What the TiVo/Amazon Announcement Really Means

As our clients will testify, TDG’s predictions and prognostications have in most cases turned out to be accurate – in some cases, eerily so. In terms of online movie download (OMD) services, we have long argued that the key to their success is reaching the TV – that is, to become a seamless part of the TV experience such that finding and engaging the content was as easy as finding a TV program to view. In April 2006, Billboard Magazine decided to publish one of TDG’s Opinions on this very subject, specifically addressing why simply adding more content to the mix would fail to spur the market. While content is a critical element, the delivery medium was more important – in other words, even with great movies, OMD services that depended on consumers to watch movies on their PC would never reach critical mass. Reaching the TV should be was the Holy Grail for OMD services, and the market would be won by those major players who reached the TV first; offered the right types of content; at a price that was reasonable; and which was integrated more completely into the TV experience.

The Announcement

Early this week, TiVo announced that that it would extend its Amazon Unbox on TiVo service to the living room TV without the use of personal computer. Previously, the Unbox on TiVo service required users to download content to their PC and then use a home network to send the content to the DVR for TV viewing. With the new service, viewers can browse, rent, and even purchase for download Amazon Unbox movies and television shows directly from their TV screen via their TiVo box – in other words, no PC needed to act as intermediary. So why is this service more likely to succeed that its online predecessors?

The Appeal

First, this new TiVo/Amazon service has no predecessors – this is the first time a broadband-enabled living room platform has been able to deliver high-value post theatrical movies directly to the living room without the need for a PC intermediary. Yes, on-demand broadband video services such as Akimbo have been around for a couple years but the content they offered was far from mainstream and did not include the hottest Hollywood movies. Yes, Apple TV delivers a wider range of movies and TV (it is iTunes, after all), but it still depends on the PC as the brains and proxy for content delivery to the TV.

Second, the process of searching and purchasing online movies is integrated into TiVo’s remote control and interface, meaning that there is no need to go to an alternative interface to search for programs stored online. TiVo’s Universal Swivel Search allows users to link from descriptions of, say, a linear TV program offered by the cable or satellite operator, to all other forms of content that may have similar elements such as program name, genre, actors, or even suggestions based on feedback from other viewers.

Third, TiVo is offering a combination of rental and sales, a move which TDG sees as imperative to the success of the model. In adopting this approach, TiVo trumped Apple which only offers video purchases – in other words, rentals are not permitted (at least at this point). TiVo has thus broadened the service’s appeal beyond those that are comfortable purchasing movie downloads (which remains a very limited, very niche group of consumers).

Fourth, TiVo is pushing this new feature with a very attractive promotion where new customers can get more than $200 in savings when buying a new Series2 Dual Tuner box with at least an annual service plan. In other words, the $199 dual-tuner DVR is basically free when you sign up for at minimum one year of TiVo service. I’ve never been accused of being an early adopter, and while I’ve done without TiVo all these years, this is precisely the kind of offer which could convince me to become a TiVo user.

The Implications

Just to be clear, I’m not suggesting that TiVo’s move will attract tens of millions of new subscribers or ?revolutionize? our TV experience. Pushing broadband video directly to the TV instead of the PC is but the next step in an evolutionary process predicted by TDG several years ago, one defined by a series of incremental but important shifts (TiVo’s move should therefore be labeled as ?important?). Incumbent PayTV operators have feared this evolution and for years done everything in their power to keep it from happening. Perhaps the greatest irony is that these same PayTV operators are now working to incorporate increasing amounts of online content into their TV offerings, as well as leverage the interactive services and applications that a broadband connected TV makes possible.

Simply stated, the short-term impact of TiVo’s specific move remains unclear, but the long-term implications are rather obvious (or should be if you haven’t had your head in the sand). High-quality, high-demand, high-ARPU online video content is coming to the TV – without the PC and without the permission of the incumbent PayTV providers.

Apple (and Apple TV) is expected to follow the “dual” offering of both rental and for purchase video content, but they will be a little more reluctant to turn iTunes into a rental service and eliminate the PC from the equation (though inevitably both will happen – it’s simply a question of timing).

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