TiVo Fiddles With Premiere Pricing ($0!)

Dave Zatz —  September 11, 2010

I thought TiVo had moved on from variable pricing schemes, but recent visits to tivo.com suggest otherwise.

Traditionally, you’d buy your TiVo hardware and subscribe to monthly service at a single rate ($12.95). Yet, in what I assume is an effort to ease the barrier of entry, TiVo is now offering multiple pricing permutations. Buy a Premiere direct from TiVo for $300 and pay the standard $12.95/mo, or take a price cut on the DVR in exchange for a higher monthly fee ($19.95). $0 upfront, locks you into a 2 year commitment while $99 requires one year of service at the elevated rate.

On the surface, it seems like it could be a decent deal but there’s some fine print worth taking a look at:

After your 2-year commitment ends, you will automatically continue to receive the TiVo service at the same rate on a month-to-month basis.

So, assuming TiVo still offers monthly service that’s lower than $19.95/mo in one or two years, you’d have to cancel and resubscribe to get a lower rate (which they hope you’d wouldn’t think of). Of course, I still contend that locking folks into contracts scares potential new customers while variable pricing can be a source of confusion (as I said in 2005) – thus replacing one barrier (perceived price premium) with another. What I’d prefer to see TiVo try is an Xbox LIVE sort of model… let’s say something like $249 for TiVo Premiere hardware with service running a flat $99/yr.

29 responses to TiVo Fiddles With Premiere Pricing ($0!)

  1. Sorry to say, but in two years I will not be using a Tivo anymore. Will miss the little guy!

  2. Three thoughts:

    1) It’s a good deal for the consumer, as long as you can set a calendar alarm to remind yourself to cancel the plan in 2 years. You get a new box for only $168.

    2) This ought to reassure you that TiVo isn’t planning on abandoning the retail market.

    3) This is smart.

    Variable rate pricing gives consumers options. And if the cellphone market has taught us anything, it’s that consumers love to pay less upfront. How many iPhones do you think Apple would have sold if they’d priced them at $650 subsidy-free?

  3. Chucky, I think your math is off a little. At 24 months the $0 down comes out to $479.76 total. Which is a better deal then the 1 year contract; $12.95*12+$299= $454.40. Which grows to $609.80 over two years.

  4. I think the $168 is referencing the marginal cost of the unit after taking monthly service cost into consideration. That is, ($19.99-$12.95)*24.

    It’s interesting that the penalty for canceling your service compared to the standard offer is less onerous for the first year. However, shortly into the second year the cost exceeds the full-term price.

    The standard offer is $299.99 + $155.40, or $455. (It’s $12.95/mo for 12 months, no matter when you cancel within the first year. The termination fee is structured so it’s equal to what you would have paid monthly anyway.)

    This promotion ranges from $313 (canceling just after the first month) up to $598 (canceling just shy of two years). Importantly, it drops to $477 at the two year mark as you are no longer subject to the termination fee. The cost can be calculated as M * $12.95/mo + $299.99 – M * $7.04/mo, where M is the number of months (1 to 23) you stayed in the commitment.

    So between months 14 and 23, it makes no financial sense to cancel. If you think you’re going to use it less than a year, this promotion is better than the standard deal.

  5. “This ought to reassure you that TiVo isn’t planning on abandoning the retail market.”

    That’s one interpretation. Another might be that TiVo isn’t moving many Premieres and this is plan B.

    Also, it’s not an apples to apples comparison with the cellphone subsidy model since TiVo’s competition operates under entirely different rules and even if you go with TiVo, you’ve still got potential monthly cable fees with CableCARD rentals and additional outlets. As we know, it’s not a level playing field by any stretch and most folks don’t care enough (or even know) to go retail for a DVR.

  6. “That’s one interpretation. Another might be that TiVo isn’t moving many Premieres and this is plan B.”

    Well, we’ve all been aware for a while that TiVo is a patent troll company that just happens to make the best DVR’s on the market as a sideline to look legit.

    Anything they can do to move more retail DVR’s is a plus, from our consumer POV, since more sales will equal more attention and development.

    —–

    “Also, it’s not an apples to apples comparison with the cellphone subsidy model since TiVo’s competition operates under entirely different rules…”

    Oh, no doubt on all of this.

    All I’m saying is that the cellphone market has taught us definitively that consumers love not paying upfront. Even though many things about the cellphone market are unique, Apple would’ve sold many fewer phones if they weren’t pricing them at $99 and letting consumers pay off the rest over time.

    And similarly, TiVo is likely being very smart in letting folks get into the game without a big upfront cost.

