Swan Song for TiVo?

"TiVo" has become a generic term for both digital video recorders (DVRs) and the process of using them. The devices are surging in popularity, with factory unit sales up 304% during the first 9 months of 2004, compared to the same period last year. Total unit sales of DVRs exceeded one million units for the first time, with dollar volume up 233% to $345 million, according to figures released in late November by the Consumer Electronics Association (CEA).

DVRs are increasingly being built into combination products such as DVD player/recorders and cable boxes, freeing consumers from having to watch their favorite shows at scheduled times.

The great initial advantage enjoyed by TiVo may be eroding, however. Caving in to pressure from broadcasters, the company is moving to cripple many of the features that gave TiVo DVRs their greatest appeal, especially the ability to skip forward in 30-second increments, letting users avoid commercials. The feature has long been a concern for broadcasters, who derive most of their revenue from paid advertising.

In mid-November, several news reports claimed that TiVo was cooperating with advertisers to scuttle the skip feature, insert "video billboards" or crawling text for the advertised products or services, and send user information to advertisers whenever one of their ads was viewed. Such information could be used in highly specific target marketing, believed to be much more effective than the traditional shotgun variety.

TiVo billboards will begin appearing in March 2005, according to the The Los Angeles Times. TiVo users may even be able to use their DVRs to connect directly to advertisers' sites and purchase products without the need to leave home. "Couch commerce" is hoped to be a boon for advertisers, TiVo, and its subscribers.

But it may well alienate many longtime users of the service, taking away the control it provided. "TV Your Way"—TiVo's simple pitch—may yield to "TV Their Way," according to a recent Associated Press report from San Jose.