Note that TiVo’s major MSO partners in Europe, Virgin Media and ONO, handle their own advertising sales and thus will not count toward that ten million subscriber target. Nor does it include the “TiVo Design” Insignia Connected TV’s sold by Best Buy, at least not at this time. Maitra did point out, however, that TiVo’s recent deal to bring their platform to Pace hardware does include an advertising component. So that deal may open up new MSO markets for TiVo.

In the meantime TiVo does still sell advertising, of course. It seems it must be somewhat successful for customers as Maitra stated that over 50% of TiVo’s ad buyers are repeat customers. TiVo users are probably familiar with these ads. They may be seen on the screen that pops up at the end of a recording, at the bottom of a program group in the Now Playing List, or on the main ‘TiVo Central’ menu screen. TiVo also has had other ad options, such as static ‘billboard’ ads that overlay a commercial for the same product if the commercial is being fast forwarded. TiVo seems to have a working formula for advertisers, now they just need to bring the numbers up to create a more attractive market.

“We used to hear all kinds of things from advertisers and agencies about pricing,” Maitra said. “I feel that we have gotten it all right except that they just want more homes. Now we have at least satisfied the trajectory and growth requirements. We have priced the advertising for the number of homes that TiVo is in and it’s working, but none wanted to invest in something that they didn’t have confidence would be a growth platform.”

CED also spoke with Thomas McMillin, Chief Operating Office for Suddenlink, one of the MSOs currently distributing TiVo DVRs directly to their customers. McMillin had some good news, and some bad news. First, the good news; Suddenlink serves 1.37 million homes and TiVo is available to customers in 70% of their markets, and it should be in 90% of their markets by year end. But he bad news is they currently have only 20,000 TiVo units deployed, in 10,000 homes. Yes, clearly some homes have multiple units.

Suddenlink is taking a “conversative” approach to marketing TiVo to their customers, positioning it as a premium upgrade from their standard HD DVR. Suddenlink charges a $15 monthly fee for TiVo and requires that customers have broadband with a minimum speed of 10Mbps. All told they have HD DVRs, TiVo included, in 47.7% of their customers’ homes. Doing some back-of-the-envelope math that means 653,490 homes with HD DVRs, 643,490 of which are not TiVo households.

The main reason for the soft sell on TiVo seems to be their existing stock of non-TiVo HD DVRs. They don’t want to be “stuck with” them if they were to more aggressively push TiVo. That does leave a ray of sunshine though. Hardware has a finite usable life, and that stock of non-TiVo HD DVRs will eventually be exhausted and begin to wear out and need replacing. If TiVo can position themselves as that replacement they’d have a slow but steady market by attrition.

Via Consumer Electronics Daily.

But in looking at this page I noticed something else. TiVo has a general page linking to all of their MSO offerings. Now, we know all about RCN, Suddenlink, Grande Communications, and Charter. But there are two other MSO’s listed on the page which I’d previously managed to overlook: Comporium and Northland Communications.

I have to say, finding TiVo on Comporium’s website wasn’t easy, but it is there. They’re a small MSO with service areas in North & South Carolina. It looks like they put out a press release way back on 2/2/11 announcing the TiVo Premiere. They lease each TiVo Premiere for $16.95/month, which is $10 more than their standard HD DVR for the first box, but only $4 more for each additional box. That doesn’t seem like too bad a deal.

Finding TiVo on the Northland site is much easier. They’re another small MSO, but much more spread out according to their “Who We Are” page:

Northland Communications currently owns and operates smaller-market cable systems in Alabama, California, Georgia, Idaho, North Carolina, South Carolina, Texas and Washington. Northland is headquartered in Seattle, Washington and has a divisional office in Statesboro, Georgia.

It looks like Northland is referring customers directly to TiVo for purchases, but they’re also offering leases on TiVo Premiere units for $13.95/month in ‘select sites’.

Comporium is one of the small MSOs serviced via TiVo’s partnership with Evolution Digital, as much as stated in the press release. I’m not positive about Northland, but I expect the same is true there given their size. If you know of other small MSOs offering TiVo to their customers please let us know in a comment. I’m sure these deals can’t be adding many subscribers to TiVo’s totals, but every little bit is a positive. And I think small MSOs offering TiVo is a good thing for the customers too.

