The rise and fall of TiVo

[mhz40]

Daily Variety

Copyright 2005 Reed Elsevier Inc.

March 11, 2005, Friday

By Ben Fritz

From Lexis Nexis

This year it's all about profits. That's the message from TiVo after a fiscal year in which it nearly doubled its subscriber count but more than doubled its net loss to pay for it.

"With our footprint firm and growing, this year we're going to focus on reduced costs and profitability," CEO Mike Ramsay told investors Thursday.

Exec said the company is aiming to make it into the black by the fourth quarter, which ends Jan. 31, 2006.

Company reported a 73% spike in revenue in the quarter ended Jan. 31 to $33 million, while its net loss nearly tripled to $33.7 million.

Earnings news came a day after TiVo received a favorable ruling in its patent infringement suit against Dish Network parent company EchoStar. A federal court in Texas denied the satcaster's motion to dismiss and transfer the case, giving new momentum to TiVo's litigation.

News sent EchoStar shares plunging 6% Thursday as investors worried it may have to license TiVo's patents for its own DVR offering.

Won't continue campaign

To reach its profitability goal, TiVo won't be continuing the $50 million marketing campaign it ran last year to increase its sub count. Company spent more than $100 million in total on subscriber acquisition during the year.

Instead, TiVo will slash sales and marketing spending and settle for modest growth as it looks to make it to profitability.

To keep current subs and generate growth among high-end consumers, TiVo will increase spending this year on research and development in order to maintain a quality lead over the scores of generic DVR services coming from cable and satellite providers.

It's hoping to differentiate itself from competitors with additional options like broadband-delivered content, home networking and transfer of recorded shows to computers.
"Our aim is to be the value leader, not the price leader," Ramsay stated.

Cable and satellite companies all charge less than TiVo's $12.95 monthly fee and also don't charge for hardware, as TiVo does.

Sub growth increases

Company reported that TiVo-owned subs grew by 250,000, compared to 130,000 a year ago.

As has been typical in the past few years, though, most of its growth came from subs generated by DirecTV, for which TiVo receives a much smaller monthly fee. DirecTV-TiVo sub adds grew 113% to 447,000. Subs generated from the partnership now account for 62% of TiVo's 3 million total.

Later this year, DirecTV will launch its own DVR service with News Corp. sister company NDS and is expected to market it in place of TiVo, which it is contractually obliged to offer through 2007. That's expected to have a large impact on TiVo as it loses its main source of subscribers.

Company's looking to add between 65,000 and 75,000 of its own subs in the current quarter, about equal with last year and down significantly from the previous quarter. But it will slash its net loss from the holidays to between $8 million and $10 million, also on par with the same quarter a year ago.

DirecTV dip

DirecTV-owned subs are expected to decline to between 200,000 and 225,000.

Ramsay, who said in January he would soon relinquish his CEO role, said the search for a new topper is still in its early stages. Company isn't planning to replace recently ankled prexy Marty Yudkovitz, who was unable to fulfill his primary task of forging cable partnerships and reportedly clashed with Ramsay.

TiVo shares closed up 4% at $4.34 Thursday on news of the successful round in court with EchoStar before earnings were announced.

[gparris]

Tivo standalone units are not able to give you PCM or Dolby Digital sound much less you record 2 while watching another, a great feature. DirecTivos do with a one-box solution rather than wrangling with more cords from your cable or sat boxes to the standalone Tivo...so they had better get a better product out, soon.

DirecTivos are great units at a reduced rate, unlike the standalones' monthly fees.
Cable DVRs are getting better, witness the 8300HD DVR.  

So either Tivo will build a better, more digital unit standalone, bind with another sat or cable service, or eventually die...which would be sad as its interface is what people buy it for.

[Steve Mann]

As you've probably heard, TiVo's not dead  yet:

http://www.usatoday.com/tech/news/2005-03-14-tivo-usat_x.htm

--
Steve
http://www.soundclick.com/rockermann

[gparris]

Maybe the standalone Tivos won't support Tivo's continued existance, but as I recall Directv isn't giving up on them, either-just a contract that goes until 2007.
Comcast's jump into the DVR front is great as I have installed one for friends of mine in Illinois (see Hookup Horror) and the Motorola boxes are great...Comcast is going to keep these boxes and have Tivo an upscale offer...good for them.
Now all we need is to have the #2 cable provider...TWC...offer Tivo features, too. :cool: