Ghostbuster Game

Not entirely relevant, but some more video game stuff. There was a Times article today about a new Ghostbusters game for Atari; Dan Aykroyd and the rest of the original cast are lending their likenesses to the game:

http://www.nytimes.com/2009/05/31/arts/31schi.html?_r=1&hp

WSJ: Nintendo Looks Outside the Box

This Wall Street Journal Article touches on some of the themes that we spoke about in class:

Nintendo looks Outside the Box

Nintendo has additional hurdles to overcome with third party developers because the developers aren't used to working with the Nintendo input devices and the market for Wii owners is different then the traditional gaming community. Plus it appears that third party developers feel that Nintendo isn't providing enough support and information, particularly on new accessory devices.

Luckily for Nintendo, they own more blockbuster series (Mario, Zelda, Metroid, etc) than competitors Sony and Microsoft, who rely more on third party developers. From the article, it looks like Nintendo is trying to reverse this trend by reaching out to these third party developers.

Konami

After our discussion on video game development today in class, I started wondering if the big game companies that were around when I played games still exist. The only one I could remember was Konami, and while searching their site, I was surprised to see an updated version of one of my favorite games, Gradius. I found it interesting that the player experience hadn't changed at all in Gradius Rebirth; the graphics are a little prettier, and it's only available as a download for the Wii. I guess these remakes are not big moneymakers for companies like Konami.
The question I have now is how the game developer landscape is broken down - do big companies produce the blockbuster games and individuals are left with the lower-priced download only games?

Nintendo Wii v. Gamecube - register size the same?

The question arose in our video game discussion: if the Wii uses a 64bit CPU then how can it run Gamecube games given that the Nintendo Gamecube is 128bit (or so we thought).

A quick check of Wikipedia reveals:

Wii uses custom 64 bit Broadway processor
Gamecube used 64 bit Gekko processor

So both are 64 bits.

Boot Linux from a flash drive

In class we discussed the possibility of trying out Linux by booting your Windows (Mac) laptop from a flash drive containing Linux. Here are two approaches to this:

pendrivelinux.com

damnsmalllinux.org

Aside: getting Blogger to play nice with Firefox 3.x

I just spent a good long while fighting with Firefox and Blogger to get a comment posted. Looks like the answer (for me) was to go into Options / Privacy and allow third party cookies.

TiVo Report

Since we spent so much time talking about it in class, I thought I'd share some thoughts on TiVo.  My 2nd Semester team did our SP/IS Report on TiVo and below is the Exec Summary, Recommendations and Conclusion from that report.  It's about 900 words (I'm guessing).  

If anyone would like to read the full report (it's written in case form) I'd be happy to email (and I'm toying with putting on my LinkedIn Profile).

This is an identical post I made today on a blog to which I contribute: Business-Schooled.com (you should check it out).

Credit where it's due: The team members were Elise Brafman, Katherine Chung, Scott Gullick, Hsin-Ying Hu, H. Alper Memis and myself, Jason Serino.  I appreciate any feedback.

TiVo Needs to Change Their Strategy to Survive

Executive Summary

TiVo was a pioneer of Digital Video Recorders (DVR), essentially creating the market in the late 1990’s. Product and software innovation has allowed TiVo to remain a technological leader in the industry. However, increased competition and new pricing structures have eliminated TiVo’s dominant position, shrinking its market share from 34% in 2001 to only 6% in 2008.[i]

As the industry grew, TiVo’s strategy proved unable to adjust to the changing demands of the marketplace.  Cable Television (Cable) and Digital Broadcast Satellite (DBS) entered the market by offering their customers DVR hardware for free; buoyed by other revenue streams they generate as content providers.  TiVo continued to experience financial losses from its inability to match this offering.  The industry changed; yet TiVo was unable to keep pace, being forced to seek out new revenue streams.

TiVo must recognize their previous failings and streamline their strategy to return to a competitive position within the industry.  This involves rebranding itself as a software provider through highlighting the benefits of their service to partners, gradually eliminating hardware sales, and focusing on their ability to collect and sell valuable market research data provided by their customers.

Recommendations

TiVo should rethink its business model to better position itself against these threats and to compete effectively within the maturing DVR industry.  The following three recommendations work together to accomplish this goal.  The process starts by re-branding the company, moving from a hardware-based to a predominantly software-based company, and leveraging its data gathering capabilities and services.

