Save TiVo!

Just when it's on the verge of creating the Perfect Machine -- streaming TV, music, movies and the Web through one stylish box -- TiVo is facing doom. Unless a certain company decides to think different.

Topics: Apple,

Save TiVo!

They say necessity is the mother of all invention, but when it comes to household gadgets, the best devices are most often inspired by sloth, greed and self-indulgence. Anyone who’s fallen in love with TiVo knows this well. The best thing to happen to TV since Larry David, TiVo is hardly a necessity. The device, which hoards and serves up weeks of your favorite shows on demand, is the product of an epicurean age, a media hedonist’s best friend. If you want to start your day with last night’s “The Surreal Life” and end it with three episodes of “The Ashlee Simpson Show,” your TiVo will acquiesce to your (bizarre) wishes without even snickering. There is probably nothing or nobody else on the planet, not even your spouse or your personal assistant, so completely committed to pleasing you.

The tragedy is, while we indulge, TiVo suffers. While we frolic in the made-for-me land of TiVo, back in Alviso, Calif., TiVo Inc., the company from whose loins this remarkable machine came forth, is quietly sliding toward its end. It doesn’t seem fair: How can a company that’s been so good to us have done so badly for itself?

The numbers are plain. The market for digital video recorders like TiVo will grow substantially during the next decade, but the company faces stiff competition from cable and satellite firms (which are handing out generic, bottom-of-the-barrel TiVo-like machines to their customers), as well as from computer companies like Microsoft, which are investing huge sums in PCs that mimic the functions of TiVo.

In the past few months, TiVo has dismissed its CEO and lost a president, seen a critical deal to provide its technology to Comcast’s cable customers fall apart, and burned through tens of million in cash, leaving its stock price at near an all-time low. (On Thursday, the company reported that it lost almost $34 million during its fourth financial quarter.) When you ask business analysts who study the firm about its future, you hear two refrains. One: TiVo’s a fine company with an extraordinary product. Two: Stick a fork in it, TiVo’s done.

There’s no reason to doubt the dire prediction. TiVo’s demise, which has been foreseen for at least a couple of years, will surprise nobody; technological trailblazers often bite the dust. What’s interesting, though, is that in its death throes, TiVo is embarking on a new effort that could well revolutionize the way we experience media around us.



What’s behind the brilliant new strategy? The company is again embracing our self-indulgence, greed and laziness by working toward a device that I like to call the Perfect Machine: a cheap, small, quiet, stylish thing that sits in your living room and can display all of your entertainment, from TV shows to music to movies to photos; it also hooks into the Web and gives you access to all manner of audio and video available online. The new project — which TiVo calls “Tahiti” — essentially aims to create a souped-up super-TiVo, a box so inviting, so enthralling, you’ll never leave the couch.

The trouble is, the company’s efforts may come too late to save it. Many of TiVo’s rivals are also looking to build similar Perfect Machines; and without comparable engineering and marketing resources, the company’s new initiative, however innovative, faces an uphill battle. What TiVo needs, says Josh Bernoff, an analyst at Forrester Research who follows the company closely, is a huge ecosystem of users and software developers willing to take a chance on its new features. But that won’t happen if TiVo looks like it’s on the rocks. There’s only one man who can save TiVo now, Bernoff and others say: Apple Computer CEO Steve Jobs.

Bernoff’s call for Apple to buy TiVo is at once crazy and inspired, and for several weeks now, TiVo-watchers online and on Wall Street have been debating its merits and adjusting their bets on its likelihood. In an open letter to Jobs, Bernoff notes that the success of the iPod has transformed Apple from a computer maker into a consumer electronics firm. But the real money in consumer electronics is in TV, not music, Bernoff says. At about $350 million, TiVo would be a cheap purchase for Apple. And if Apple pumped some resources into marketing and developing the product, it could turn TiVo into the iPod for TV. “TiVo-branded Apple products could generate hundreds of millions in revenue in the next few years,” Bernoff writes.

