Ramsay, Michael and Barton, James

Michael Ramsay

c. 1950 • Scotland

Company executive

James Barton

c. 1958 • United States

Company executive

Michael Ramsay and Jim Barton are the founders of TiVo, the company that makes the revolutionary digital video recorder (DVR) for television. Ramsay and Barton fought tough battles with competitors and other opponents during their first decade in business. TiVo, meanwhile, gained a cult following among users. Some called it the next frontier in television viewing because of the freedom it allowed viewers.

TiVo's founders met when both were top executives at Silicon Graphics, Inc. (SGI). The Mountain View, California-based company was an early pioneer in the development of computer workstations. These were desktop machines with immense computing power. In the early 1990s SGI also became a leader in developing the software used in producing special effects for movies. The dinosaurs in Jurassic Park and the tornadoes in Twister were two of its biggest successes.

Silicon Valley success stories

Michael Ramsay was born in Scotland, in the early 1950s. He grew up in Sighthill, a poor section of Edinburgh. After earning a degree in electrical engineering at the University of Edinburgh, he moved to California around 1976. He first worked for computer maker Hewlett-Packard and another company called Convergent Technologies. Both were located in the so-called "Silicon Valley" hub of high-tech businesses near the California cities of San Jose and Palo Alto. SGI became one of Silicon Valley's biggest success stories during the 1980s, and Ramsay rose to become senior vice president and general manager of its visual systems group. He was later involved with another division in the company called Silicon Studio, which created interactive digital media applications.

Jim Barton also studied electrical engineering during his under-graduate days. His degree was from the University of Colorado at Boulder, where he earned an advanced degree in computer science. His first jobs were with Bell Laboratories and Hewlett-Packard. At SGI he served as vice president and general manager of the systems software division.

"TiVo is the first and only post-Internet Big Idea."

Michael Ramsay, Fortune , March 19, 2001.

TiVo's roots date back to an infamous failure of the mid-1990s. Ramsay and Barton had both been involved in SGI's work on an exciting new cable television experiment in Orlando, Florida. SGI worked with Time-Warner Cable to help create a two-way cable television system called Full Service Network. It offered four thousand Orlando households some five hundred television channels and a new kind of remote control that allowed viewers to program their favorites. It even took users to a site where they could order a pizza delivery with the click of a button. But the much-hyped Full Service Network never caught on, and reportedly cost Time-Warner $100 million. It was touted as the next generation of online access, but the World Wide Web took off in earnest in 1995, and users discovered they would rather surf the Web from their desktop computers than from their television screens.

Barton served as the lead system software architect for the Full Service Interactive software, but moved on to a project between SGI and AT&T Network Systems. This was called Interactive Digital Solutions Company, and Barton was its chief technology officer. He eventually left the company and founded Network Age Software, becoming its president and chief executive officer.

Dreamed of futuristic "home network"

Ramsay and Barton joined forces after Ramsay left SGI in May of 1997. Because of their combined work history, it was easy for them to get appointments with venture capital firms in Silicon Valley. These investment companies provided start-up money to new businesses in exchange for a stake in future profits. With a venture capital check for $3 million in the bank to start their own company, they began brainstorming ideas for consumer products. They first tried to come up with a way to connect appliances in a home with a computer and Internet access. In their "home networking" vision, a sensor in the refrigerator could tell when a carton of milk was going bad, and automatically order a fresh delivery to the home from a grocery service. A resident would be able to turn his thermostat up or down from his home office chair. But Ramsay and Barton realized the idea presented too many potential roadblocks. As they later told New York Times Magazine writer Michael Lewis, "When you build a company around a technology and someone says, 'Tell me again what this thing does?'you need to be able to say, 'It does this.'We found that we couldn't say what home networking did."

Ramsay and Barton had come up with the company name "Tele-world," and kept that name when they changed their vision to that of working solely with the most-used home appliance—the television. Their idea was a "personal television receiver." It would use a digital chip to give television viewers a ground-breaking degree of control over what they watched and when they watched it. The personal television receiver sat on top of the television, much like a VCR or cable box, and was linked to the outside world via a telephone line. They came up with a quirky brand name, "TiVo," and an animated logo. They asked the venture capital firms for another $300 million, and used the money to launch their company in earnest.

Although the TiVo box looked a little like a VCR, it was much easier to program. It could store up to forty hours of programming if instructed, and had an innovative "Season Pass" feature. The Season Pass would record an entire season's worth of a series with just one or two clicks of the remote. A TiVo user could then watch what had been recorded, with the ability to fast-forward through commercials. TiVo also let viewers pause during a live program. TiVo contained a unique "smart" feature that could tape shows based on what a user had previously recorded. As Lewis wrote in the New York Times Magazine article, the company now had a clear idea to sell to investors: "When someone asked Barton or Ramsay, 'Tell me again what this gadget does?' they now had a simple answer: 'It lets you watch anything you want to watch when you want to watch it.'"

Company struggled in early years

The first TiVos were introduced in the United States in early 1999. They sold for about $500 each. Buyers also committed to a $9.95 monthly subscription fee to use TiVo's unique features. An initial public offering of stock by the new company later in 1999 was a great success. There was tremendous early buzz about TiVo, along with rumors that it would forever change the public's viewing habits. Still, the company struggled for the next few years, and posted huge financial losses. Some of those losses came because it sold the digital video recorder, called a "DVR," below cost in order to lure new users. Still, TiVo was slow to catch on with consumers. By the end of 2000, it was in just 150,000 U.S. households. The company also made a mistake with some of its first advertising campaigns, one of which cost $50 million. That first generation of TiVo television commercials, marketing experts claimed, did not explain the innovative new technology well enough.