AT&T has settled with TiVo, offering payments that will total at least $215 million, and potentially much more, in exchange for a mutual patent licensing deal. TiVo will receive $51 million up front, followed by recurring quarterly payments guaranteed through June 2018, for a total minimum payment of $215 million. In addition to these minimum payments, AT&T will pay recurring per-subscriber monthly license fees should the level of U-Verse subscribers exceed“certain levels”. Just what those levels are wasn’t revealed in the press release, but TiVo apparently expects the total payments to“significantly exceed” the minimums. In this case what’s good for AT&T is good for TiVo – the more subscribers they get, the more TiVo makes.

The Form 8-K TiVo filed with the SEC regarding this settlement reveals more of the details about the payments as well as the patents involved:

Under the Agreement, AT&T has agreed to pay TiVo a minimum amount of $215,000,000 (the “Payment to TiVo”) plus incremental monthly fees per DVR subscriber if the growth of AT&T’s subscriber base exceeds certain pre-determined levels. Based on currently available industry forecasts, TiVo expects that the total fees payable to it by AT&T under the Agreement will significantly exceed the guaranteed minimum Payment to TiVo. The first $51,000,000 of the Payment to TiVo is due on January 3, 2012 and the remaining amount is due to TiVo in equal installments 30 days after the end of each calendar quarter in the amount of $5 million for the first four calendar quarters and approximately $6.5 million in subsequent calendar quarters through the calendar quarter ending June 30, 2018. Any incremental additional per subscriber fees are due to TiVo on the same schedule.

Pursuant to the Agreement, TiVo granted AT&T a limited license under its advanced television patents, including the patents that TiVo had asserted against AT&T (U.S. Patent Nos. 6,233,389, 7,493,015 and 7,529,465), to make, have made, use, sell, offer to sell and import advanced television technology in connection with AT&T multichannel video programming services, including AT&T U-verse, subject to certain limitations and exclusions. AT&T granted TiVo a limited license under its advanced television patents, including the patents that AT&T had asserted against TiVo (U.S. Patent Nos. 5,809,492, 5,922,045, 6,118,976 and 6,983,478), to make, have made, use, sell, offer to sell and import advanced television technology in connection with TiVo products and services, including products and services provided to other multichannel video programming service providers, subject to certain limitations and exclusions.

We may learn more about the terms when TiVo files their Form 10-K after their fiscal year ends on January 31, 2012.

In addition to the settlement payments there is also the indirect benefit to TiVo in reducing their legal costs by no longer needing to pursue the suit. It also eliminates the distraction and allows their legal team to focus their efforts on Verizon. Speaking of Verizon, that’s where all eyes are now as they’re currently the sole remaining target for TiVo’s patent suits. With victories against EchoStar/DISH and now AT&T, it doesn’t seem unreasonable to expect Verizon to taking a serious look at their chances of victory and weighing it against the cost of a settlement. I fully expect TiVo to also be making a reinvigorated push to establish deals with the remaining US cable providers, such as Time Warner Cable, Cablevision, and Bright House Networks.

Taking a look at the top 10 US MVPDs (as of June 2011):

1. Comcast Corporation 22,525,000 – business relationship to allow VOD access to retail TiVo units, now in trials
2. DirecTV 19,433,000 – business relationship with licensing and new THR-22 DirecTiVo just released
3. Dish Network Corporation 14,056,000 – $500 million legal settlement and licensing
4. Time Warner Cable, Inc. 12,235,000 – no known agreement or licensing
5. Cox Communications, Inc. 4,838,000 – business relationship to allow VOD access to retail TiVo units, in development
6. Charter Communications, Inc. 4,413,000 – distributes TiVo directly to customers
7. Verizon Communications, Inc. 3,848,000 – ongoing patent lawsuit
8. AT&T, Inc. 3,407,000 – $215 million legal settlement and licensing
9. Cablevision Systems Corporation 3,284,000 – no known agreement or licensing
10. Bright House Networks LLC 2,139,000 – no known agreement or licensing

In addition, of course, TiVo is being distributed to customers of smaller cable MSOs Suddenlink (#11), RCN (#16), and Grande Communications (not in the top 25). Each victory, licensing deal, or business arrangement strengthens TiVo’s hand at the negotiating table. TWC, like Comcast, is large enough that they develop a lot of their technology and software in house. As such I don’t really expect them to adopt TiVo as their new platform, as Charter has. However, I would not be surprised to see them make a deal with TiVo to support VOD on retail TiVo units, just as Comcast and Cox have, in exchange for staying out of the legal crosshairs.