The alliance could also make for some great technology. At the moment, no company, not even TiVo, has quite perfected the Perfect Machine. Many firms are trying hard, and have achieved only satisfactory results. Microsoft’s 2-year-old Windows XP Media Center Edition, a specialized version of its operating system that can connect to a TV and record television shows and serve up music and photos through a remote control, has attracted a small but growing following, and the company is devoting significant resources to the product. A host of small tech companies are also releasing innovative media-center machines designed to make it easy to manage all your media from your TV, and there are thrilling efforts by hackers and hobbyists working to turn Linux and Mac computers into media centers. Even me.

The thing people call a “media center” seems to be in just the same place that MP3 players were about three and a half years ago, just before Apple released the iPod. Nobody quite knows what they should look like, or how they should function, or what features they need to have. But it’s hard to see how Apple and TiVo could go wrong if they joined forces. As Bernoff writes in his memo to Jobs, “Think different. Buy TiVo.”

Do you need a Perfect Machine? Well, “need” is a strong word. Do you need your TiVo, iPod, cable TV, DSL, subscription to the New Yorker, or dinner at Chez Panisse? If you say yes to several of these things, you’re likely the type to need a Perfect Machine.

The Perfect Machine ameliorates laziness, refines sloth, embellishes indulgence. Here’s an example: Like TiVo, the Perfect Machine would record all your TV shows. But it would make your shows accessible anywhere in your house, on every laptop and desktop, on every other Perfect Machine, every connected thing. I live in a small apartment in Oakland, Calif., designed in such a way that I can’t see the one television in the apartment from the kitchen, which is where I spend a great deal of my time. Cooking, for me, is a pleasure, but a pleasure best combined with reruns of “South Park.” So here’s the difficulty: I’m in the kitchen. I’d like to watch what’s on my TiVo. How can I do this? I need a Perfect Machine.

Or say that you’re on your couch, 6 feet away from your computer, which is playing one of the tens of thousands of songs you have stored on its hard drive. You have a sudden, insatiable desire to listen to another song, a specific track, let’s say, the Stones’ “Satisfaction.” If you’re the type who’s OK with getting up and walking to the computer to change the track, you don’t need the Perfect Machine. If, on the other hand, you’re like most civilized Americans and would prefer to change the song using a remote, with a listing of all your songs displayed on your television, you need a Perfect Machine.

The Perfect Machine comes in handy in other ways. Imagine that your mother, who never was a housewife, recently discovered she desperately loves “Desperate Housewives,” a show that you happen to have been recording for the entire season. If you had a Perfect Machine, you could easily burn the recorded episodes to some DVDs and give them to her as a gift on Mother’s Day. Or maybe, in a less-than-perfect moment, your Perfect Machine somehow forgot to record last week’s episode of “The O.C.” That’s OK: The Perfect Machine will play all the video files you have stored on your computer, which means you can use one of those illegal file-sharing networks to download any TV show you like and stream it through your Perfect Machine to your TV.

The Perfect Machine will also download legal movies from the Internet (TiVo recently signed a deal with Netflix to make this possible), and let you browse online music stores from the comfort of your couch. It’ll tell you the weather, show you CNN’s headlines, or play your favorite Internet radio stations — all at the push of a button. The Perfect Machine is flexible in the way that a computer is, but works as flawlessly as a DVD player. The Perfect Machine, the ultimate hybrid of a PC and a consumer electronics device, would be upgradable and minimally programmable, but it would never freeze up or slow down, and would be immune from bugs and spyware and spam and viruses of all kinds.

Is such perfection possible? Actually, none of these features is very advanced. TiVo has been offering many of these things in its machines for some time. If you’ve got a new TiVo you can connect it to your home network and give it access to all the songs and photos you’ve got stored on your machines. If you own two TiVos (in separate rooms, for instance) you can watch the shows on either one at either device. TiVoToGo, a new service the company unveiled this year, allows you to transfer the shows to a PC or burn them to a DVD. TiVo also recently announced a plan for its machines to access online content (such as the weather, or movies).

