dan9999
12-14-2009, 05:17 PM
Can TiVo Reinvent Itself?
DVR Pioneer Needs Help — Fast — From Cable Operators to Survive
by Todd Spangler -- Multichannel News, 12/14/2009 2:00:00 AM
TiVo president and CEO Tom Rogers says he doesn’t run a DVR company.
This is odd, since TiVo is synonymous with the digital video recorder — a technology that, in the last decade, has altered the TV-advertising business and fundamentally changed the way millions of people watch TV.
It is odd, too, given that about 80% of TiVo’s revenue still comes from sales of the retail DVRs and related subscription fees.
According to Rogers, TiVo is not a DVR hardware provider or even a software company, but a “television behavioral company at heart.”
Rogers is now scrambling to convince cable operators — whose own DVRs have contributed to the decline in people willing to pay for TiVo service — that he’s able to offer much more than just the best DVR on the planet.
Instead, his pitch is this: TiVo, with its highly intuitive and user-friendly software, is better-positioned than anyone else to help users sift through and manage “infinite choice” in the same way Google has made the Web itself searchable.
Recording linear TV for later playback will continue to have its place, Rogers said, but as more Internet-delivered video comes to TV screens, Tivo will be the front-end TV portal through which subscribers access linear TV, video-on-demand, broadband content, interactive services and advertising.
“Our past was inventing the DVR. Our future is advanced television,” said Rogers, who joined TiVo in 2005 after running publishing company Primedia; before that, he headed NBC’s cable division.
Rogers doesn’t have much of a choice these days. TiVo, which popularized the DVR, has watched its core business die off as cable, satellite and telco providers successfully introduced their own digital video recorders. To save itself, TiVo must cut deals with those same TV operators and persuade them to adopt its next-generation navigation software.
To that end, TiVo has signed different deals with Comcast, Cox Communications, DaveTV, RCN, U.K. operator Virgin Media and others to pitch TiVo-based DVRs and services to customers.
Each has a different motive. For RCN, the issue was that service providers that are “beholden to Motorola and Scientific Atlanta [now part of Cisco Systems] are not truly going to be able to embrace the convergence of TV and the Internet,” said RCN chief financial officer Mike Sicoli in August when the company announced its deal with TiVo. “This leapfrogs that and gives us the best platform that costs even less than what we have today.”
Virgin Media, the United Kingdom’s biggest cable operator with 3.7 million video subscribers, has also bought into TiVo’s pitch. Under a deal announced last month with Virgin Media, TiVo will become the exclusive provider of middleware and user interface software for the cable company’s next generation of set-top boxes. Virgin Media anticipates its first TiVo co-branded product in 2010.
“TiVo clearly has an experience that none of the operators has been able to match yet,” said Parks Associates vice president and principal analyst Kurt Scherf. Its next huge challenge is to persuade major pay TV companies “that they can’t develop this themselves.”
And time is running out for TiVo to turn the next-generation TV story into a real business. All at once, Rogers faces defecting subscribers, technical delays with cable operators, agile competitors and a legal strategy built around defending the patents that are the foundation of its DVR business.
As of Oct. 31, TiVo had 2.7 million total subscribers — down from 3.5 million a year ago, and off 62% from a peak of around 4.4 million in late 2006.
Its finances have also taken a hit: TiVo’s net revenue for the nine months ended Oct. 31 declined 15.9%, to $121.3 million, compared with the same period last year, and the company posted a net loss of $14.4 million.
In 2010, TiVo’s growth prospects will largely depend on convincing cable subscribers they should pay a premium to enjoy its particular flavor of digital video recorder. “Until they get some significant revenue coming in [from distribution agreements], there’s plenty of reason to doubt they’ll be able to keep it going,” Scherf said.
If it continues to hemorrhage subscribers, according to analysts, TiVo may ultimately be an acquisition target for the likes of Cisco or perhaps even Netflix (with whom TiVo has a partnership) for its patent portfolio and tremendous brand equity.
To go it alone, though, TiVo needs the cooperation of pay TV operators because most subscribers won’t go through the trouble or expense to buy a standalone DVR and hook it up themselves. According to SNL Kagan, about 34.6 million U.S. households had DVRs as of the third quarter of 2009 — giving TiVo less than an 8% share of the market.
“The consumer perception of TiVo has always been much larger than their actual adoption,” said Yankee Group director of consumer research Carl Howe.
TiVo’s partnership with Comcast is now four and half years old without producing tangible gains. Comcast has just reinitiated marketing across the New England market, which includes Boston, “now that the vast majority of technical hurdles have been cleared,” Rogers said on TiVo’s Nov. 24 earnings call.
Cox, for its part, has moved out of the testing phase with TiVo-based boxes in its New England region — but still doesn’t offer the service to customers.
