Case Study: Why TiVo failed

TiVo by Jamie McCaffrey

Today, virtually everyone who still has a cable subscription has a DVR.  People expected their content be available whenever they wanted it.  But that wasn’t the case at the turn of the century.

In 1999, TiVo was introduced.  It was a new technology unlike anything that was available at that time.  It recorded TV content onto the device making it available on-demand.  It differed from VCR as it didn’t require a tape and it had advance features such as recording set based on series, actors, or interests.  It could skip commercials and rewind live TV.  It was very smart for its time.  At launch, Forrester predicted greater than 50% household penetration in 5 years, and yet, it’d be hard to find a standalone TiVo in many homes today.  What happened?

First, TiVo did not fully understand the consumer. Truly for a considerable length of time after launch, individuals still didn’t recognize what the item was or why they would need one.   TiVo was creating a new market, but they did not recognized it.  They expected consumers to understand the need for TiVo, when in fact they were quite satisfied with their existing solutions.  There was inertia toward making a change and TiVo did little to combat that inertia.  Why did consumers need TiVo?  It was a question that was never answered, and therefore, the need was never established.  Despite heavy advertising, TiVo never concretely displayed a solution to a problem.  It depicted freedom from a set TV schedule, but it wasn’t a problem that people seeking solutions for.  (Or if it was, it was a very small group of people.)  Thus, TiVo wasn’t able to capitalize on a first-mover advantage and capture its fair share of market before cheaper alternatives became available.

TiVo’s marketing focused on the wrong problem.  It built brand awareness, which is often necessary to launch a new brand.  People adopted TiVo as a verb, which is the greatest success in building a brand.  It put TiVo in the league of Kleenex and Google.  “I’ll just TiVo that show.”  However, brand awareness is secondary when you’re creating a new market.  Need awareness comes first before brand awareness is necessary.  And if the need is salient enough, and if you provide a good enough solution, the brand will build itself through word-of-mouth.  However, in TiVo’s case, while the solution was beautiful, there wasn’t a need at the time.  The existing solution was perfectly acceptable.

Furthermore, TiVo did not fully appreciate the industry structure and the hurdle it would create.  The industry that should have been TiVo’s greatest ally would become TiVo’s greatest competitor.  In order to get TiVo in a home, a consumer would have to actively go get a TiVo.  As the technology became available, easier alternatives started to emerge – a DVR that came bundled with the cable service.  TiVo wasn’t able to break into the cable provider industry, as the industry was self-interested in lowering cost of entry and monetizing on the subscription.  Therefore, placing advanced technology with heavy marketing such as  a TiVo console was aligned with cable service providers’ strategy.  Therefore, TiVo lacked distribution.  Adding insult to injury, TiVo’s heavy marketing actually created the market for the cheaper easier alternatives.  While the benefit of TiVo was not concrete enough for a consumer to seek one out, it was just intriguing enough to say “yes” when a cable service provider asked if you may like that add-on.

A lesson learned here is that whenever you think you’re bringing to market an innovation, big or small, ask yourself this – what is the existing solution and how do I establish my innovation as the ultimate solution?

Photo credit: Jamie McCaffrey

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