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Technology Stocks : Tivo (TIVO) Interactive TV
TIVO 8.375+0.8%3:59 PM EST

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From: Glenn Petersen5/5/2019 3:25:04 PM
   of 2092
 
hey Thought It Was Black Magic’: An Oral History of TiVo

How the original DVR paved the way for Netflix and the cord-cutter movement

Tom Roston
OneZero
Medium
Apr 2


Illustration: Shira Inbar
_______________________

It’s hard to believe, but a scant 20 years have passed since viewers were unshackled from their televisions. For decades, NBC told us Thursday nights were “Must See TV” and ABC insisted it was “TGIF” Friday, so we did as we were told and stayed home to watch Friends, Seinfeld, and Full House.

Then, in 1999, two former employees of Hewlett-Packard and Silicon Graphics (SGI), Jim Barton and Mike Ramsay, introduced a revolutionary new product: a digital video recorder, or DVR. The product, named TiVo, seamlessly recorded shows, paused live television, and allowed users to fast-forward through the commercials. Sure, you could achieve similar wonders with a VCR, but the process was so laborious that few would try. Plus, TiVo included an algorithm to make suggestions about the shows we might want to watch.

TiVo was a giant leap into the digital age that can be traced to the ambitious “Orlando project,” a 1994 venture by Time Warner to use televisions to fully network a community in Florida so that people could email, shop, and choose movies on their TV screens. Time Warner had enlisted SGI, with Barton as the lead software system architect and Ramsay developing the workstations. But the project was ahead of its time and too expensive to have practical application in a predigital world.

After the Orlando project folded, Barton left SGI. In 1997, he and Ramsay recognized an opportunity: letting users easily record and watch their favorite shows on their own time. “They didn’t just want to build something good. They wanted it to be legendary,” says Richard Bullwinkle, who would become TiVo’s official chief evangelist. “This was their chance at immortality.”

Their hubris paid off. At the dawn of the millennium, TiVo represented the future of television. It was on the tip of everyone’s tongue, from Howard Stern to Oprah. It was so successfully branded that TiVo became a verb, like Xerox. And deservedly so—it revolutionized how we watched TV and paved the way for the streaming era.

Yet despite its impact, there is a perception that TiVo didn’t quite live up to its promise. In 2016, TiVo was sold to humdrum digital entertainment company Rovi for $1.1 billion.

On the 20th anniversary of the first TiVo shipment, OneZero presses pause with many of TiVo’s original creators to see how the first DVR came to be, how the technology made its way into pretty much every television in the United States, and why, despite all that, TiVo is no longer a household name.

Jim Barton (TiVo’s co-founder and CTO, 1997–2012): In early 1997, I saw a big news report that SGI had a bad year. Mike Ramsay had resigned. I called him up and said, “Why don’t we go have lunch?” We went to Café Trio in [the San Jose suburb of] Los Gatos. We were both very interested in what was going to happen in terms of digital media and digital content.

Mike Ramsay (TiVo’s co-founder and CEO, 1997–2005): We talked about how it would be great if your home had a capability to manage all of your media. A home server idea. It was a natural extension of what happened in the Orlando project.


Photo: Howard Look
________________________

Jim Barton: We wanted to deploy technology within the home so consumers could stream music or video to their TV from a server in their garages. We formed the company as Teleworld—the name was a placeholder—and began to architect the hardware and software.

Howard Look (TiVo’s vice president of application software/user experience, 1998–2005): I was still at SGI, which started to implode. A bunch of our friends had left to form [the early web browser company] Netscape. The web was taking off. Money was growing on trees. Everyone wanted to work at a startup.

Jim Barton: We talked to quite a few venture capitalists, and a lot of them said, “Pass. No one will buy this.” [Eventually] we got funded on our initial slide deck—a bunch of transparencies on an overhead projector. We raised $3 million from New Enterprise Associates and Institutional Venture Partners. We pitched an aggressive vision of what we could do in the home.

Mike Ramsay: But it became clear that the whole-home thing was just too complicated to build and too complicated to describe to the average person. And from a hardware standpoint, the DVR was the most compelling component of what we wanted to do.