With Comcast’s current TiVo offering, priced at $2.95 per month on top of the regular DVR fee, subscribers are able to search across TV and VOD listings, but the MSO is not providing access to broadband content. Cox is following that same model. RCN, DaveTV and Virgin Media, meanwhile, envision offering some broadband-delivered video through their TiVo services in an integrated fashion.
Rogers said TiVo’s distribution partners each have “various incentives and commitments” for how they market the services. He also suggested that cable operators need the firepower of TiVo’s brand and enhanced features to remain competitive.
“You don’t want to be in a position where somebody has a better product than you do,” he said.
TiVo was in many ways incubated by the cable industry. According to company lore, the idea for TiVo came to co-founders Mike Ramsay and Jim Barton while they were working together for Silicon Graphics Inc. on Time Warner Cable’s Full Service Network interactive TV project in Orlando, Fla., in the 1990s.
By 1999, after shipping its first DVR, TiVo scored a coup with its original distribution deal with DaveTV. The satellite operator launched a TiVo-based DVR, which was a major part of its growth early on. But five years later, DaveTV said it would market its own DVR, developed by NDS, then a sister company through News Corp.’s investment in both — shutting off that spigot and leading to a steady erosion of DaveTV customers using TiVo boxes.
“DaveTV was a big part of the reason TiVo was successful. Then they were part of the problem,” said Carmel Group chairman Jimmy Schaeffler, who has worked as a consultant for TiVo in the past.
TiVo last year struck a new deal with DaveTV, to run through at least February 2015, under which the companies will develop a new broadband-enabled HD DVR as a high-end option for subscribers. Previously slated to launch in the second half of 2009, that product is now anticipated next spring.
As it looks for new customers, TiVo has also erected a legal strategy around its key DVR patents, aggressively defending them against Echo* and Dish. TiVo has won $400 million in judgments so far and could get even more depending on the ultimate outcome of the litigation from the U.S. Court of Appeals for the Federal Circuit.
TiVo also has taken aim at the two biggest U.S. telco TV operators, filing patent-infringement suits against AT&T and Verizon Communications for allegedly violating three of its patents. TiVo’s message to the industry would appear to be: Work with us, or we’ll see you in court.
Asked about the litigation, Rogers said TiVo would prefer a business solution, “but sometimes you have to protect yourself.” Still, analysts don’t believe there’s a bright future in its simply licensing intellectual property.
Cont'd on Next Post...
DVR Pioneer Needs Help — Fast — From Cable Operators to Survive
by Todd Spangler -- Multichannel News, 12/14/2009 2:00:00 AM
TiVo president and CEO Tom Rogers says he doesn’t run a DVR company.
This is odd, since TiVo is synonymous with the digital video recorder — a technology that, in the last decade, has altered the TV-advertising business and fundamentally changed the way millions of people watch TV.
It is odd, too, given that about 80% of TiVo’s revenue still comes from sales of the retail DVRs and related subscription fees.
According to Rogers, TiVo is not a DVR hardware provider or even a software company, but a “television behavioral company at heart.”
Rogers is now scrambling to convince cable operators — whose own DVRs have contributed to the decline in people willing to pay for TiVo service — that he’s able to offer much more than just the best DVR on the planet.
Instead, his pitch is this: TiVo, with its highly intuitive and user-friendly software, is better-positioned than anyone else to help users sift through and manage “infinite choice” in the same way Google has made the Web itself searchable.
Recording linear TV for later playback will continue to have its place, Rogers said, but as more Internet-delivered video comes to TV screens, Tivo will be the front-end TV portal through which subscribers access linear TV, video-on-demand, broadband content, interactive services and advertising.
“Our past was inventing the DVR. Our future is advanced television,” said Rogers, who joined TiVo in 2005 after running publishing company Primedia; before that, he headed NBC’s cable division.
Rogers doesn’t have much of a choice these days. TiVo, which popularized the DVR, has watched its core business die off as cable, satellite and telco providers successfully introduced their own digital video recorders. To save itself, TiVo must cut deals with those same TV operators and persuade them to adopt its next-generation navigation software.
To that end, TiVo has signed different deals with Comcast, Cox Communications, DaveTV, RCN, U.K. operator Virgin Media and others to pitch TiVo-based DVRs and services to customers.
Each has a different motive. For RCN, the issue was that service providers that are “beholden to Motorola and Scientific Atlanta [now part of Cisco Systems] are not truly going to be able to embrace the convergence of TV and the Internet,” said RCN chief financial officer Mike Sicoli in August when the company announced its deal with TiVo. “This leapfrogs that and gives us the best platform that costs even less than what we have today.”
