Replays Retreat May Trample TiVo

Guest Commentary: One might think that TiVo is sitting pretty with SonicBlue's Replay TV in disarray, but Wireless Supersite Editor Ross Rubin warns that the surviving company in the digital video recorder market needs a "kick in the pants&quo

Ask most consumer-level digital media junkies about the two products that have done the most to change their lives in the past five years, and youll likely hear about TiVo and iPod. The little white Walkman-killer and the big black VCR-killer are both hard-disk-based, and both transform media experiences by basically providing media-on-demand.

Even with limited competition from consumer electronics giants, SonicBlue, which offered both MP3 and DVR lines, couldnt capitalize enough on the success of either of these phenomena to stay afloat. At the same time, the company kept the waters stormy by pushing the envelope of fair use.

TiVo was far ahead of most Replay TV features out of the gate, and always had the better interface, still Replay TV struck back with its 4000 series, adding photo viewing, and in-house video streaming, and most importantly, letting customers transfer video over the Internet to another Replay TV box. It already had the ability to be controlled via the Web, but not in "real-time" as TiVo now does.

This Internet transfer feature earned most of Hollywoods wrath and was even criticized by many reviewers, who complained that it could take days to transfer a movie over the Net. They squabbled that, in that time and for far less money, you could send videotape to a friend by courier.

In proposing this quaint workaround, these DVR Luddites overlooked that a key factor in sharing video is convenience for the sender, and its simply more convenient to press Send than drag out a videotape and let it record in real-time. As my former Jupiter Research colleague David Card once pointed out, there is a limit as to how many boxes consumers can stack on top of their televisions. Besides, if youve already got a DVR and a DVD player, do you really need a VCR around?

Timid TiVo?

Now that Replay TV last month was snapped up by D&M Holdings, the parent company of Denon and Marantz, it will be interesting to see how the Japanese audiophile company will manage it along with SonicBlues even more famous brand, the Rio line of MP3 players. I suspect, for one, more conservative management that will tone down the feature set to be more conciliatory to the MPAA.

That would be a shame, because frankly TiVo could use a little kick in the pants. Its Series 2 provided limited improvements over the original box other than improved capacity and broadband connectivity, two features that had already been pioneered by the hacker crowd. The recently released Home Media option, while welcome, just refines the broadband network features that appeared in Replay TV 4000 series.

Still, TiVo—long hamstrung juggling the preferences of cable companies, broadcasters, and consumers—acts somewhat two-faced when it comes to protecting rights-holders interests. The normally hacker-friendly company has applied the screws to anyone trying to tamper with the video stored on its hard drives, and its Home Media option will not allow video to be transferred outside a home network.

On the other hand, this very same option allows users to freely share any unauthorized MP3s that are on their PC hard drives, adding value to potentially pirated music! Rip. Mix. Share. No problem. I dont even think TiVo has made the token gesture of the "Dont steal music" sticker that Apple placed on the iPod.

So, with signs of the rivalry between TiVo and Replay TVabating, Im concerned the DVR innovation may stagnate. One could argue that TiVo has basically developed a successful formula that needs only tweaks now. But in a market with fewer than a million units in use, it seems like TiVo needs to work harder.

Coming Competition

In one sense, the DVR, like the DVD player, arrived at an awkward time in the history of television, just as the industry was beginning its prolonged transition to High-Definition Television. It can complicate the entire proposition. For example, HDTV resets the clock on all the capacity improvements weve seen in storage over the past few years, so a 120GB hard drive—often difficult to fill with the current spring seasons shows—will hold less than 15 hours of video.

TiVo needs to keep bringing in the revenue, but it also needs to keep innovating, especially if its going to justify its outlandish "activation" tax (which can easily cost as much as the device itself) or ad infinitum service charge. That TiVo has been able to build any kind of business with such an onerous "double purchase" is a testament to its products appeal. Imagine, if it were removed, how easy it would be to justify multiple TiVos to make the most of the Home Media option.

However, consumers may demonstrate limited patience, especially when lowballers like Apex start shipping the vanilla hard disk recorders they have in the works. The standalone DVR market may wind up thriving after all, but without the fluidity and elegance that TiVo brought to television.

Wireless Supersite Editor Ross Rubin is a senior analyst at eMarketer. He has researched wireless communications since 1994 and has been covering technology since 1989.