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In our numerous talks about Warren Buffett and his insights into the importance of differentiation and not being a commodity company, TiVos' struggles are a good case study into this very problem.

TiVo (TIVO) is at the place where they can't be differeniated from any other company. Their main competitors, which are cable and satellite companies, offer DVR devices less expensive than TiVo.

Here's the way one online newspaper describes TiVo:

"TiVo's service is known for its slick, easy-to-use interface and advanced features such as suggesting programs a user might enjoy, the ability to transfer TiVo recordings for viewing on PCs and portable devices, and the ability to schedule last-minute recordings via the Web."

The ease-of-use aspect is important, but how hard can it be for other companies to duplicate that? How hard can it be to offer the user the ability to make a click or two to do what they want?

As is shown by the struggle of the company, the vast majority of people don't care that much about all the features of the service, they want to record their show and watch it when it's convenient. That is a commodity business. Why would anyone want to buy a service like this and pay more if that's the underlying purpose for them wanting it? The answer is that they wouldn't. And consumers are voting with their dollars saying it.

The problem is that people don't want some complicated device just to record their shows. Adding an endless array of features isn't going to differentiate. How many will the normal user want to learn or need?

These days it's a mistake to think that because you're first to market that it guarantees that you'll remain a market leader; especially when it's connected to technology that can be easily duplicated.
 
When it comes down to being a commodity, and price being the main reason for consumers that want a product or service, a company is in big trouble. TiVo is in trouble if they aren't able to offer anything beyond recording. And if they do, will they have expertise in what they enter into? A problem many companies that offer commodity products and services face.