The first recommendation is a re-branding of TiVo.  The company should switch from a focus of promoting its set-top box to promoting the “TiVo Experience”.  TiVo has many differentiated features, such as its easy to use UI, smart search and recording capabilities and “TiVo-to-Go” which allows users to transfer TiVo recorded programs to their personal computer.

Effectively rebranding their service allows TiVo to take advantage of network effects that will create demand on both the user side and the content provider side.  TiVo will position itself as the central platform that provides the User Interface consumers want and the access to consumers that the content providers and their advertisers desire.  A similar effect was seen with the Intel chip.  A consumer does not buy Intel directly, but one would not buy a computer without “Intel Inside”.  Our goal is to make TiVo desired in the same way, where one does not want a DVR device that does not use TiVo software.

The second recommendation is that TiVo should slowly phase-out hardware sales.  With TiVo’s current business model, hardware makes up only 17% of its revenues, but over 30% of its expenses. [ii]  This leads to large losses on the hardware side and negative margins.  The margins for the hardware segment for fiscal year 2007 through 2009 were -171%, -120%, and -40%.  When compared to the software margins for these three years of 78%, 80% and 76%, it becomes evident that hardware is causing downward pressure on the company’s earnings.[iii]  The sustainability of this recommendation assumes that TiVo is able to create demand among content providers as to avoid any hold-up effect.

Eliminating hardware sales allows TiVo to strive to become the standard platform for DVR software in the industry.  Through a focus on Software as a Service, increased partnerships will allow TiVo to benefit from the low DVR penetration rate among content provider consumers.  The percentage of Comcast subscribers with a DVR is around 20% and Time Warner is 25%[iv], showing that there is still a potential for deeper penetration within the existing market.  If TiVo were to expand its partnership with Comcast and add Time Warner Cable, the net present value of these potential partnerships is $101.3 million (through 2014).  SeeExhibit 3 for details on the calculation of the NPV (not included).  This business model generates a modest ARPU (average revenue per user) per month of approximately $1, however, it virtually eliminates TiVo’s hardware losses and subscriber acquisition costs.[1]

The third recommendation is to increase TiVo’s ability to leverage the viewer data that its software gathers from its subscribers.  TiVo is capable of capturing the viewing habits of its consumers, both its own subscribers and from its partnerships with content providers.  TiVo’s “Stop||Watch” ratings service has the ability to track what people watch, but more importantly, how people watch television.[v]  The data obtained includes which hours viewers watch live or on time shift, which programs are the most recorded for later viewing, and which commercials are viewed or skipped when viewers watch the program on time shift.

TiVo’s data mining abilities creates additional benefits of the TiVo software and contributes to further network effects.  TiVo can capture information from all users, providing more accurate and expansive marketing base for advertisers and other companies to access.  Advertisers can use this information to make their ad placement more successful and profitable.  This ability to increase the ROI for advertisers through TiVo’s technology will create demand from content providers’ advertising partners for TiVo’s services. 

These three recommendations will shift TiVo’s competitive focus in the industry.  It will move from a hardware provider to mainly Software as a Service company.  TiVo will no longer be competing with Cable, DBS or Telecoms, but rather working with them as a partner and service provider.

Conclusion

TiVo’s current business model has been unsuccessful at competing within the current DVR market. As a result, TiVo has had net losses for the past 10 years, large marginal losses on its hardware business and overall declining market share in an unattractive industry.  Through the elimination of stand-alone hardware sales and broadband content distribution, TiVo becomes more streamlined, highlighting its differentiated services to establish itself as the DVR Software Standard.  Rebranding its marketing message, moving towards a Software as a Service company and leveraging its data-mining capabilities, will create network effects that allow TiVo to become profitable and find alternative growth opportunities within the industry.

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[1] Projected ARPU calculated based on TiVo’s current ARPU through DirecTV service agreement.

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[i] Based on www.magnainsights.com, On-Demand Quarterly Report, September 2008 and TiVo annual reports. Only includes stand-alone DVR subscribers. DirecTV partnership sales are not included.

[ii] TiVo, Inc., annual report (Form 10-K) for period ending January 2009

[iii] TiVo, Inc., annual report (Form 10-K) for period ending January 2009

[iv] National Cable and Telecommunication Association <>

[v]  http://tivo.mediaroom.com/index.php?s=43&item=378

Welcome Students

Hope everybody had a good first year, and looking forward to a fun summer intensives.  See you in class on Monday morning at 8.

Welcome to the Summer Intensives Blog

This is a place to post questions, comments, or interesting links to what we discuss in the intensives.