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Technology Stocks : Tivo (TIVO) Interactive TV
TIVO 6.0900.0%Jun 1 4:00 PM EDT

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To: i-node who wrote (2066)11/18/2010 12:01:14 PM
From: TimF   of 2093
TiVo's new $99 and 'free' deals are no deal at all
By Rob Pegoraro

You can now buy a TiVo digital video recorder for just $99 and change. Please don't.

The "special holiday offer" headlined on the Alviso, Calif., company's home page looks like a sizable discount at first. Instead of forking over $299.99 upfront, then paying $12.95 a month in service fees, you can spend $99.99 for the DVR from now through Dec. 31 in return for committing to pay $19.99 a month for service for a year. Or ante up an extra $200 for the higher-capacity Premiere XL recorder and sign up for the same monthly rate.

But TiVo's fine print leaves out an unpleasant provision confirmed by company publicist Lacey Haines in a series of e-mails last week: The $19.99 rate remains in effect forever on those discounted TiVo boxes.

So while you'd be doing well after one year, you'd go underwater not long after two.

Let's do the math. TiVo normally sells its Premiere DVR for $299.99 and charges $12.95 a month for service. That yields a total one-year cost of $455.39. After two years, you'll have spent $610.79; after three, $766.19. If you take the $99.99 offer, your expenses hit $339.87 after one year, $579.75 after two and $819.63 after three.

You'll do better under another, non-XL offer that TiVo doesn't mention on its home or product-information pages: Pay nothing for a Premiere in return for committing to two years of $19.99-a-month payments (after which the $19.99 rate remains bolted to the DVR). Under this offer, you'd pay $239.88 after one year, $479.76 after two and $719.64 after three.

But even that cost outstrips the total expense of paying full retail on a Premiere and then $399 for "lifetime service." (That's supposed to mean "life of that one TiVo box," although I've heard from users who talked TiVo into moving their lifetime service to a new DVR.) This caps your total expenses at $698.99. If you keep a TiVo at least as long as the average computer, the lifetime deal is the best one.

I'm sure it's a coincidence that TiVo's online store doesn't mention the lifetime option unless you click through to a small-type listing of payment plans. That page also notes that if you don't buy a full-price Premiere directly from TiVo, you can pay $129 up front for a year of service, a cheaper option than even lifetime until you begin your fourth year with the DVR.

Only if you retire the TiVo after two years can you guarantee that you'll save money on the free offer--and that's assuming that TiVo will offer the same no-money-down deal on a new model in 2012.

As veteran video blogger Dave Zatz noted over the weekend, TiVo has experimented with this kind of promotion before. In September, the company briefly offered the same deals--and it didn't explain the $19.99/month lock-in any better back then.

Maybe this time, TiVo will realize that modeling pricing strategies after the kookier extremes of wireless carriers is no way to build a business.

Have any suggestions for how TiVo could better package its prices--or tips on getting a better deal out of the company? Let me know in the comments.
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