Not satisfied with contributing to the demise of the television industry, TiVo -- the company that invented the time-skipping digital video recorder (DVR), the set-top device that empowers TV viewers to "zap" or fast-forward through 30-second commercials -- is now unleashing its creative/destructive storm on the Internet.
Last week, the Silicon Valley based TiVo Inc. (Nasdaq: TIVO) -- in alliance with the German software company, Nero -- launched an online version of its DVR called TiVo PC. This TV tuner that can be plugged into a PC will be available in the U.S., Mexico, and Canada Oct. 15; $199 buys you a full year’s service with an annual renewal fee of $99.
All this raises a host of questions:
- Does the arrival of the TiVo PC set-top box represent the final convergence of television and Internet video?
- What will be the impact of TiVo's new device on the online video economy?
- Will TiVo be remembered as the company that helped slaughter the advertising golden goose that has enriched the broadcasting industry for the last 50 years?
The TiVo PC isn't the company’s first foray into uniting the online and television experiences. In July, for example, TiVo announced an alliance with Amazon.com Inc. (Nasdaq: AMZN), which enabled its 4 million U.S. subscribers to buy books, CDs, and DVDs directly from onscreen menus on their TVs. In March, TiVo launched an arrangement with YouTube Inc. by which its high-end Series 3 and HD subscribers would be allowed direct access to YouTube’s video content on their TVs. Given, however, that only around 3 percent of YouTube content currently comes with pre-roll advertising, it isn’t entirely clear what the real benefit of time-skipping technology is for TiVo subscribers wanting to watch YouTube videos on their TVs.
Earlier this year at "All Things D" TiVo's outspoken CEO Tom Rogers predicted that "Like it or not, it's 'game over' in terms of forcing people to watch commercials." With TiVo PC, a product that really represents the full convergence of TV and the Internet, Rogers is doing some fast-forwarding of his own with that prediction coming true.
It is particularly disturbing that the TiVo PC set-top box has been launched just as promising video channels like Hulu.com (3.2 viewers in June, according to Nielsen) and ABC.com (2.9 million viewers in June) are finally reaching their tipping points. All the video content on both these sites is free, all comes with pre-, mid-, and post-roll advertising, which, inevitably, will be skipped by the 50 percent of TiVo users who use their DVRs to avoid commercials.
So, if the DVR revolution spells game-over for forcing people to watch online commercials, then how are sites like ABC.com or Hulu.com supposed to finance their high-quality, curated content? Certainly not with the false panacea of product placement advertising in television content, which actually dropped 15 percent between the first half of 2007 and 2008. Unfortunately, then, a product like TiVo PC might well up end up spelling game-over for an inchoate online video business dependent on advertising revenue for its survival.
So what is TiVo's ultimate business goal with this convergence product? I did contact TiVo to learn more about its intentions, but -- surprise, surprise -- they never got back to me. So I'm left to speculate on these intentions for myself. On one level, of course, TiVo is simply trying to sell as many packages of $199 hardware and $99 software packages as it can.
But I wonder if there’s another, more sinister explanation here as well. In the summer of 2006, TiVo launched a research division designed to aggregate and then sell the data of how its millions of subscribers viewed commercials using their traditional television set-top boxes. TiVo PC will, of course, provide much richer and more intimate details of user behavior than does the company’s television product. As television and the Internet converge, perhaps we should imagine TiVo as the big brother of the emerging online video industry, a data mining company with treasure chests of valuable information about all of our Internet viewing behavior and preferences.
— Andrew Keen, Silicon Valley author, broadcaster, and entrepreneur