But while many features of the Perfect Machine are available in TiVo’s new systems, they are far from perfect. The advanced applications are not especially easy to set up or use, and people have reported difficulty getting some of them to work. Take, for instance, TiVoToGo, the company’s new service that allows you to move TV shows from your TiVo to your laptop (for instance, if you’d like to spend your New York-Los Angeles flight watching “Law & Order”). Because media companies worried that the TiVoToGo service would let people too easily trade TV shows online, TiVo was required by the FCC to install a host of copyright protections in the service, and initial reviews of the system faulted its tight restrictions. The system also suffered some unforgivable technical difficulties.

“On my first try, a two-hour movie took roughly eight hours to copy to my laptop over a somewhat weak WiFi signal,” Rob Pegoraro wrote in the Washington Post about using TiVoToGo. “After I redid my network to provide a much stronger signal in the living room, I still saw transfer times of about 2 1/2 hours for movies lasting two hours or less.” He added that every time you play a video on the system, “you’ll see the same nag on the screen: ‘Remember that the TiVoToGo feature is provided for your own personal non-commercial use.’ This incessant nag bothered me more than I thought it would. I resented getting lectured every time, as if this little sermon was the only thing stopping me from tumbling into a life of crime. The paranoid level of security built into this system is almost comical — in what universe should an episode of ‘Desperate Housewives’ get more protection than my Quicken financial data?”

TiVo did not respond to several interview requests, so it’s hard to know how or why the usually technically proficient firm could release such a lackluster product. In TiVo’s defense, it’s worth noting that TiVo devotees seem to be generally satisfied with the new features. But some TiVo experts suggested that the trouble the company had in deploying TiVoToGo was precisely due to its diminished resources; if the firm had the deep pockets of Apple, it would have come up with something grander.

TiVo’s competitors aren’t doing much better in their attempts to create the Perfect Machine. Like TiVo, many competing firms offer users a rich list of features. But implementing those features, and integrating the system with other components you might have in your home, proves difficult.

At the top of the heap of firms looking to rule the home media center is Microsoft, which released the first version of its Windows XP Media Center Edition operating system in the fall of 2002. At that time, the company was only selling the software through computer manufacturers as a pre-built media center system. The computers were relatively expensive (around $1,600), but they were sold as top-of-the-line machines, systems with enough power to manage all the media in your house.

Microsoft sent me a review unit of a Hewlett Packard-based media center computer back then, and I thought the system was quite good, though hardly perfect. You can connect it to your TV pretty easily, and the machine did the job of a TiVo well enough. However, I did notice there were certain advantages to running your media center on a PC over running one from TiVo: Microsoft’s TV recordings can be more easily burned and recorded to DVDs, and the shows are available, via a home network, to any other PC in the house. With a media center PC, you can easily trade shows over the Internet, and the system will make it simpler to play content from the Web — movies and music that media companies would classify as “stolen” — through your TV. A PC is, by its nature, flexible; with a media center PC, this flexibility is sometimes a wonderful thing.

Microsoft has upgraded its media center since its first version, and it has also relaxed the way it distributes the system, now allowing all kinds of PC makers — even small, mom-and-pop shops, or weekend hackers — to put together a Perfect Machine of their own. This is fortunate because pre-built media center systems are still not cheap; it’s hard to get a bare-bones one for less than $600, and a reasonably well-equipped system will cost $1,000 or more.

The worst part about running your media center on a PC is that the machine’s ugly (though you can find stylish PC cases), it’s loud, and it takes forever to start up. These may sound like small problems but they’re not. We’re used to dealing with delays on Web browsers but not on TV. When you press a button to select a show on TV, you want the show to start within one second, not 10. “There’s a big difference between what you can live with in the office and what you can have in your living room,” says Matt Haughey, who runs PVRblog, which covers media machines. “In a living room you can’t have noise, you can’t have heat, it has to work, it can’t be clunky.” Microsoft’s system works most of the time, but because it runs on a full-fledged PC, sometimes it feels clunky. And in the living room, in your pursuit of indulgence, sometimes is just enough times to be annoying.

To many Mac fans, Apple’s introduction of the Mac Mini earlier this year seemed to signal the company’s desire to build a media center PC of its own, along the lines of Microsoft’s effort. The Mac Mini — which, like a TiVo box, is small, silent and pretty enough for the living room — blurs the lines between PCs and a consumer electronic device. So it’s not inconceivable, Bernoff says, that Apple already has a media center machine built and on the shelf, ready to be announced whenever Jobs gives the word.