    I’ve always thought that both the TiVo and Kindle should be priced essentially at free. Give away the razors. Sell the blades.

  7. You guys shouldn’t be paying $12.95/month for Tivo Service. I called a few years ago and told them I was going to cancel and get a cable co DVR and they dropped my rate to $7/month…for life…

  8. “I think the $168 is referencing the marginal cost of the unit after taking monthly service cost into consideration. That is, ($19.99-$12.95)*24.”

    Correct, you are.

    And after some coffee, I realize I did my math with the wrong figures.

    Using the $10.75 per month figure for a yearly contract, they’re selling the $0 Premiere for $221. And that makes much more sense to me than the $168 figure, which seemed a bit cheaper I would’ve expected…

  9. I think it’s brilliant. $20 a month isn’t an unreasonable amount to pay for TV service and for someone who is reluctant to make an upfront investment, this could be very attractive. After spending a year or two with the service, they could always upgrade to another box or continue renting like they’ve always done. Comcast charges close to this for their DVR in the bay area, but disguises it by offering similar up front service discounts that expire later. I’d like to see them take this program a step further and remove the termination fee entirely, but they’d need to study their churn under the program to see if consumers would stay on for a year or two anyway. In a lot of ways, it reminds me of a similar move by Tmobile in the cell phone space. Instead of forcing you into paying higher service fees, you can pay $550 for the new Samsung Galaxy and get cheaper cell phone service over the life of the device. Some people don’t have the cash to pay up front and pay more even when their termination period is up, while others prefer to take advantage of discounts by not subsidizing their phone. Either way, TiVo can now reach both customers instead of opting for one.

  10. For $16 a month you can get a cable provided DVR with no contract at all. Granted you won’t own the box, but it’s still cheaper.

    Maybe TiVo should offer box rentals? If you don’t return the box when you’re done, they would charge you.

    Of course if you’re going to buy a TiVo, the lifetime option, is the only one that makes sense as it pays for itself in a few years. Unless you plan on buying a new TiVo every other year (which I don’t know why anyone would).

  11. This seems to be a pretty easy decision to make for those already paying a monthly fee for a cable box. I’ve saved a LOT of money with the up front lifetime plan, but I paid upfront for my 1st gen iPhone too. I know I’m not the typical consumer in that I’m LESS attracted to the multi-year commitment.
    I do think this is different from the cellphone example in the perception of the service being provided, but the price is also pretty reasonable. I think they’ve got to think about providing more services if they want to provide value for the monthly fee. Maybe a bundle including netflix type streaming, family video conferencing, and other applications that make more sense from the living room than at a desk.

  12. Chucky, Davis, I’m not outright opposed to the plan or giving a greater subsidy. I’m opposed to having various plans which I believe could confuse the issue for folks with limited knowledge of TiVo, perhaps encouraging them to stick with the simple/familiar cable provided box. However, I also believe folks in general don’t care for monthly payments (though we continually sign up) and the Xbox LIVE scenario could work well.

  13. Where do I find the option to order the Tivo with $0 down?

  14. Pete, the screenshot I took at the top of the post was from the front page of tivo.com today. I clicked through to the chart pictures in the bottom of the post, which is here:
    http://www.tivo.com/promo/pricepackage/index.html

    Either I’ve got early onset dementia, or the $99 package I saw yesterday (with one year required @ $19.95/mo) was taken down. When I’m back home in a couple days, I’ll check my other computer – I took a screenshot.

  15. The fine print in these contracts annoy me. Companies want your loyalty, but then they engage in quasi deceptive practices. Be up front in the beginning and you might be rewarded with customer loyalty.

  16. “Pete, the screenshot I took at the top of the post was from the front page of tivo.com today. I clicked through to the chart pictures in the bottom of the post, which is here:
    http://www.tivo.com/promo/pricepackage/index.html

    When I go to that URL, I get:

    “We’re sorry, the offer you have requested has expired or the web page is currently down for maintenance.”

  17. Weird. Maybe it launched prematurely. This link still seems to work:

    http://www.tivo.com/promo/gettivo/

  18. The 6 months of free Netflix is a pretty nice touch. The two services really compliment each other quite a bit.

  19. “The 6 months of free Netflix is a pretty nice touch.”

    It’s an awesome touch, especially since it also applies to current Netflix subscribers.

    That means the price of the $0 Premiere is only $167, if you want the Netflix.

    At that price, I’d start getting very interested in upgrading, once the method of home upgrading your hard drive in the Premiere gets open-sourced in a somewhat more user friendly fashion.

