Thursday, August 16, 2012

Apple Needs TIVO More Than Ever!

Apple Patent Application Design
Back in early June, I wrote a piece advocating the merit of Apple acquiring TIVO (please refer to Why Apple Needs To Buy TIVO Today). Recent stories in traditional media only makes my conviction greater! MacRumors reported yesterday that Apple is in talks to build a set top box.  It has also been widely reported that Apple has been recently awarded several key patents allowing "DVR like" controls to be incorporated onto a device which looks very similar to your friendly iPhone or iPod Touch.

Then today, the Wall Street Journal has run a front page article, "Apple's New Front In Battle for TV."  This article is sure to fuel renewed speculation on Apple's technological and tactical actions intended to advance its presence in the world's livingrooms beyond the innovative "hobby" which is Apple TV.

Of course all of this renewed speculation about the mythic product which Steve Jobs famously told his biographer Isaacson, "We've finally got it figured out!" has its share of supporters and detractors. Notably, the cable companies, which are also financially hopelessly intertwined with the content creators, have reportedly not reached any agreement with Infinity Circle to allow Apple to act as an  intermediary between them and "their customers," the cable consuming masses! Apple's ability to successfully intermediate in the entertainment consumption process (and profit handsomely in the arbitrage) has been put on stage for all to see as iTunes has consumed the music industry.....

Cable companies aren't likely to "give" Apple the keys to the cable box freely. Still, more and more content is being consumed via alternative sources-- Hulu Plus; Netflix; YouTube and more. All of this content which "cable cutters" are relying upon rather than traditional, expensive, packages of cable channels, must still run through a "pipe." Cable companies actually realize a much higher profit margin supplying the "dumb data pipes" to our front doors than thinner margins garnered from assorted channel packages....

Interestingly, Apple has recently and quietly added Hulu Plus to its Apple TV lineup! Techcrunch and others have reported on this event in recent weeks. Apple's expanding integration of Air Play which allows seamless and wireless mirroring of content between Apple products makes using services like Hulu Plus on an iPad or new MacBook along with your high end HDTV ridiculously simplistic. The ability to sign up for Hulu Plus through your Apple TV using your Apple Account removes another barrier to the process. This appears to be another foreshadowing of what Apple can accomplish without the direct support of Hollywood and the cable companies!

For Apple there is the complexity of dealing with multiple vendors each controlling a given region. There is also the non insignificant matter of  getting consumers to pay for a premium set top box rather than lease a set top box for a few dollars a month. It may not be lost on astute followers of the Apple/Google wars, that Motorola (now a wholly owned subsidiary of Google!) is a major manufacturer of cable set top boxes! (This good be a real scoop of  sweet posthumous revenge for Jobs whose disdain for Google is legendary.)

So why TIVO!? As I wrote in part my earlier post:

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.
If you wish to read my entire earlier piece on this subject, click here. TIVO also has the manufacturing expertise to build boxes which are compatible with virtually all cable networks using an industry standard (if  still somewhat flawed) Cable Card interface. No need to rely on Motorola (or provide Google with any profit potential building boxes for Apple) to produce modified cable boxes. And let's not forget those TIVO patents which are always now part of any tech takeover math!

I still believe TIVO and Siri would make a great match! More importantly, Apple's design and interface expertise coupled with TIVO's DVR power would be a powerhouse product which would get me to line up at my "corner" Apple store! If the cable companies don't allow Apple a seat at the table, TIVO could change the channel on its own with this acquisition and the company's piggybank wouldn't even lose 2% of its value....

What are your thoughts on Apple's possible entry into this market? Please share your thoughts and comments below. If you enjoy this article, please share this on Google Plus, Twitter, and FaceBook!

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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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