Tuesday, June 5, 2012

Why Apple Needs To Buy TIVO..... Today!

Almost every tech pundit on the planet seems to have weighed in on the oft rumored Apple TV. I have abstained from playing the "What's Apple Going to Do" parlor game until now.....

While not commenting, I have read with interest, and more than a small dose of amusement, others' thoughts on the matter. Candidly, even after reading Walter Issacson's biography in which Steve famously states, "We've finally cracked the code." in reference to the televisions, I haven't been able to make sense of it....

Some prognosticators have speculated on an iTV of around 40" which will be aesthetically pleasing and serve as the communal hub for all things iOS. Others have opined about Siri like voice functionality. A universal remote with a voice, a mammoth database, and even a touch of common sense.....

Still others speculate the revolutionary Apple iTV will really be a major overhaul of Apple TV, the "hockey puck" add on which provides access to select content and more importantly in my mind, Airplay support for iPhones and iPads running on the same network. To date, this product has been little more than a project or "experiment" in the Apple iVerse.....

Overriding all of these possibilities is the cold reality that TV is about access to content. Specifically, network content controlled through studios and major pipeline players such as Comcast, Time Warner, and satellite providers such as Dish. These folks have little interest, or incentive, to effectively subjugate themselves to Apple as they "Appify" content and resell it on a channel by channel (gasp) or series basis! Even a company as iconic and financially sound as Apple will be hard pressed to wrest the creative "clicker" from Hollywood.....

Couple this problem with the cut throat current HDTV marketplace which runs on razor thin (read nonexistent) margins and relatively long replacement life cycles. People simply aren't going to trade in their televisions every year or two as they do iPhones and iPads. Apple is not in the business of selling hardware in an arena where margins are notoriously low or where they cannot contribute a quantum change in the total experience.... I don't see how traditional TVs simply  make sense in the Apple universe.

Then I read this piece by Jeremy Allaire, "Apple Television, Airplay, and Why the iPad Is The Next TV Apps Platform" This article which is a by-product of the respected "All Things D" Conference lays out a compelling argument which makes technological and financial sense to me in many respects. However, there is a missing piece in my mind and I have what i think is an interesting solution.....

If you haven't experienced AirPlay and AirMirroring (where you can mirror your iPad or iPhone onto your HDTV with the swipe and the press of a button using an Apple TV as an intermediary, you owe it to yourself to go "harass" a techy friend to let them demo this great feature (which Apple has really not promoted heavily to date). If you have an iPad or iPhone, just click here, shell out $95 for your very own Apple TV (new version) and experiment with this technology yourself!

Many Apps, including Netflix, MLB and other TV centric content providers have already embraced the Airplay KoolAid and there will no doubt be many others. What is perhaps even more interesting is the release of APIs which makes the iPhone/iPad a second screen device. A device with (very good) built in cameras, microphones and gyroscopes. The possibilities are staggering...... Interactive TV done right.....

What's more, there is a potential universe of 500,000 Apps which could run on Apple TV through the combination of an iPad and Apple TV. Angry Birds on a 60" HDTV..... You and your significant other researching a trip using TripAdvisor, a web browser, perhaps Kayak or HipMunk. Each of you can take turns showing information on the family HDTV while controlling the experience on your individual iPads from the couch..... Almost limitless possibilities..... Almost....

What would make this perfect for me is the addition of true DVR functionality. Imagine having access to all of your TIVO content (which would still be sourced through your cable or satellite provider) with a beautiful Apple interface..... Add Slingbox like capability allowing Airplay to work synchronously. iPad content to the HDTV.... "TIVO" content to the iPad anytime, anywhere...... Wow! Give Siri the smarts to do things like "Record the next Titans Game" or "Get me a Season Pass for Modern Family but skip reruns" and you have "cracked it" for sure.

TIVO is still a household name. Like Kleenex and Google, it has become ingrained in our society as a "verb." I always say I will TIVO that.... I never hear anyone say I will DVR that show..... The TIVO interface is superior, if dated, to virtually every generic DVR I have seen. The problem is DVR's are now bundled with cable and satellite packages. You pay for them in the form of inexpensive leases buried in your monthly bill (and often forgotten about). Essentially, DVRs have been commoditized. However, for the most part the interface and experience is inferior to TIVOs (and in fact many of these DVR's utilize TIVO technology in a "dumbed down" form). Still "almost free, is almost free" and TIVOs are decidedly not free.

I wrote in an earlier post about the economics of TIVO versus the recently introduced Joey and Hopper DVR combo developed by Dish that the tides had turned..... In fact, I advocated dropping TIVO (of which I currently own four) for this new technology. Financially, it still is very much a justifiable migration for most.
Speaking of finances, TIVO currently has a 1.1 billion market cap. Apple could buy the company at a 100% premium! for $2 billion and it wouldn't even be a rounding error. (Apple currently has about $100 BILLION in CASH in the bank!) I am sure TIVO even has a war chest of patents which could partially justify the acquisition without any further analysis.

Apple could then integrate Apple TV with a TIVO DVR. A DVR which uses existing CableCard technology to "talk" to the cable and satellite networks. This would effectively serve as an "end run" around the content issues which seem legally and contractually insurmountable at this time.Taking the best of the TIVO interface and Apple TV interface would be something Apple's talented engineers could accomplish with more aplomb than any other group. (And TIVO has failed to make significant improvements in this area despite repeated efforts.)

Effectively, your iPad and myriad Apps would become the focal point of your TV experience. When away from home, you could watch any content seamlessly and of course use Siri or a more traditional App to manage your Season Passes and other recording needs. At home, the iPad can become your "second screen" allowing instantaneous stat information on the big game; real time voting for "The Voice;" and much more.....

Current content providers and Hollywood keep their "walled garden" of content and advertising. (At least for now.) Apple focuses on beautiful hardware and elegant user interfaces which people want so badly they line up to pay premium pricing for the privilege of being first to own the experience. As part of the bargain, Apple effectively markets the ultimate cable set top box and holds patents in this area as a result of the TIVO acquisition. (Google's recent acquisition of Motorola puts them in the cable set top business in a big way! Apple's much publicized disdain for the Big G would only make this coup that much sweeter!)

This scenario would be bad news for Logitech. Their universal remotes, while not perfect, are the best widely distributed technology in this field. Oh yeah, the name options would be fun too, iTIVO... iDVR.... iNewUNeededIt... iExperienceLife

I know I would be among the first in line to buy one of these toys. And I would be very excited indeed to discuss my future iTIVO needs with Siri and throw out a boxful of remotes! By the way, this serendipity wouldn't be a good day for Slingbox either which currently makes a very good, if misunderstood by most service. iNewIt. (If anyone from Infinity Loop is reading, please feel free to provide me a percent or two before you subsume TIVO and begin your next empire..... You heard it here first.....)

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I currently hold a Long Position in $APPL

I have no plans to acquire new, or additional share in any company mentioned in the next 72 hours.

Companies: Apple, TIVO

This commentary is not meant as an endorsement of any company or to provide financial advice.  If the author has any financial interest in any company mentioned at the time of this article’s posting, it will be explicitly noted. I welcome feedback and comments. 

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