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TiVo, the digital video recorder (DVR) pioneer, is jumping into e-commerce with a new partnership with Amazon.
The new Product Purchase feature unveiled today is TiVo’s (NASDAQ: TIVO) attempt to deliver on what has been a tantalizing, but elusive dream for advertisers. Through the partnership, TiVo will display menus with links to Amazon’s (NASDAQ: AMZN) online store, inviting viewers to use their remote control to purchase products like books or CDs featured on talk shows like “The Oprah Winfrey Show” and “The Daily Show.”
The move continues a shift in TiVo’s strategy away from pure-play set-top boxes in favor of new business lines, such as software-licensing agreements and advertising services. It also extends TiVo’s efforts at reinventing the television business model that it famously disrupted by allowing viewers to skip past commercials.
“We started off as a DVR company — it used to be just about television. Now it’s so much more than that,” Evan Young, TiVo’s director of broadband services, told InternetNews.com.
On the advertising side, TiVo, which just a few years ago seemed to presage the demise of ads on TV, is now reaching out to marketers and developing new interactive ad products for its service.
Until today, advertising through TiVo had been limited to display ads that users could click to request more information from the advertiser or to activate an interactive application — design your own BMW, for example.
“This is the first thing that we’re doing with physical products,” Young said.
The option to buy a product can be presented to a viewer in two ways. Once a program has finished being played back, a link to products that TiVo thinks are relevant appears on the Delete screen, on which a viewer is asked whether they want to store or delete the finished program.
Talk shows on which guests appear to promote a book or CD are the most natural fit for the ad format, but there are opportunities in dramatic series as well. To the viewer who has just finished watching an episode of “Lost,” for example, TiVo might recommend that they visit Amazon to purchase a season’s worth of episodes on DVD.
The second way TiVo displays an Amazon link is through the DVR’s search feature, called Universal Swivel Search. In the spirit of “Six Degrees of Kevin Bacon,” a search for “Baywatch” might produce an Amazon link to star David Hasselhoff’s greatest hits CD, a “Knight Rider” DVD, or the actor’s autobiography, “Don’t Hassel the Hoff.”
At present, TiVo’s Product Purchase feature bases its recommendations on a relatively superficial understanding of the content of TV programming, such as the guests scheduled to appear on talk shows or the actors on a dramatic series.
Young said that TiVo is talking with television producers about partnerships to do a deeper dive into their content that could serve up Amazon recommendations based on products placed more subtly in the shows.
The arrangement would be similar to Amazon’s online affiliate program, with TiVo earning a commission from each sale it refers.
The new partnership builds on an existing relationship between TiVo and Amazon. That arrangement allows TiVo viewers to buy and rent movies from Amazon’s digital download service, Video on Demand (formerly called “Unbox”).
TiVo has also struck partnerships with YouTube and Rhapsody to pull media formats other than television broadcasts into its box.
“Our goal is [to put] all the entertainment you want in your living room on your television,” Young said. “It’s certainly video-focused, but it extends to all media.”
TiVo has been working with cable providers Comcast and Cox Communications to develop software for their set-top boxes that would carry TiVo’s branding.
Young said that the version developed for the cable companies is similar to what TiVo’s own boxes offer, though the company’s partners have opted to exclude certain features — such as the tie-in with Amazon’s Video on Demand and the new e-commerce channel.
Comcast (NASDAQ: CMCSA) has rolled out the product in the Boston and will move into other markets in the coming weeks, Young said. Cox is still in the testing phase.
Through those partnerships, TiVo is hoping to expand its reach beyond its roughly 3.8 million subscribers. While TiVo can be credited with helping to kick off the DVR revolution nearly a decade ago, it has since grown into something much larger.
Research firm eMarketer is predicting that 41 percent of U.S. households will have DVRs by 2012, up from 22.4 percent last year. But whether a household uses TiVo or one of its myriad imitators, the disruption to the 30-second TV spot is the same, TiVo’s Young said.
“All those people skip commercials. That fundamentally changes the previous impression-based economics of advertising,” he said. “We want to re-energize TV with the revenue model that will support the changing face of television.”
