The Cheap Toothpick Syndrome

Do you remember the story a few chapters back about the restaurant that chintzed on its toothpicks at the expense of its customers? That's the upshot of the media meltdown. Technology, communications, and entertainment that sells the public short and out! The most dangerous variety of the cheap toothpick syndrome is spying on customers and selling their personal information. Unfortunately, this is commonplace. TiVo is typical.

Figure 9.13: TiVo

The DVR ( Digital Video Recorder ) is the successor to the VCR. It is essentially a hard drive connected to a TV via the Internet ”a stepchild of convergence. DVR makes videotape obsolete by storing 80 hours of recorded programming on an internal hard drive. For a few hundred bucks plus a $12.95 monthly service fee, you can buy a TiVo and never watch another TV commercial again! According to NextResearch, one in five people who own a DVR (such as TiVo or ReplayTV) never watch any commercials. Research also indicates that DVR owners prefer to watch programs recorded on their machine rather than on television itself. Ignoring the networks' painstakingly planned schedules, DVR owners watch programs at their leisure, often oblivious to the channel on which the program originally appeared.

Hollywood and Madison Avenue are in a snit over DVR, as you might imagine. Some even characterize ad skipping as thievery! Jamie C. Kellner, the CEO of Turner Broadcasting, puts it bluntly. "There is no Santa Claus! The free television that we've all enjoyed for so many years is based on watching commercials. If you don't watch commercials, someone is going to have to pay...and it's going to be you!" When prompted, Kellner admitted that, "There's a certain amount of tolerance for going to the bathroom." In 2002, media conglomerates including Viacom, NBC, the Walt Disney Company, AOL Time Warner, and 20th Century Fox slapped SonicBlue, maker of the ReplayTV DVR player, with a federal lawsuit for copyright infringement.

TiVo, SonicBlue's rival, wasn't named in the lawsuit because theoretically, TiVo players can't skip commercials automatically the way ReplayTV players can. In retrospect, there may be another reason why TiVo was excluded from the lawsuit. While everyone was distracted with claims and counterclaims, a light bulb apparently went on in TiVo's head. It was sitting on an untapped gold mine ”the viewing habits of its subscribers!

In 2003, TiVo announced it would start selling information about its subscribers' viewing habits to advertisers and broadcasters. The new service will initially provide a quarterly audience-measurement report to track primetime viewing habits, but TiVo eventually plans to use its technology to provide data on consumer patterns for virtually every show and commercial on television.

One way to avoid a lawsuit is join the enemy! This is only hypothetical, but perhaps TiVo wasn't named in the SonicBlue lawsuit because it was playing footsie with the plaintiffs! In my opinion, that's what TiVo has done ”misled subscribers, switched sides, and ratted out its customers!

TiVo Privacy Policy: Disclosure of Subscriber Information

3.1 Generally. We disclose aggregated Account Information and aggregated Anonymous Viewing Information and any reports or analyses derived therefrom, to third parties including advertisers, broadcasters, consumer and market research companies and other organizations.

3.6 Factors Beyond Our Control. Your privacy is very important to us. Due to factors beyond our control, however, we cannot fully ensure that your Subscriber Information will not be disclosed to third parties. For example, we may be legally obligated to disclose Subscriber Information to the government or third parties under certain circumstances, or third parties may circumvent our security measures to unlawfully intercept or access your Subscriber Information.

 

I read the company's privacy policy. Subscribing to TiVo is the equivalent of signing a death warrant on your own privacy. TiVo claims that data is kept in aggregate and doesn't reveal individual information. Where have we heard that before? From every company that's ever been hacked! More to the point, does TiVo have any credibility left after pulling a cheap stunt like spying on subscribers for the almighty buck?

Selling subscription information is TiVo's latest attempt to eke out revenue from a modest subscription base of 703,000 members . TiVo lost $7.9 million in the first quarter of 2003. The company hopes to expand to one million subscribers by 2004. The real question is, will that make a difference? According to Josh Bernoff, principal media analyst for Forrester Research

TiVo is in a situation where any revenue-generating ideas are important toward the goal of making the company profitable. While the slow economy could make selling research difficult, the authoritative data that TiVo has to offer could pique advertisers' interest. The number of people who want to know the truth about viewing habits and ad skipping is large!

Any way you slice it, TiVo is profiting at the expense of its customers by selling their private information. That is the epitome of the cheap toothpick syndrome!