Is RIMM The Next Tivo?

A rumor at the Apple tuaw.com weblog is describing how Apple is working on a new iPhone application called iControl, allowing the iPhone to connect wirelessly to local iTunes libraries and then play stored media. Again, this is just a rumor, but it does drive home a difference between Apple and other smart phones - Apple has a unique ability to integrate the iPhone with its own existing media sources, such as iTunes, and various software applications, like Safari. Is iChat for the iPhone next? Who knows, but it does bring up an interesting observation. Does Research In Motion have the functionality and applications that will drive demand forward, or is design, email ease, and past loyalty enough?

Recently, RIMM reported that it added 6.5 million subscribers in its last fiscal year, twice the previous number, and more than Apple. The stock has also been responding well recently as it nears a 52 week high, partly on the introduction of the Pearl and Curve, each of which has been helping RIMM capture more of the consumer market, in addition to its corporate Blackberry market. Nonetheless, RIMM is still losing some share (albeit in a growing market, thank you Apple), with market share in the U.S. down 5% to 40%. Apple has taken over / created a 17% share in just its first 6 months, and this number is expected to grow. By working with Microsoft, iPhones will also be able to work with business computers, allowing Apple to go beyond the consumer market where it has growing share, and further tap into the corporate market, currently dominated by RIMM's Blackberry customer base. A faster 3G phone that is expected to be launched in June should increase Apple sales, although RIMM is also releasing a new 3G phone in May. But the question remains. With headwinds from Apple and other Smartphones, can RIMM continue to dominate, or will RIMM possibly become the next TIVO?

As we often forget, Tivo revolutionized an industry, created one really, with the introduction of the DVR - digital video recorder. The problem was that Tivo really did not have a product that could not easily be reproduced, nor did it have a killer app. It is true that TIVO has TivoToGo, allowing you to download videos to your computer or other mobile device, and does allow for on-line scheduling, but are these enough? I personally own a few Tivos and enjoy the convenience of on-line scheduling, and do occasionally download a show for my laptop if going on a trip, but I don't find the features something that makes me want to go out and buy a new machine. In fact, in addition to Tivos in the house, I also have a few cable supplied DVRs. Personally, I still find the Tivo easier to operate, but it does not matter. The cable DVR is convenient and cost effective, given that I don't have to buy it, I can record HD shows, and the monthly service charge is just about the same. Sure, Tivo now has a HD DRV, but it is still expensive, and even with a lower cost, what is the motivation for making the purchase?

This brings us back to Apple and RIMM. Why do I buy a Blackberry or other new smartphone from RIMM over the Apple iPhone? Does one or the other have a killer app? Recently, two software developers for RIMM discussed how a touch-screen Blackberry is in development, and how it will be an Apple Killer. But will this killer app be an Apple killer, or just a way to try and keep up? If current crack-berry addicts prefer the tactile keyboard for their email, what will motivate them to buy the touch-screen version? If the non-corporate consumer market wants a touch-screen, why not just buy an iPhone?

So in the end, what will be the motivation for consumers? If you believe the major media CEOs and analysts, content is what is important. On this front, Apple again has an advantage. Beyond its iTunes library, Apple has released programming tools for developers, driving expectations of increased offerings of entertainment programs that should be available for the iPhone later in the year. This is further strengthen by the connection the iPhone has with the iMac computers, where iMac computers are driving sales of iPhones, and iPhone are driving sales of iMacs. If it is true that "content is king," then RIMM may become the next Tivo, and Apple with its extended supporting product line and applications should continue to see success. RIMM will not go away, just as Tivo still tries to innovate today. Both Apple and RIMM may continue to see growth and higher stock prices in the near-term, but eventually RIMM may find itself with continued shrinking share and less ability to differentiate itself. In the end, or at least-longer term, this may begin to affect valuation. Only new innovation, content, and/or the devotion of the crack-berry addicts, may continue to drive market share.

Tickers: AAPL, RIMM, TIVO