Virgin Media, the United Kingdom’s biggest cable operator with 3.7 million video subscribers, has also bought into TiVo’s pitch. Under a deal announced last month with Virgin Media, TiVo will become the exclusive provider of middleware and user interface software for the cable company’s next generation of set-top boxes. Virgin Media anticipates its first TiVo co-branded product in 2010.
“TiVo clearly has an experience that none of the operators has been able to match yet,” said Parks Associates vice president and principal analyst Kurt Scherf. Its next huge challenge is to persuade major pay TV companies “that they can’t develop this themselves.”
And time is running out for TiVo to turn the next-generation TV story into a real business. All at once, Rogers faces defecting subscribers, technical delays with cable operators, agile competitors and a legal strategy built around defending the patents that are the foundation of its DVR business.
As of Oct. 31, TiVo had 2.7 million total subscribers — down from 3.5 million a year ago, and off 62% from a peak of around 4.4 million in late 2006.
Its finances have also taken a hit: TiVo’s net revenue for the nine months ended Oct. 31 declined 15.9%, to $121.3 million, compared with the same period last year, and the company posted a net loss of $14.4 million.
In 2010, TiVo’s growth prospects will largely depend on convincing cable subscribers they should pay a premium to enjoy its particular flavor of digital video recorder. “Until they get some significant revenue coming in [from distribution agreements], there’s plenty of reason to doubt they’ll be able to keep it going,” Scherf said.
If it continues to hemorrhage subscribers, according to analysts, TiVo may ultimately be an acquisition target for the likes of Cisco or perhaps even Netflix (with whom TiVo has a partnership) for its patent portfolio and tremendous brand equity.
To go it alone, though, TiVo needs the cooperation of pay TV operators because most subscribers won’t go through the trouble or expense to buy a standalone DVR and hook it up themselves. According to SNL Kagan, about 34.6 million U.S. households had DVRs as of the third quarter of 2009 — giving TiVo less than an 8% share of the market.
“The consumer perception of TiVo has always been much larger than their actual adoption,” said Yankee Group director of consumer research Carl Howe.
TiVo’s partnership with Comcast is now four and half years old without producing tangible gains. Comcast has just reinitiated marketing across the New England market, which includes Boston, “now that the vast majority of technical hurdles have been cleared,” Rogers said on TiVo’s Nov. 24 earnings call.
Cox, for its part, has moved out of the testing phase with TiVo-based boxes in its New England region — but still doesn’t offer the service to customers.
With Comcast’s current TiVo offering, priced at $2.95 per month on top of the regular DVR fee, subscribers are able to search across TV and VOD listings, but the MSO is not providing access to broadband content. Cox is following that same model. RCN, DaveTV and Virgin Media, meanwhile, envision offering some broadband-delivered video through their TiVo services in an integrated fashion.
Rogers said TiVo’s distribution partners each have “various incentives and commitments” for how they market the services. He also suggested that cable operators need the firepower of TiVo’s brand and enhanced features to remain competitive.
“You don’t want to be in a position where somebody has a better product than you do,” he said.
TiVo was in many ways incubated by the cable industry. According to company lore, the idea for TiVo came to co-founders Mike Ramsay and Jim Barton while they were working together for Silicon Graphics Inc. on Time Warner Cable’s Full Service Network interactive TV project in Orlando, Fla., in the 1990s.
By 1999, after shipping its first DVR, TiVo scored a coup with its original distribution deal with DaveTV. The satellite operator launched a TiVo-based DVR, which was a major part of its growth early on. But five years later, DaveTV said it would market its own DVR, developed by NDS, then a sister company through News Corp.’s investment in both — shutting off that spigot and leading to a steady erosion of DaveTV customers using TiVo boxes.
“DaveTV was a big part of the reason TiVo was successful. Then they were part of the problem,” said Carmel Group chairman Jimmy Schaeffler, who has worked as a consultant for TiVo in the past.
TiVo last year struck a new deal with DaveTV, to run through at least February 2015, under which the companies will develop a new broadband-enabled HD DVR as a high-end option for subscribers. Previously slated to launch in the second half of 2009, that product is now anticipated next spring.
As it looks for new customers, TiVo has also erected a legal strategy around its key DVR patents, aggressively defending them against Echo* and Dish. TiVo has won $400 million in judgments so far and could get even more depending on the ultimate outcome of the litigation from the U.S. Court of Appeals for the Federal Circuit.
TiVo also has taken aim at the two biggest U.S. telco TV operators, filing patent-infringement suits against AT&T and Verizon Communications for allegedly violating three of its patents. TiVo’s message to the industry would appear to be: Work with us, or we’ll see you in court.
Asked about the litigation, Rogers said TiVo would prefer a business solution, “but sometimes you have to protect yourself.” Still, analysts don’t believe there’s a bright future in its simply licensing intellectual property.
Cont'd on Next Post...