    (I don’t want to use the new UI until it gets out of beta, but I’d like the better throughput, the improved trick-play, and the higher drive capacities of the Premiere.)

    —–

    My only real question is about the fine print of the terms.

    What happens at the 2 year point? Can you then get the $10.75/month rate? Or are you locked into the $19.95/month rate for the future of the box?

    The terms aren’t clear at all about that…

  20. last time we had variable plans we kept getting threads in TCF from those that seemed math challanged. It is confusing but I held out on my first TiVo due to high upfront cost on an unknown product. If they had a monthly plan back then I might have gone for it. Ironically my first box is a lifetimed 240 model that has cost me far less.

    2 points though
    1. anyone who forgets tthey are paying some company 20$ a month or does not notice it on their statement deserves what they get.

    2. You can watch for deals on premeier and also do a flat yearly payment now. Aside from price point I am not quite sure Dave why you keep harping on they should have that as they do already.

  21. @chucky – the terms are clear – enough with the FUD.
    at 24 months the box goes month to month at 19.95 and the user needs to call or go to the account web site and choose a plan they are eligible for. IF they cna get MSD then they could switch to MSD pricing by agreeing to whatever length of service.

  22. “@chucky – the terms are clear – enough with the FUD.
    at 24 months the box goes month to month at 19.95 and the user needs to call or go to the account web site and choose a plan they are eligible for. IF they cna get MSD then they could switch to MSD pricing by agreeing to whatever length of service.”

    That still doesn’t clear up the point I’m confused on.

    I understand you continue on at $19.95 a month after 24 months if you do nothing.

    I understand you can cancel service after 24 months.

    What isn’t made explicit in the Terms, and thus isn’t obvious to me, is whether or not you can continue TiVo service for the box at the lower “non-subsidized” price after the 24 months are up.

  23. “You can watch for deals on premeier and also do a flat yearly payment now. Aside from price point I am not quite sure Dave why you keep harping on they should have that as they do already.”

    I haven’t seen Dave mention that before, but I agree with you, ZeoTiVo, that TiVo already offers the kind of “Xbox Live” plan Dave asks them to offer in his post.

  24. My primary point is that they should offer a single plan. And when they do, the yearly subscription to service could be the way to go. $249 upfront and $99/yr is reasonable pricing, especially given how much cash TiVo has in the bank. (Although the no money down, $20/mo plan for 2 years has grown on me.)

    TiVo’s obviously not adverse to fiddling with the pricing and more options are great for the educated, but the uninitiated may just give up in confusion. And the plan you thought you wanted may not be there when it’s time to purchase, renew, or extend.

    I always picture my mom as one example of a typical, mainstream customer and I know if she went to tivo.com and saw the chart above, she’d quickly move on and say her current cable box is sufficient.

  25. FYI Ben Patterson of Yahoo’s tech blog followed up with TiVo PR:

    TiVo’s PR team tells me that the deal is a “limited test” that will end “within a week”, and that there are “no particular plans for permanent changes” at this point.

    Hm, interesting. Wonder what they’ll decide based upon how it works out. But without any promotion is a one week test sufficient?

  26. “Hm, interesting. Wonder what they’ll decide based upon how it works out. But without any promotion is a one week test sufficient?”

    Well, that explains the lousy marketing.

    But I continue to hope they do something like this in the future, since I think they’ll move more boxes with a plan like this.

    And if they do continue, I certainly hope they retain variable pricing schemes. In Europe, Apple is forced by the government to sell the iPhone in both subsidized and unsubsidized forms, and the consumer doesn’t seem overly confused by the choice. Choice is good.

    A consumer like me prefers to buy my gear unsubsidized, but I know that a lot of other consumers respond to other incentives.

  27. Just a note for existing Tivo customers who are looking at this offer: DON’T DO IT.

    This deal: $20/mo x 24 = $480 then must continue paying whatever monthly cost it is at that point.

    For existing Tivo customers through 9/30:
    https://www3.tivo.com/store/upgrade.do

    Tivo Premiere ($269) + Lifetime ($199) = $469

  28. @Chad

    They must love you more for the Lifetime purchase.

    For me it was..

    Tivo Premiere ($209.99 @ 30% off) + Lifetime ($399.99) = $609.98

  29. Please note, I was told during a chat with a tivo rep, that under the 19.99/month for 2 year plan, the 19.99 per month service fee is appartently tied to the box for life. In other words, you can cancel and resubscribe after the 2 years is up, but you will never be able to get cheaper service! You would still be charged 19.99 per month. Of course, they may change their mind down the line but that is their stance at this point. I was all set to do it but that was a deal breaker for me.