By Popular Demand

Cable World, April 4, 2005

Consumers are confused...on demand from the cable company or the box? It's taken awhile, but DVRs and VOD can live together; if cable can just teach its subscribers the advantages of both.

By Anthony Crupi

For a while, DirecTV and TiVo were the Class Couple, a dreamy union of the starting quarterback and the head cheerleader. You'd see them murmuring in low whispers in front of TiVo's locker, sneaking a furtive kiss before practice. That was before NDS moved to town from England, and while we're averse to trafficking in feckless innuendo, let's just say that there were a few things the new girl would do in the backseat of DirecTV's Camry that TiVo just wasn't into, thank you very much. NDS was fast and easy. There was no way red-blooded DirecTV could resist.

Rather than resort to indulging in the weepy retreats into imaginary colloquies with her stuffed animals and bingeing on chocolate, TiVo picked herself up off the ground and set about looking for another beau. At the risk of pushing the analogy to the breaking point, we'll just report that the hunky senior with the Camaro and the fat bank account walked into the gym on prom night with TiVo on his arm. Turns out the two had been meeting in secret behind the Circle-K while things were going south with DirecTV, and though it wasn't apparent at the time, Comcast and TiVo were working toward an open relationship dynamic likely to incite certain stirrings in the rest of the student body (i.e., the other MSOs).

Whatever comes of our John Hughes movie scenario, it is inarguable that Comcast chairman and CEO Brian Roberts saved TiVo's life on the Ides of March. Roughly 70% of TiVo's subs were pulled in via its relationship with DirecTV. While the split wasn't as definitive as the sundering of a romantic entanglement--the contract binding TiVo and DirecTV doesn't officially expire until February 2007--TiVo's future was looking bleak. Now that it's in good with the country's largest cable operator, that's all irrevocably changed.

What, then, did Comcast see in TiVo? Although the MSO doesn't release its cumulative DVR numbers, in January Roberts told an investors' conference that the cable giant had 300,000 DVRs in the field and was "just getting started," so it's not as though it doesn't already have a viable product line in place. Roberts gave a clue to his motives in an interview with Georgia Public Television taped two days after the deal went down. "I think TiVo is like a religion to some people," Roberts told the Georgia Business Report. "It is a fabulous brand and a fabulous product, I think a little bit like Apple and Windows."

Roberts, who has an endearing way of employing "fabulous" as a sort of catch-all adjective--George W. Bush does a similar thing--understands the value of the TiVo brand, which has become a generic signifier for an entire range of consumer electronics devices, the way Q-Tips stand for all cotton swabs. Adherents use the brand as a verb; i.e., "I TiVo'ed Deadwood last night," even when the box doing the recording is a component of generic cable DVR service, i.e., a Motorola or Scientific-Atlanta product. All of which is to say that with TiVo in tow, Comcast (and, perhaps, other cable operators) now has a product that enjoys an undeniable place in the Zeitgeist, early sub numbers be damned.

Now, How Do You Market It?

At this point in the game, the most reliable indicators of marketing efficacy are the numbers. By that token, Time Warner Cable has been the most aggressive shill for DVR by far, having deployed the devices in all 31 of its divisions and leading the industry with a total of 710,000 DVR customers as of the third quarter of 2004. Those numbers account for 15% penetration among all of the MSO's digital subscribers, and, more strikingly, about 65% of all cable DVR users.

None of this should come as a surprise, considering that Time Warner was the first cable operator to seek out a DVR of its own. In 2000, while Comcast was testing ReplayTV in its southern New Jersey market, Time Warner realized that the economies of scale weren't there, and it asked Scientific-Atlanta to create a set-top box with a DVR built in. The speed with which the cabler went from looking over the schematic diagram for the first DVR-enabled cable set-top box, the S-A Explorer 8000, to its initial deployment in Time Warner's Rochester, N.Y., system in July 2002 is emblematic of how the company handles every product launch, says SVP of marketing Brian Kelly.

"The reason we can introduce new products so rapidly is that we start with intensive research," Kelly says. "We find out what features of the DVR resonate with people the most, and which would have an impact on their intention of buying the product and how such a product might affect their perception of the company." The responses are boiled down to the most salient points and lo, there is your message. "And from those we never stray. That's the secret sauce, and it hasn't let us down yet."