Is the ‘Free’ DVR TiVo’s Last Stand?

What do you do when you’re a consumer electronics company that depends on subscription revenue and you’re hemorrhaging subscribers? If you’re TiVo, (s TIVO) you give your product away for free and raise your subscription rates, hoping to make up for lost sales over the course of a two-year contract.

TiVo, which was once synonymous with the DVR, has seen its subscriber numbers plummet over the last several years as cable companies have undercut its products by leasing DVR boxes of their own to subscribers. The company lost 666,000 subscribers over the past year, or nearly a quarter of its user base.

To combat further subscriber losses, TiVo announced special holiday pricing today, aimed at getting consumers excited once again about owning one of its DVRs, as opposed to leasing one from their cable provider. For the next six weeks — and possibly longer — TiVo will be selling its Premiere DVR for just $99, which is $200 off the usual retail price of $299. But that price comes with a hitch: rather than pay the usual $12.95 monthly service fee, TiVo requires purchasers of the $99 Premiere DVR to pay $19.99 a month for a one year contract. But that’s not the only special promotion TiVo is pushing; sign a contract for two years of service at the inflated rate; and you get a Premiere DVR for free.

The problem with these promotions, as pointed out by the Washington Post, is that they’re not always a good deal for consumers. Getting a TiVo DVR for $99 might seem like good for the first year, but if you continue to shell out $19.99 for three years of service, you’re actually paying more than if you bought your DVR for the non-discounted rate. WaPo runs 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.

It might be difficult for TiVo to convince consumers to pay a higher monthly fee and sign a one- or two-year contract for DVR service when they can already lease a similar box from their cable or satellite provider for less than what TiVo is asking. While most cable DVRs don’t offer nearly as many features or flexibility as what TiVo has put together with its Premiere box, for many cable subscribers, what Comcast (s CMCSA) or Time Warner Cable (s TWC) has to offer is good enough.

Photo courtesy of Flickr user Katie Brady.

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