Jim Barton: We collapsed the concept into a single box on your TV to capture content off your television feeds and present that back to you. We came to the idea of pausing live TV, being able to record things, and all the pieces you need to manage all that.



Photo: Howard Look
____________________________

Howard Look:
I came on in early 1998… I was a video junkie. My wife and I, we watched a lot of TV. My job was to program the VCR in the morning every day before work. We had seven VHS tapes for Saturday through Sunday, which I would program.

Richard Bullwinkle (TiVo’s chief evangelist, 1998–2002): People didn’t realize the need—that you should never have to stay home to watch Friends. But NBC had us brainwashed.

Howard Look: To me, it was really obvious how disruptive it could be.

Mike Ramsay: We did get questions from some of the VCs, like, “Well, why won’t the big companies just do it themselves and just crush you? You are talking about a product that may violate copyright if it is recording television programs and manipulating them.” They said, “You are stepping into a world of large companies whose vested interest is that you not succeed.”

Mike Ramsay: We went about trying to build a team. We needed a few engineers. First place we were was in Santa Clara.

Howard Look: We took turns picking up the pizza orders. Instead of a receptionist, we had a motion-sensor frog that would make noise so we knew someone had walked in. I was employee number 16. [Within] months, we outgrew the space and moved to a new office building in Sunnyvale. We were bouncing around a space that had 200 or 300 seating capacity.

Mike Ramsay: [Microsoft co-founder] Paul Allen gave us $3 million.

Howard Look: We flew up to Seattle to demo the product for Allen at his Mercer Island home. While we talked, koi fish were splashing in a pond. He kept pulling out bags of potato chips. He asked a lot of good questions. And then he asked, “Would you like to see my home media environment?” He took us to an underground bunker with a 200-seat movie theater. And he had robotic arms programmed to put VHS tapes into VCRs.

Mike Ramsay: He also invested in ReplayTV, which had seen him earlier that morning. [ReplayTV, launched by Silicon Valley entrepreneur Anthony Wood, began developing its own DVR around the same time as Teleworld.] Replay was vested by Kleiner Perkins Caufield & Byers, the premium VC firm. That made us nervous.



Jim Barton and Mike Ramsay
________________________________

Richard Bullwinkle: We were really trying hard to find a name. We had it down to Bongo, Lasso, TiVo. A lot of names that ended with “o.”

Michael Cronan: Once I began to understand that [the DVR] could change behavior on an essential level, I began to pose questions like, “What would ‘the next TV’ be like? Are we naming the ‘next’ TV?”… Of all the names we developed, TiVo was the ninth name we presented. [Cronan passed away in 2013. His quote comes from an interview conducted by Matt Haughey for PVRblog in 2005.]

Mike Ramsay: The logo character was originally kind of a two-dimensional cave painting. We wanted to animate it, so we contracted (TV marketing company) Pittard Sullivan, which did most of the TV show openings. What was a clincher for me about the name and logo was that it was a character we could animate.

Richard Bullwinkle: The remote was the first thing I saw that I felt, “This matches my effort. Everything I am doing to get this out the door, this feels right.”

Paul Newby took on the idea that the thing in your hand was the most important interface—more than the box or even the screen. Paul knew it before maybe anyone.

Stephen Mack (TiVo’s director of operations, 1999 to present): Paul not only has a physical resemblance to Ned Flanders from The Simpsons, he is also, like Flanders, a sweet, can-do guy.

Paul Newby (TiVo’s senior director of consumer design, 1998–2008): I hired [design and consulting company] IDEO in Palo Alto. It was an excellent team effort. The idea was to build [the remote] early and rough and then iterate like mad.

Howard Look: I put it in my wife’s hand. We called it “waf,” or “wife acceptance factor.” We wanted this to be a different consumer product, not just for the typical nerdy guy bringing something new home from Best Buy so the wife would say, “We don’t need another remote.”

Mike Ramsay: I think Howard had the idea of using the remote to vote on something you like or don’t like. We wanted to get TiVo biased to knowing your preferences. We used a thumb up and thumb down.

Howard Look: I remember watching Siskel and Ebert and thinking, “That’s how people think about TV shows, too.”

