Eufreka!

I mean, there are days when I truly regret the "blogafication" of the web. It has allowed way too many people to elevate themselves to a level of expertise to which they should not really aspire.

Now that everyone has started chanting the mantra I started preaching three years ago, I am going to think different....

To Om Malik, those pearls are the jewels inspired by the sand kernels of his amazing insight, ready to be stuffed into the oyster shells of his readers ears; but to me, they are just another way of saying: "Since I have been wrong about Tivo for three years, maybe I better change my tune, but I need to do so in a way that doesn't expose the hollow shell of my past pontification..."

Sadly, however, with every following word, Malik's magic mallet of insight rings less and less like Thor's mighty hammer and more like a child's trusty plastic toy, futilely striving to pound that square peg through the clearly round hole of his playset.

After a barrage of off-the-cuff (but take it as gospel) vague future oriented analyst opinions masquarading as fact, Malik quickly moves to his "plan":

I think TiVo can be saved - actually with very little work. Here is how - TiVo should basically give away two million of these devices in next one month - hit the 5 million subscriber mark. That’s $65 million in monthly revenues (assuming everyone pays $13 subscription fees.) At those numbers the company can do $750 million in annual sales.

Ummm, very interesting....how clear it all suddenly becomes--NOT. I mean, really, how lazy and uninformed can one be? Where shall we start?

Oh, I know, how about with the simple fact that Tivo SOLD 250,000 direct subscription units in the last quarter. Now that means, they could easily project SELLING 1 million direct subscriptions in the next year (ignoring the DirecTV units/revenue).

So, Malik needs a little lesson in Excel, I think; but here is the gist of the analysis:

Malik's plan: give away 2 million units TOMORROW and just subsist on the subscription revenue. Since it's all play numbers, try this at home: 2 million units TIMES $13 a month TIMES 12 months EQUALS $312 million dollars in raw revenue one year from now. For fun, assuming they HAD 2 million units to give away, and assuming the units cost Tivo $50 each, that's $100 million to subtract, leaving $212 million in NEW revenues for the next 12 months. Okay, great plan, Malik.

BUT, Tivo is already SELLING 80,000 units a month at (it's all funny numbers now, remember that) $199 each. So fire up Excel, and create the following projections: Tivo sells 80,000 units a month and each unit is a $13 subscription for the remaining months of the year. So the first month there are 80 thousand units and $1 million in subscription revenue, which grows steadily each month until month 12, when there are 880 thousand units SOLD and $11.4 million in monthly subscription revenue ($68.6 million for the 12 months). Amazingly, that works out to 880,000 units SOLD at $199 ($175,120,000) MINUS $50 cost each ($44,000,000) EQUALLING $131 million, along with a blended 12 month subscription revenue of PLUS $68.6 million, leaving $199.7 million in NEW revenues for the next 12 months.

So Malik's magic plan would produce $12 million dollars in revenue more than Tivo's current growth suggests it will (could) produce already! Brilliant. Reminds me of the old joke, How To Live Like a Millionaire--step 1, get a million dollars.

Sounds great, except for the whole 2 million units TOMORROW part. Assuming it were possible, Malik would have Tivo spend $100 million dollars TOMORROW in exchange for $12 million in ADDITIONAL revenue a year later...

But wait, there's more great advice here:

Stop pushing the service - and turn TiVo into an exclusive club, a BMW among PVRs.

Wow, I did not know that BMW gave away its cars to build its exclusivity--I really thought people were buying the dang things!

Clue phone, Malik, Tivo IS an exclusive club, and in reality its future growth looks pretty good to me (based on historical factors, not future ambiguities). After all, I pointed this out earlier this month.

So, as a final exercise in meaninglessly inaccurate projections, here's a slightly better plan that Malik's: Go to 2-for-1 packaging on all direct subscriptions: You get 2 Tivos for $199, and pay $20 a month in subscription fees (this is Tivo's current pricing structure). Updating my prior projection from 80,000 monthly units to 160,000 works out like this:

Tivo sells 160,000 units (80,000 unit-pairs) a month and each unit-pair is a $20 subscription for the remaining months of the year. So the first month there are 160 thousand units and $3.2 million in subscription revenue, which grows steadily each month until month 12, when there are 1.76 million units SOLD and $35.2 million in monthly subscription revenue ($211.2 million for the 12 months). Amazingly, that works out to 1,760,000 units SOLD at $99.50 ($175,120,000--same as last time!) MINUS $50 cost each ($88,000,000) EQUALLING $87 million, along with a blended 12 month subscription revenue of PLUS $211.2 million, leaving $298.3 million in NEW revenues for the next 12 months. Under this scenario, we've still SOLD fewer units than Malik would GIVE AWAY, yet now we have realized $86.3 million MORE revenue than his plan would produce.

After all, the unit-pairs could be delivered pre-configured to be networked--wired or wireless! Oh, and selling multi-unit packages at a higher total subscription rate SOUNDS a lot more like a premium brand/exclusive club approach to me too. Or maybe that's just the sound of Malik's magic mallet ringing in my ears...