How Tivo Is Gaining Leverage at Best Buy
Tivo and Best Buy recently announced a partnership that will change how both DVR’s and TV’s are sold. I won’t bore you with all the details but the summary is that both Best Buy and Tivo are giving and getting something big.
In Tivo’s case, they will be getting favored real-estate to display their product, with an increased focus from the Blue Shirts. This kind of vote of confidence from a retailer like Best Buy is gold at retail. Combine this with their coming wave of DVR’s via partnerships with DirecTV and Comcast, they have a story to tell and great place to tell it.
On Best Buy’s side, they are already a leading retailer of TV’s, and also a leading TV advertiser among retailers (almost $400 million in 2008). However, once the customer gets home with their brand new TV, Best Buy is in the same boat as other advertisers when it comes to trying to reach the consumer. The Tivo partnership will provide Best Buy with a platform to stay connected to customers who buy special Tivo boxes from Best Buy, as well as their house brand TV sets (Insignia, Dynex). This platform is expected to operate on top of the renowned Tivo interface. You can bet that Best Buy will use this tool to reinforce to its customers that it is the destination for technology, and provide offers and opportunites to learn more about their products and services.
So what did Tivo give up to gain leverage at Best Buy? Frankly not much. Instead of giving up more margin, or spending MDF dollars to buy premium merchandising, Tivo has created something new that they are basically giving away to Best Buy (and perhaps other retailers in the future).
Tivo is breaking new ground with this retailer specific platform that it can deploy via its boxes, or software embedded in TV’s. The real question is what can Tivo gain? They’ve been waging a losing war as of late as consumers take the generic DVR’s from their cable/satellite providers, and in many cases either think of it as, or refer to it as, a Tivo. If the Best Buy partnership can help consumers make the choice to go with Tivo instead of blindly taking their providers DVR, Tivo is back in business.
More details are coming out on the communications platform that Best Buy is getting from Tivo. The platform may be coming on TV sets beyond just the Best Buy house brands (Dynex, Insignia). LG and Samsung are rumored partners to deploy the Best Buy Tivo interface on their sets sold at Best Buy.
If the Tivo interface is anything like a storefront presence, you can guarantee that other key vendors at Best Buy will want to find ways to get their brands/products featured there. If it is important to Best Buy, it better be important to you if you want to sell TV’s there or any products for that matter.
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Tivo was definitely the first mover in their category, but the cable companies have successfully taken share based on accessibility, affordability and same functionality. It will be interesting to see if Tivo can make a step change in this category as a result of retailer partnerships.
There are still a couple million people who are paying a premium for Tivo versus simply using the cable co / satellite dvr. They are in litigation right now with Dish Network of their patent of the most basic of DVR functions. If they win – pretty much everybody offering a generic DVR will have to license Tivo’s technology. While I think the Best Buy partnership is big, I think it is just another chip on the table as they try to cover all their bases. DVR’s sold at biggest player in consumer electronics retail – check.
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