Paul Newby: We agonized to minimize button count and maximize Braille-ability [the ability to feel your way around the remote]. And we knew that the blank space between keys was of equal importance as the buttons. We had a really good two-dimensional map for a minimal 30 buttons when other remotes had 40 or 50. By the fall of 1998, we had functional iterations. We did hundreds of foam shapes until we settled on the friendly, narrow-waisted peanut shape.

Jim Barton: I was very focused on the remote and the UI [user interface] and making sure everyone had a TV experience with their TiVo.

Richard Bullwinkle: We knew we needed a sound like NBC’s “dun dun dun.” We really worked on it. Our sounds came off a CD that were morphed to be original. They were a part of the brand.

Jim Barton: Broadcast TV never stopped. You want that smooth experience. It was suggested that we could use Windows, and I said, “Are you crazy? Windows crashes all the time.” Your TV doesn’t crash. A hardware manager came to me with a chassis and asked, “Where should we put the reset button?” I said, “There’s no reset button.” The software in the system had to be robust.

Mike Ramsay: Your refrigerator doesn’t have a reset button.

Richard Bullwinkle: The first program we recorded was Jerry Springer. Hey, that’s what was on. We all gathered around and watched the little red light go on. This was late 1998.

Howard Look: On Christmas Day, my family opened presents, and then I had to go to work. My son said, “Daddy, don’t leave.” But we were working every day to have a successful launch at CES [the Consumer Electronics Show in Las Vegas] in January.



TiVo team at the Consumer Electronics Show in Las Vegas (2000).
________________________________

Mike Ramsay: It was our coming out. The booth was packed. My interest was in finding partners to build the box. We ended up with three deals: Phillips and Thompson to build a box and a deal with Direct TV.

Stephen Mack: On my first day, someone said, “Oh my God, Mike Ramsay stood in front of everybody yesterday and said, ‘Hey, remember at CES we promised we would ship in Q1 of 1999? Well, guess what? Today’s March 1st, and we are going to keep that promise.’”

Richard Bullwinkle: It was an all-company meeting. We looked at a calendar and said, “There is no fucking way.”

Stephen Mack: He said, “No one is going to remember us if we’re the second DVR that ships. Replay is close. We have to do everything in our power to ship by the end of the month.” The hardware team was like, “How can we possibly get the hardware off the assembly lines?” And the software team was like, “There are so many bugs.” The server team was like, “Our server is running on a tower PC under someone’s desk.”

Mike Ramsay: There was a lot of pressure within the engineering team to make it perfect. It occurred to me that this could delay and delay [the launch]. I felt like we had to call it. I thought that it may have some bugs, but we can update later when someone plugs it into their home. [TiVos were initially linked to a main server via phone lines for schedule updates.]

Paul Newby: The engineering psyche is to underpromise and overdeliver. We were on the edge of there being very little difference between what we could promise and what we could deliver. We were clearing the pizza boxes in the common spaces in Sunnyvale so we could build set-top boxes and do software updates and pull together prototypes to take home for homework.

Stephen Mack: I would sit in the board meeting, and these board members would say, “You are not growing fast enough. Money is free. You have to hire more. Here’s the money. Now, go!” We had engineers who would drive up from L.A. and sleep in the parking lot. We sold the first TiVos for $499 for 14 hours with a one-time fee of $199, or $9.99 per month. We didn’t add the $999 for the 30-hour TiVos until later.



Photo: Howard Look
_______________________________

Jim Barton: The big companies were scared of us because of the commercial-skipping capability. They were also concerned about copyright.

Mike Ramsay: They went from being those people hating us and threatening to sue us to showing up at our board meetings. It was weird.

Jim Barton: They realized, “We are going to be disrupted anyway, so let’s get ahead of these guys and invest in them. That way, we can have a seat at the table.”

Mike Ramsay: A consortium of media companies, including Discovery and NBC, had invested a significant amount of money [into TiVo] before we went public. I think it was over $100 million.

Richard Bullwinkle: On March 31, we delivered the first 250 boxes to friends and family. They were at full cost.

Stephen Mack: Mike handpicked the first buyers. People he knew who would be forgiving.

