good.
Next generation recorder
BRW, 28th June, 2007, p.32
The Seven Network have announced that they will be bringing Tivo to Australia. This has generated much excitement in some circles and left others perplexed. In case you already didn’t know, Tivo is a digital video recorder or DVR – recording TV programs onto a hard disk as opposed to tape. Of course, there are already DVRs available. Foxtel have their IQ product and there are others by the likes of Thomson and Sony. This has prompted many commentators to say: so what?
As one of the excited, let me explain why Tivo leads the pack. First, it was one of the first to be launched in the US. Second, it has an incredibly strong brand name; so much so that it has spawned verbs such as I ‘Tivoed’ the Daily Show or you should ‘Tivo’ Lost. Indeed, even though it has not graced our shores, it has significant brand recognition here.
But, most importantly, it is just a better product. How do I know this? Well, I am one of over 2000 Tivo users in Australia who bought second hand Tivos from the US and have deployed them here to record both free to air TV and Foxtel (long before recording that became easier with IQ). Put simply, it is the little things that matter. People often joke about how difficult it is to even set the clock on a VCR. What Tivo does is make everything easy. You can navigate the entire program guide (including what’s on now and what will be coming on in the next few hours) without stopping your current viewing. You can then simply press a button to schedule a recording. And what is more you can program ‘Season Passes’ to find the stuff you want to watch even should the schedule change.
But wait there’s more. When you fast forward (say, through a commercial) you can do this quickly and Tivo recognises that, as you watch pictures fly by, you will only press ‘play’ again after where you want to stop. And it compensates. No more back tracking. Once again, easy and simple. It is the Apple Mac of video recording.
Now all this has implications for Seven that I will come back to in a second. However, these little things are what will give Tivo a big share of this new market. In a world where products are otherwise similar, little features like the ones I have described (and there are even more that I haven’t) move products of the shelves. The car industry knows this. When some car maker gets their hands on a new feature – iPod connectivity, GPS navigation, parking distance control, etc. – they get a surprising advantage while others catch up. The same is true for electronic appliances and Tivo fits that mould.
Won’t a big adoption of Tivo pose problems for Seven? Well, not as much as for other broadcasters. For Seven, they get a cut of every Tivo adopter even if they lose some ad revenue as a result. So all this is insurance for them; something others do not have. What is more, Tivo is networked (that is how guide information is downloaded on to it) and that means that user viewing information can flow the other way. So Seven will have access to all that that represents.
Finally, there is Foxtel. It has its own product (IQ) which currently doesn’t carry information on Seven and Ten. As Tivo let’s viewers managing their viewing better, it represents a threat to Foxtel. By allowing viewers to time shift on free to air programs, they may well find that they don’t watch Foxtel anymore and stop subscribing. And so Foxtel will have to react to this by cooperating with Seven to allow Tivo to do what it does elsewhere and record cable TV. This gives Seven yet another insurance policy; this time on pay TV viewing.
With all this, it is a wonder that no one has done this before. I guess it takes time to break traditional industry mindsets.
Joshua Gans is professor of economics at Melbourne Business School. He blogs on these issues at economics.com.au.