But could Apple quickly create a much better media center than the one TiVo has already built? Bernoff doesn’t think so. TiVo’s been in the business for years and it knows the ins and outs of building its machines. It’s got great engineers who’ve cooked up and patented many of the key systems involved in building a digital media center. “If you ask whether Apple could create a DVR within 12 months, I will tell you they absolutely could and there’s probably one sitting in their laps right now,” Bernoff says. But could they quickly create one “that is absolutely terrific”? Could they create the Perfect Machine? No. The best way to do that would be to acquire TiVo.

In Bernoff’s imagination, the perfect Apple-TiVo alliance wouldn’t attempt to convert Apple’s computers into TiVo systems. “If you take a PC or Macintosh and cross it with a TiVo, you’re going to end up with a camel,” Bernoff says. It’s a description that perfectly captures a system like Microsoft Media Center: It does the job, but not very elegantly. “The people at Apple will tell you that to have a really great device, you want to make it so it does one thing, and it needs to do that one thing very well.” This is the mind-set that brought us the iPod, Bernoff notes, and that’s the same idea behind the TiVo.

Yet while TiVo and Mac won’t be the same machine, they’ll be in a sense connected at the hip if Apple buys TiVo. “If you have an iPod, then you ought to be able to connect it to your TiVo,” Bernoff says. “If you have a home network, it ought to recognize that instantly and let you play the sound from the TV and out of the Airport Express.” Ideally, you should be able to use Apple’s iTunes store through your TiVo, and even more ideally, you should be able to buy movies and TV shows, not just songs, from that store.

There’s an element of whimsy, or at least wishful thinking, to Bernoff’s suggestion. TiVo and Apple are everyone’s favorite tech brands: Who doesn’t think it would be great if they joined forces? But Bernoff insists that he doesn’t care about “the sentimental factor”; purely as a business deal, he thinks an Apple-TiVo alliance would be grand for both companies.

Bernoff acknowledges that Apple, which has never purchased an established brand, is unlikely to take his advice. Other analysts, responding to a recent uptick in TiVo’s stock price, prompted by rumors that Apple was interested in a purchase, have looked upon the idea even more dimly. Investment firm Smith Barney told Forbes that Apple executives “want to stay focused on selling select proven products (e.g., iPod) rather than gambling on unknown initiatives.”

Still, it’s not hard to see how both companies would benefit. What TiVo needs most, Bernoff says, is marketing muscle. Apple taught the world about music players through its iPod ads, and in the same way, it can teach the world about digital video recorders. Without a major acquisition and an infusion of cash, “I think they’re going to have a rough time,” Bernoff says of TiVo. “They say they’re going to be profitable next year. But that’s going to mean backtracking on some projects, and the things that make the company great will get swept away.”

Apple would also benefit mightily from such a purchase, as Bernoff sees it. TiVo is in many ways already the Perfect Machine. All it needs is a little more engineering, a little more advertising, and TiVo fever could grip the nation, turning the device into the kind of blockbuster the iPod became. Bernoff’s firm once surveyed about 600 owners of DVRs, most of them TiVos, about their attitudes toward their devices. In their responses, “19 percent used the word ‘love,’” he says. “It’s not often that people use that word to describe electronics. But these people are crazy about their TiVos. You meet these people at parties and they won’t shut up. We found out, actually, that on average, each user tells seven other people to buy one.”

The only other tech devices that inspire so much love among their users are Macs and iPods. Indeed, Bernoff puts Steve Jobs directly on the spot, saying that Apple is the only company that could make a success out of TiVo. The two companies’ customer base, as well as employee culture, are very similar. If TiVo were purchased by any firm other than Apple, Bernoff believes the product would suffer. “I think it will mean that the extraordinary will become the ordinary.”

Apple’s genius is in making the extraordinary more extraordinary. “If I were sitting across the table from Steve Jobs right now,” Bernoff says, “I’d ask, ‘Do you want to keep making product for people who are only interested in digital music? Or do you want to get something that’s much more popular?’”

What about it, Steve?

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