Kevin Smith (TiVo’s principal engineer, 1999–2015): We all knew what we had. And we thought it would sell itself. But selling boxes in the beginning was like pulling teeth.

Howard Look: People did not understand it. They thought it was black magic. They were like, “You can’t pause live television. That’s impossible.”

Jim Brown (early adopter; management consultant in the Washington, D.C., area): Before TiVo, I had three VCRs stacked below the TV. Watching TV was a complicated dance of juggling and searching tapes.

Matt Haughey (tech journalist): My TiVo was a happiness robot. The remote was remarkable. It was like a Mac OS experience—super-refined. Who has ever turned off the sounds of their TiVo? That’s because even the sound is well designed—pleasing and informational.

Jim Brown: The products seemed magical?—?like a glimpse of the future. I purchased my first TiVo in June of 1999. It was a 30-hour standalone unit at the rather significant cost of $1,150 [including the lifetime subscription fee]. Using that first TiVo gave me a feeling similar to what I experienced with my first PC, my first Mac, and, later, my first iPhone.

Matt Haughey: It removed the tyranny of a TV schedule. It would grab Simpsons shows in syndication. That blew me away.

In September 1999, TiVo went public. It was the height of the dotcom bubble. That year, there were 457 IPOs, 117 of which doubled in price on their first day of trading. TiVo’s stock price opened at $16 per share and eventually shot up to $78.

Paul Newby: There was a euphoric feeling in Silicon Valley.


The marketing team gave the product away to both influencers and the public in high-profile events to help make TiVo a household name (2004).
____

Kevin Smith: At TiVo, when you joined the company pre-IPO, you would be given a bunch of stock. But it wouldn’t start vesting until after a year.

Stephen Mack: There was a little bit of stars in our eyes. Companies that did nothing at all were getting $100 stock prices. And we actually had a product.

Kevin Smith: We had a massive IPO party in San Francisco that felt very dotcom. We got there, and actors were pretending to be paparazzi with cameras, taking pictures of us on a red carpet.




2,500 people showed up to a TiVo giveaway event (2004).
_____________________________

Richard Bullwinkle: There was a lot of drinking, and employees were making out in the hallways [at the party]. There was an Austin Powers lookalike. But the IPO was not one of the great moments. It polluted the value of why we were all there. You’d walk up to someone’s cubicle, and they had spreadsheets that they would hide. People were making big plans for their lives. With the IPO, it became about money.

TiVo’s stock price quickly dropped by more than 90% from its peak. In its first year, only 48,000 units were sold. But while the company was not making a profit, it was still attracting investors. In 2000, AOL invested $200 million in a plan to partner TiVo with AOL TV, a bold (ill-fated) venture that sought to merge televisions with the internet.

Howard Look: Six months after we go public, the market crashes and everything changes. You could not assume money would grow on trees anymore.




2004 was the height of the so-called TiVolution.
____________________________

Stephen Mack: I remember sitting in weekly meetings, and we’d discuss sales. We were so focused on [reaching] 1 million subscribers.

Howard Look: It wasn’t shooting up the way we hoped. But there was still a feeling of optimism.

Stephen Mack: We did a survey to find out the reasons people were not buying the product. The first reason was the monthly fee. The second was people still didn’t quite get it.

Brodie Keast (TiVo’s senior vice president of marketing and sales, 1999–2005): The message was that this is television that you could customize. We positioned it as a lifestyle improvement. You can work late or have dinner, the kids could do their homework, and you would still not miss your favorite shows.

Susan Cashen (TiVo’s vice president of marketing, 2000–2005): I had worked for Fleet Bank when they introduced the first ATMs in Rhode Island and Boston. “Get cash when you want it? From a machine?” That taught me how afraid consumers are to change, and especially something technological. The media kept calling TiVo a PVR [personal video recorder]. But when we talked to consumers, they didn’t know what a PVR was. Is that like personal pan pizza? Digital sounded better. We came to call it a DVR.

Brodie Keast: We had ridiculous approval ratings, like 95% or better. And the product was something customers liked talking about. We picked up on that. So we had a massive seeding program: We gave the product to athletes and people in Hollywood. And not just to big names—we gave them to writers, stylists, producers. And soon we were being written into shows like Friends and The Sopranos.