Despite the early financial worries, many saw the potential in Ramsay and Barton's idea. The partners struck deals with America Online (AOL), DirecTV, Comcast, and Walt Disney. "TiVo's courtship of investors ... was impressive," wrote Fortune 's Christine Y. Chen. "By venture capital standards, it wasn't exactly a big draw. The company had an expensive business model and was creating a new consumer electronics category. It was subsidizing its hardware, was service- and subscription-oriented, and was unlikely to become profitable for years. But Ramsay and Barton's vision for customized television ultimately proved too strong to resist."

Ramsay and Barton decided to stop spending money on big advertising campaigns and let TiVo take hold through word of mouth instead. In time, a minor cult of enthusiastic TiVo users sprang up, and articles on the new programming device began to fuel the public interest. One such article was a 2000 New York Times Magazine cover story by Michael Lewis. The writer compared the importance of the date that TiVo was founded, August 4, 1997, to that of November 10, 1994, the founding date of online retailer Amazon.com. And Lewis further argued that TiVo had the potential to forever change commercial television broadcasting. As Ramsay told Lewis, "One question our investors did ask us is 'How long will it take for the TV networks to hate you so much that they shut you down?'"

TiVo affects advertising

Ramsay and Barton met several other challenges over the next half-decade. There was competition with Replay TV, a rival. There were also patent violation lawsuits. But as TiVo began to catch on, television networks did indeed become fearful that the end was near. Major broadcast networks like CBS and Fox were able to sell advertising slots for Survivor, American Idol, and other top-rated TV shows for millions of dollars per minute. And TiVo users were said to especially love the ability to skip over commercials. But Ramsay and Barton pointed out that TiVo actually offered new potential markets for media companies and advertisers: TiVo could collect data on viewers and offer it for sale to marketing companies. It also launched a new "showcase" feature, where a viewer could click a button on the remote control and request more information on an advertised product.

Ramsay gave up one of his job titles when TiVo hired longtime NBC executive Marty Yudkowitz to guide the company as its new president. Ramsay became board chair and chief executive officer, while Barton served as TiVo's chief technology officer. The company reached its one-millionth subscriber mark in November of 2003. But it was also facing renewed competition from Microsoft, Sony, and even hackers posting how-to guides on how to triple the memory space in the boxes on a do-it-yourself basis.

Ramsay and Barton hoped that TiVo would be in thirty million households by 2007. In the spring of 2004 they announced a new venture that would allow TiVo users to download movies and music from the Internet. But their original idea has become so common that "TiVo" even began to be used as a verb. Barton's favorite shows to "TiVo" are Star Trek reruns and Comedy Central's The Daily Show. One of Ramsay's favorite shows is the real-time thriller 24. Journalist Frank Rose in Wired, compared Ramsay to the hero of that very series, played by Kiefer Sutherland. "Like Jack Bauer," wrote Rose, Ramsay "pinballs from one crisis to another as powerful enemies, shifting alliances, and relentless plot twists conspire to do him in. The specter of betrayal lurks behind every encounter. The clock is ticking. Any minute his bigger, better-financed adversaries—major cable carriers, PC and consumer electronics giants—will arrive on the scene to blow him away."

For More Information

Periodicals

Bevens, Nick. "Times Are Changing as TiVo Looks to Kill the Video." Evening News (Edinburgh, Scotland) (August 22, 2001): p. B4.

Carnoy, David. "Anthony Wood and Mike Ramsay Are at War." Success (March 1999): p. 52.

Chen, Christine Y. "TiVo Is Smart TV (But Hey, Brains Aren't Everything.)." Fortune (March 19, 2001): p. 124.

Coppa, Matt. "The Tao of TiVo: Wisdom from the Men Who Changed How the World Watches TV." Men's Fitness (May 2004): p. 78.

Einstein, David. "SGI Reorganizes, 2 Execs Depart." San Francisco Chronicle (May 6, 1997): p. C1.

"Here's the Next 'Next Big Thing.'" Business Week (August 9, 1999): p. 38.

"Is TiVo's Signal Fading?" Business Week (September 10, 2001): p. 72.

Lewis, Michael. "Boom Box." New York Times Magazine (August 13, 2000): p. 36.

Markoff, John. "New Service by TiVo Will Build Bridges From Internet to the TV." New York Times (June 9, 2004).

McHugh, Josh. "TiVo's Turning Point: It Redefined Television. Now Comes Competition." Wired (October 2003).

Pitta, Julie. "Interactivity: The Great White Whale." Forbes (September 21, 1998): p. 60.

Rose, Frank. "The Fast-Forward, On-Demand, Network-Smashing Future of Television." Wired (October 2003).

St. John, Warren. "Friend Or Foe? The Cult of TiVo Cometh." New York Times (April 20, 2003): p. 1.

Taub, Eric A. "How Do I Love Thee, TiVo?" New York Times (March 18, 2004): p. G1.

Turner, Nick. "If TiVo Succeeds, Will It Attract Many Suitors?" Investor's Business Daily (January 3, 2002): p. A6.

Woolley, Scott. "Zap!" Forbes (September 29, 2003): p. 76.

Web Sites

"Management Team: Jim Barton." TiVo.com. http://www.tivo.com/5.2.3.asp (accessed on June 1, 2004).

"Management Team: Michael Ramsay." TiVo.com. http://www.tivo.com/5.2.1.asp (accessed on June 1, 2004).

Stone, Brad. "TiVo's Big Moment." MSNBC. http://www.msnbc.msn.com/id/4208945/ (accessed on June 1, 2004).