TiVo: Being Acquired Might Be the Right Channel

September 9th, 2004 – TheStreet.com: Street Insight

I canceled my TiVo (TIVO:Nasdaq) subscription last week; the unit went back to Costco (COST:Nasdaq). Costco has a generous return policy. If you are dissatisfied with a product (unless it is a computer), you can return it to any Costco store at any time after the purchase.

I purchased the TiVo unit about five months ago. It worked fine with my cable box (though I had to glue my RF cable from the TiVo box to the cable box which did not simplify my already-complicated home entertainment system) and the Tivo software worked extremely well. It has a very smart and easy-to-use interface; once it’s set up, it works flawlessly.

What changed? I moved. I dropped my Comcast (CMCSA:Nasdaq) in favor of Echostar Communications’ (DISH:Nasdaq) Dish Network. From the very beginning, I started having problems making TiVo work with my Dish. After several frustrating hours of yelling at the unit and memorizing the user manual, I gave up and called TiVo customer service. I found that the automated voice-activated system that TiVo uses to direct calls did not understand my “slight” Russian accent or my wife’s Colorado English dialect. After 20 minutes, the voice system recognized my wife’s cries for help and transferred us to the operator.

It took me an additional 40 minutes on hold to get to talk to the right person just to find out that I have to reset the TiVo box, which could take several hours. I followed the instruction to the tee, but again I could not get the TiVo to communicate with my Dish Network box. I called back (this time I wizened up and I had my three-year-old son who speaks English with a Disney accent say “operator” — Disney dialect is understood at TiVo), however, after learning that the expected wait time was 45 minutes, I decided to let TiVo go.

Lesson learned: TiVo is a great technology company, but as a stand-alone box, its technology is too complex for the average non-tech-savvy consumer. Unless it is greatly simplified, it may not be economical since it requires a large customer support staff to assist confused consumers. Outsourcing customer service to India maybe a plausible solution — I would rather talk to somebody in India than be placed on hold for 40 minutes every time I have a question.
TiVo Would Benefit From Partnering With a Cable/Satellite System
But TiVo’s issues run deeper than customer service. Its technology makes so much more sense as part of a cable or satellite box than a stand-alone product. For example, TiVo has to download the programming guides via a telephone line connection. A cable/satellite system like DirectTV or Dish Network or Comcast already has the programming schedule. If TiVo were integrated into one of these systems, the connection would be seamless.

Cable/satellite operators can install and service a unit a lot better than TiVo ever could. Dish Network has a DVR that is far inferior to TiVo which Dish Network installs and services. I bought one of those units for my father several months ago. The satellite guy brought the box, installed it and configured in the matter of minutes without causing any stress to my PhD-holding, but non- tech-savvy father.

TiVo, a $400 million company, would fit in well as a part of Scientific-Atlanta (SFA:NYSE) or Motorola (MOT:NYSE), which could use TiVo’s technology to improve their product offering. TiVo is a good software company, but not a great hardware company; its technology would be a great compliment to the satellite or cable box manufacturers.

I really like the idea of being able to watch TV on my terms rather than on the cable company’s terms, so TiVo’s concept makes total sense. I am seriously considering switching from Dish Network to DirectTV for only one reason — TiVo comes in the DirectTV receiver and I want a simple, easy-to-use TiVo service.

A Dish Network subscriber, long Disney DVDs and the Disney Channel, Costco member since 1998

Vitaliy N. Katsenelson, CFA

Copyright TheStreet.com 2004