Richard Bullwinkle: I figured I must have given away something like a thousand TiVos in three years. There was a Sex and the City episode [“Great Sexpectations”] about TiVo. Miranda wants to stay home with her TiVo instead of dating. We must have given away 15 TiVos to people who worked on that show.

Brodie Keart: We got one to Howard Stern, who talked about it a lot. Oprah loved hers so much, she invited us over. We gave her a TiVo for everyone in the audience so that she could give them away.

Richard Bullwinkle: After Oprah, we got so many orders that it crashed our site.

Brodie Keast: We did an ad with Joe Montana and Ronnie Lott, who were investors. It pushed the envelope. It got a lot of buzz, but we had trouble getting it by all the networks.

Richard Bullwinkle: At CES 2000, ReplayTV and TiVo were near each other on the floor. They had this gimmick where they had people shout, “No monthly fees.” We wanted to shout, “No business plan.”

Stephen Mack: They were experimenting with ad skip. Our head counsel said, “This is too dangerous [for the company] to feature.”


TiVo’s logo, its peanut-shaped remote and even the box colors were designed to be accessible and friendly (2004).
____________________________

Brodie Keast: With TiVo, you had to fast-forward the commercial. That was no different from a VCR. Replay stripped out the content entirely. A second problem they had was they implemented a feature that you could share content with your buddy in Chicago.

Mike Ramsay: With the studios, there was a line in the sand. We figured if we did not upset them too much, they would leave us alone. From a commercial-skipping viewpoint, you still sort of saw the commercial. Not with Replay. That was the line in the sand. And Replay didn’t have a dialogue with the companies.

In 2001, studios and networks sued Replay, claiming copyright infringement. SONICblue went bankrupt two years later. Meanwhile, TiVo had to do battle on two fronts: assuage the studios that they weren’t infringing on their business and defend their patents from cable providers, which were building their own DVRs.

Howard Look: I ended up being the guy who met with the studios to explain what we were doing to protect their content. This was the era of Napster. I remember one meeting with a television executive who stood and put his hands on the table and said, “You are a cancer. I am going to be retiring in two years, but I am going to spend those years putting you out of business.”

Jim Barton: I spent a big chunk of time in various lawsuits. Patent trials are very complex.

Mike Ramsay: Echostar came out with a DVR that clearly stepped on our patents. If we didn’t do something, it would be free rein. We sued them in 2004. It went to trial. Seven years later, we finally settled. The upshot was we won. It rippled through a variety of other media companies so that TiVo ended up having some sort of licensing agreement with most of the distributors. Licensing fees and damages from lawsuits became a big chunk of the company’s cash flow.

TiVo eventually earned approximately $1.6 billion in settlements from patent-enforcement lawsuits. The company’s total annual revenue ranged from $96 million to $526 million between 2005 and 2015.

Paul Newby: That was not a fun period. As a designer and an engineer, that energy didn’t have to do with making great products. It had to do with defending what we had.

By April 2004, TiVo may have had only 1.4 million subscribers, but it had become a household name.

Stephen Mack: TiVo became a verb and changed the world.

Matt Haughey: It was life changing.

Howard Look: There was an Academy Awards that ran really long. People across Hollywood were hosting Oscar parties and recording the show on their TiVos. That night, some people didn’t anticipate that the show would be so long and didn’t record the best picture. The New Yorker did a story on it. It was becoming part of the culture.

During the 2004 Super Bowl halftime show, Janet Jackson’s wardrobe malfunction became the most TiVoed moment in history.


Janet Jackson and Justin Timberlake performing at the 2004 Superbowl. Photo: Jeff Kravitz/Getty Images
__________________________________

Howard Look: That was crazy. It was a true popular-culture TiVo moment. But there were new moments every week. We had weekly all-hands meetings, and we’d hear that David Letterman had mentioned TiVo. Or Howard Stern. Or we were in a Weird Al Yankovic song. People were approaching me at parties and literally getting on their knees doing the “I am not worthy” thing. We were changing lives.

