In last few years, whenever we had seen major movements in TIVO’s stock price, noticeably they were mostly related to legal announcements against its patent portfolio law suits. That would make you think whether this is all that TIVO has become now, a legal battle. TIVO came out with digital video recorder technology in 1997. That was real pioneering work and TIVO rightfully got patents on various technology components of DVR service delivery system. Dictionary definition of patent is “A government protection to an inventor, securing to him for a specific time exclusive right to his invention”. However looking at the attempts the other TV service or content vendors have made to monetize DVR service themselves by circumventing TIVO’s patents in recent past, one would think if it is enough to have government protection in current competitive world of technology business. Rather than honoring TIVO’s rights and licensing the technology, many companies with financial muscle or access to the end customers have tried to work around and deliver the service using their own technology and devices. It had been proven so far that these systems have used the concepts developed by TIVO in one way or the other.
Probably TIVO’s size is the main issue because of which it is not able to quickly scale and fully monetize its invention even before others allure to this market space. It may also be that TIVO is not properly placed in service delivery value chain. May be if it has proper forward or backward integration with TV service providers or content owners, it would be able to scale fast enough to capture the market and not leave enough financial incentives for other vendors to enter this space. After availability of TIVO’s software only version, it has become even easier for other big vendors to fully imbibe its technology and integrate the company. For example, XBOX (NASDAQ:MSFT) can use this technology in much more profitable way and capture more adult users for the box. May be Comcast (NASDAQ:CMCSA) can use exclusive rights on TIVO technology to differentiate itself after AT&T (NYSE:T) and Verizon (NYSE:VZ) have substantial coverage with their faster content delivery networks and wipe out cables’ main advantage. Certainly it would be helpful for TIVO, if they are part of a bigger company as that would deter other vendors from encroaching on its innovations. Although Netflix (NASDAQ:NFLX) is not that big but even if TIVO and Netflix combine together, they would both benefit as Netflix would get a connected Box at customer end and TIVO would get access to content. They will also both have bigger negotiating power while dealing with at home entertainment providers. After all size and proper relationships do matter, when it comes to protecting once competitive advantage.
Disclaimer: Long TIVO