As my readers are probably aware, TiVo used to be the DVR provider for DirecTV. However, after News Corp purchased DirecTV, they announced in late 2005 that they would cease marketing TiVo-based DVRs. Instead, DirecTV switched to using technology from another DVR provider – NDS. Unsurprisingly, as NDS is also owned by News Corp. Effectively, News Corp brought the DVR ‘in-house’. While TiVo and DirecTV extended their relationship into 2010, to continue to support existing subscribers, DirecTV lost the rights to market and sell TiVo-based units.
The new DVRs, the R15 and HR20 (which replaced the R10 and HR10-250, respectively), have met with a mixed response. Most of the reviews have been mixed, at best, and most are negative. It is common to see users comparing the new DVRs poorly to the old TiVo-based models. DirecTV also limited the features on the TiVo-based units – keeping all of the network features disabled. Many people, myself included, believe this was deliberately done to prevent the ‘new’ DVRs from looking all the worse, as they don’t offer similar features. It would’ve looked pretty bad if the new ‘Plus’ DVRs lacked all of the advanced features of the old units. Keeping the feature set of the TiVo units limited kept the bar lower for the new units to clear.
However, a ray of hope appeared late last year. Liberty Media began the process of acquiring DirecTV from News Corp, which continues today and is expected to complete later this year. Why is this hopeful? Well, a few reasons. First of all, Liberty Digital, a division of Liberty Media, is an equity investor in TiVo. Second, Liberty Media doesn’t have a direct interest in the DVR market, as News Corp did. They don’t have an ‘in-house’ technology provider to shift business to. (If anything, TiVo is probably the closest to that as they’ve invested.) And, third, Liberty Media executives are known to look favorably on TiVo and have talked them up, which is encouraging.
This has lead a number of people, myself included, to speculate on a possibly reconciliation between DirecTV and TiVo, once Liberty Media assumes control of the former.
Well, now we have another reason to speculate and be hopeful. While speaking at the Deutsche Bank Media and Telecommunications Conference yesterday, Tom Rogers, TiVo’s CEO, made some interesting comments during the Q&A:
Liberty is a company that has no ownership interests, now or even after the DirecTV closes, in a competing DVR, so that probably changes things. I know the guys at Liberty, I’ve known them for a long time, I think it is fair to say that they’re fans of TiVo and what it does. So, certainly, I look at that as positive in terms of the change of ownership. That deal hasn’t closed and therefore suggesting that there is anything that might follow from it is totally pre-mature. But I’d say in the scheme of things, that’s a positive thing.
It is one thing when bloggers and the press speculate on the possibilities, but it carries a bit more weight when the CEO does it. That usually means discussions are already happening.
From his presentation, 46% of TiVo’s new subs are still from analog cable customers. And TiVo is still the primary DVR for that market. Approximately 50% of new subs opt for a pre-paid plan (I would), and 59% of dual-tuner subs connect via broadband. He focused on the differentiating features TiVo has – like Amazon Unbox, Swivel Search, KidZone, etc.
Rogers also reiterated the August roll-out date for the Comcast software, and that Cox is still planning to do their initial roll-outs by the end of the year. Together, Comcast and Cox cover approximately 50% of US cable households.
He mentioned some interesting details about the Australian deal with Seven Network. Australia has a low cable/satellite penetration of ~30%. Most of the TV households use DVB-T over-the-air, which is the market TiVo is targeting. Broadband also has a high penetration in Australia, which will go well with TiVo’s broadband features.
Rogers also shared some info on Seven. They’re the largest independent broadcaster, with the #1 ratings this season. $800 million in annual TV advertising revenue. They have the exclusive rights to the 2008 Olympics – that could boost sales if TiVo gets the box out before then. They also control major magazine publications (read: advertising), and hold a 50% stake in Yahoo! Australia and a 33% stake in VOIP provider Engin. So expect to see cross-marketing and likely application tie-ins.
Once again DVB-T was highlighted as an international standard. It is a standard in 33 countries and is expected to reach 100 million households by 2009.
From Australia, Rogers jumped to Mexico to discuss the Cablevision Mexico deal. They’re the top cable provider in Mexico City with 500,000 digital subscribers, 51% owned by Televisa – the #1 broadcaster in Latin America. The boxes will be based on the current TiVo platforms – I’d presume the S2DT. It is TiVo’s first Spanish language box, and they’ll be able to leverage that work in other Spanish speaking markets. (As I, and others, have said in the past.)
He covered TiVo’s advertising and broadband offerings, as well as the ongoing EchoStar lawsuit, but didn’t really say anything we haven’t heard before.
They’re forecasting a Q2 adjusted EBITDA loss of $3 million to break-even and a net loss of $5-8 million, and they’re still looking at roughly break-even EBITDA for FY’08.
Rogers reiterated that a lower-cost HD box is coming this year and he expects that to be significant. The high price of the current S3 has limited sales. TiVo will also continue to do less subsidizing of the boxes and more advertising to drive sales.
During the Q&A, Rogers revealed an interesting fact about the Comcast software. Existing recordings are preserved when an existing DVR customer decides to upgrade to TiVo. I know this has been a question in the community. It sounds like existing ‘Season Passes’ are also preserved:
The existing recordings off of an entirely different DVR set of software, we look to preserve as we transfer it to make a TiVo DVR. And that is a really interesting proposition for a lot of people. To not only think they can get a quick download but, in so doing, it doesn’t disrupt any of their passes that they’ve created along the way.
He also said that TiVo has not started development on Scientific Atlanta boxes yet, but as things move to OCAP the transition work the re-use will go up.