And yet, Ramsay stepped down in 2005. TiVo was caught between becoming a licensing business for big distributors, which made cable companies its primary customers, and innovating hardware, software, and services for consumers.

Kevin Smith: The other companies were making their own DVRs. It was no longer a sprint. It was now a marathon.

Mike Ramsay: I probably wasn’t the best person to do the licensing business that we were getting into. Every time I dealt with those other companies, it was always arguing. That wasn’t me. I wanted to innovate.

Paul Newby: Tom Rogers [a former NBC executive] came on to replace Mike. After you’ve had the startup experience that we had had under Mike’s leadership, anything else would feel like a compromise.

Stephen Mack: Tom said, “Look, I wear a suit. That’s my armor. I am a Wall Street guy. When you are in T-shirts and you see me in a suit, know that I am fighting for you.”

Jim Barton stepped down in 2012. His departure marked the end of an era. In the years since, as streaming services emerged and cable cord-cutting spread, TiVo struggled to remain relevant. The company introduced the TiVo Bolt set-top box in 2015, which streams 4K and has the ability to condense the actual runtime of a show’s content by 30%. In 2016, Rovi, a company that principally owned a slew of patents and was responsible for on-screen television guides, acquired TiVo for $1.1 billion and adopted its name.

Richard Bullwinkle: Rovi is a patent troll. They sue for a living. They bought TiVo for their patents. That company is a shadow of its former self.

Stephen Mack: That’s not true. We’re still here and creating new products. I still enjoy working here, and I still think it’s innovating. We’re more of a license company. It’s not the same startup energy, but no startup stays a startup forever.

Mike Ramsay: I don’t have any animosity toward them. It’s nice that they continue to keep the TiVo name. They have found a way for the company to survive and to stay relevant.

The TiVo Bolt OTA is being hawked to cord-cutters because it can be used with antennas to capture live network TV, even without cable. The company also recently introduced CubiTV, a platform that works with Android TV. And while its products struggle for relevance in a crowded field of streaming options and Rokus, it licenses its IP to nine of the 10 largest TV service providers. Recently, there have been talks of another acquisition, with the hardware company splitting off from the product and licensing business.

Matt Haughey: TiVo is a cautionary tale. TiVo was great technology that was well-designed. It shifted everyone’s perceptions and expectations. But it didn’t take over the world.

Jim Barton: Could it have been bigger and better? Yeah, I think so.

Stephen Mack: But if you look at the companies that went public in 1999, how many are alive today?

Mike Ramsay: TiVo is a billion-dollar company. It has protected its patents. It has made a lot of people happy. It is a strong brand that continues to this day. If someone says it’s a failure, I don’t support that. Yes, it’s not Google. There are a variety of factors that play into that.

Paul Newby: At every turn, TiVo had to go up against these cable companies whose cultures had become all about defending the monthly revenue based on an old, tired programming model. Replay got squelched first. The decision to partner with the networks seemed to be an important survival tactic.

Matt Haughey: Apple wasn’t met by the music world with open arms either. They were fighting all the way. But Apple could do it because they are Apple. TiVo was a small player.

Jim Barton: TiVo was a bit different than Apple coming out with a set of devices where there wasn’t already a slot. TiVo was interjecting itself between the TV signal and you.


Photo: Howard Look
______________________________

Richard Bullwinkle: Boy, do I wish I had been beating on Mike’s door and saying, “License it for a dollar and get it everywhere.”

Mike Ramsay: Could TiVo have done something different? Could it have monetized its technology when you have companies that have such deep pockets they could give it away for free? The reason a lot of companies become spectacularly successful is because they become advertising businesses. Advertisers give Google, Facebook, and so on a lot of money. We are the anti of that. We were for people who don’t like ads.

Television-obsessed President Donald Trump has said on different occasions that “TiVo is one of the greatest inventions of all time.He has also said, “Television is practically useless without TiVo.”

Jim Barton: Donald Trump actually said that? I don’t listen to a lot of what he says, because they’re all lies. But this is one time, he may have told the truth.

Stephen Mack: I heard a rumor that our president believes he has a TiVo but that he is using a generic version.

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