Minyanville Mailbag: TiVO, Cable Stocks
"A man gets thirsty for beer after a column like that... PLEDGE!!!!"
Note: Our goal of Minyanville.com is to remove the intimidation of financial markets and encourage an interactive dialogue among the Minyanship. We share this column with that very intent.
(Note: In this particular Minyanville.com mailbag, I'm featuring a note from a former college Fraternal Little Brother of mine (for our purposes, his name is "Pledge"). Unless your CV includes that exact experience ("Jeffmacke's Fraternity Little Brother") my response to the first e-mail will be more harsh than any response you could expect from me. If the note seems harsh that is regrettable. However, I stand by the defense that the law of the Fraternal Jungle demands establishing a clear hierarchy. If you let uppity pledges grow unchecked you will be quickly overwhelmed.)
Pledge for Life writes:
Dude, read your TiVo article. Gotta give you some pushback.
You say TiVo (TIVO) reduces churn for DirecTV (DTV) but you then compare the churn (1% less) for TiVo DTV vs. SFA (Scientific-Atlantic) generic from an MSO. What about Sat churn vs. cable churn and vanilla DTV vs. TiVo DTV? That's a more appropriate comp since you're trying to judge the TiVo effect.
Second, have you used both products? My friends that have & use TiVo or ReplayTV don't love them. They love DVR. The SFA product (not the MOT) product is pretty cool and has better functionality.
Wow, getting uppity with your 'Big Bro' nearly 15 years out; that's flat out EARNING "pledge for life" status.
Vanilla Sat (read DirecTV (DTV) customers without TiVo's and their creamy dual-tuner goodness) churn rate is around 1.65%. DirecTiVo customers have a churn rate that has hung-around the .2-.3% rate. That is a huge spread so I'm rather glad you asked.
Calculating exact churn for the cable guys is a nightmare because of the analog/ digital/ digital dvr different flavors, leaving aside the endless bundling, all of which creates data "noise". But you're right, the comparable "spread" is the important part. I suspect that stat is exactly why Comcast (CMCSK) signed a deal. They have mentioned that the customers who have taken generic DVRs from Comcast are churning "at a rate about 25% lower than that of other digital customers".
Even with the data, there simply isn't a perfect way to measure the "why's" of churn reduction. Since we're talking noise, there's also self-selection bias issue w/ Tivo DVR users on DTV as well (people who love Tivo have HAD to get DTV; people that worked-up aren't likely to churn).
Of course, Syracuse can't exactly apportion the blame for losing to Vermont, either. The MSOs aren't getting the results they want from generic DVRs. Something is thus wrong.
The point of the "thinking like an MSO CEO" exercise was to... um... "think like a CEO". CEOs see the same data I have and more. They've had it explained to them endlessly by their in-house tech guys, SFA and MOT (Scientific-Atlantic and Motorola) that TiVo didn't have anything that couldn't be quickly ripped off. They ran with what in-house and STB makers told them. Whatever way you slice it... according to the surveys, the consumer report type agencies and customers, TiVo is better. As the CEO, your eye would then move to the churn spread.
You're an aggressive Alpha type, pledge. What would you be thinking if you were in a strategic review meeting with someone from IT and maybe a box-maker? DirecTV is *SELLING* TiVo boxes faster than your company can give customers free ones, remember. On top of that, in 1998 you (or, more likely your predecessor) green-lit a few billion spend on VOD despite not securing any sort of licensing deal for television rights or even apparently *considering* the idea that you'd need to do things like strike a deal with each of the "Friends" to decide their cut should your customers have the foolish desire to "watch popular television programming" on your DVR alternative product.
As the CEO you should have substantial organic "energy" coursing through the veins pulsing in your forehead as you went into this meeting.
I think, if it was me in the CEO chair with these facts at hand and my team was sitting in front of me... my 'losing' team... suggesting that we're going to stick with our knock-off plan because we simply "don't 'do' TiVO"... well, my pledge friend, I do believe that I would regard it as Mission Critical for me to beat my team into talcum powder and then rebuild them (or their replacements) from scratch.
I'd seek to be loving but tough enough to install a firm sense of the pecking order; the way one need treat a naughty dog or, as in this case, an uppity pledge.
* Thanks from the heart to all the Minyans sending me white light and good thoughts this morning as the Missus and I went to our ultrasound. Whatever you offered seemed to do the trick! I'm not jinxing anything or getting cocky but so far everything is looking good.
* From the looks of it, a young male Macke will join his sister in August (No, the name isn't "up for grabs" and Todd-O doesn't get to name him "Todd Harrison Macke" because he "called it").
* I honestly didn't care about the gender going into this as I've come to be rather fond of little girls over the last 2 plus years. With that said, a young boy on deck does mean a few things, upon reflection:
1. 100 More Years of Macke
2. I now have a credible threat of future generations avenging me, should any foes be plotting ("Plllllllllleeeedge...").
3. Collins and Meehan have a new boss.
I spent a few hours trying to hold the boy up in presentation to his Kingdom, ala the Lion King, ever since we got home. After a stern talking to from his mother, I have decided to wait until the boy has left his mother before attempting the ceremony again.
And thank you all, again, for your kind thoughts. It's all about Community folks. Even pledges are welcome...
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