Verizon is more of a wildcard. They have a rocky track record when it comes to developing and releasing software updates for their FiOS STBs. And they have a small enough user base that outsourcing their software development to TiVo and benefiting from their economies of scale might benefit them. Their architecture is not all that different from Virgin Media in the UK and ONO in Spain. TiVo has already shown they can handle a hybrid cable/IPTV system with those networks, which is what FiOS is. To me that would be the ideal solution, as FiOS joining Team TiVo would increase development funding. And it is likely that they’d push the addition of features to match what they’ve implemented in house, which would benefit everyone. But they may also simply negotiate a licensing settlement like AT&T’s.

AT&T is pure IPTV and they’re using Microsoft software end-to-end. It was pretty much an impossibility that they’d adopt TiVo’s software for their STBs given the infrastructure they’re using. The licensing settlement is really the best result we could hope for in this case. Cablevision and Bright House could easily adopt TiVo as their next-generation STB platform. They’re smaller than Charter, who already has, and Suddenlink, also a TiVo user, is more than half as large as Bright House.

Oh, there is another reason I think TiVo will move more aggressively to establish deals with more MSOs on the back of this settlement: Google. More specifically Google’s pending acquisition of Motorola, the largest STB vendor for cable systems in the US, and Google TV. Back in August when I looked at the announcement, and specifically at the implications for TiVo, and then more recently in November, I stated that I full expect Google to bring the Google TV platform to Motorola STBs as a standard option.

More and more MSOs are looking at OTT (over-the-top) content to increase their competitiveness, which is a prime reason MSOs have turned to TiVo, and Google TV’s Android platform and apps would be a huge boon. Google has Sage TV to provide DVR technology and placeshifting, which also allows them to compete with EchoStar’s SlingLoaded offerings. They could build the streaming client into every Android phone and tablet sold, as well as Google+, that’s a very big stick – or carrot, depending on how you look at it. If Google’s acquisition of Motorola goes through, they will do this. I’m certain of it; it just makes too much sense.

But it will all take time, most likely a few years. The acquisition itself will take time. And then the work to port Google TV to Motorola HW and/or developing new HW to better support Google TV/Android needs to be done. Then they need to land MSO clients for the new HW/SW bundle, and get it deployed. It all takes time. And that time gives TiVo a window to expand their beachhead in the industry. Once an MSO has a significant deployment of TiVo HW and/or SW in the field they’re much less likely to walk away from that investment and adopt another platform.

I expect TiVo to redouble their efforts on the back of this victory. They may even have some deals in their back pocket to announce at CES this month. But for now they can celebrate one victory in an ongoing war.

• DirecTV will finally release the new THR22 DirecTiVo in “early December”.
• Charter will be launching retail “very soon”.
• Comcast OnDemand support is in field trials now.

I think the DirecTiVo news is the most anticipated, so in TiVo’s own words:

Additionally, DirecTV has informed us that they intend to initiate the launch of the TiVo-DIRECTV product in select markets in December with a nationwide rollout to follow early next year.

Still, don’t set your expectations too high. We know the new DirecTiVo is based on the old HR22 DVR and it will lack a number of features found in the current DirecTV DVRs. DirecTV really doesn’t seem to want to release it, but they’re obligated to do so. They’re clearly focused on their in-house units with their five-tuner DVR, new HD UI, and whole-home support.

In other news, TiVo has had their first increase in total subscriptions in four years – adding 117,000 subscribers compared to a 33,000 loss last quarter. This is mainly thanks to Virgin Media’s runaway success, but also growth from RCN & Suddenlink. With ONO, Grande Communications, and Charter coming online, and the new DirecTiVo finally shipping, the MSO subscribers will become even more significant going forward. And TiVo indicated further MSO deals are pending, with TiVo having responded to several Request for Proposals.

Conversely, the retail side continues to slide. They added 30,000 new subscribers, but lost 60,000 old ones – for a 30k net loss. MSOs actually added 147,000 – the lower 117,000 net add is due to this loss. The good news is the new subscribers are worth more to TiVo as the higher monthly fees increase revenue per customer. If & when Comcast launches VOD support on TiVo and provides some marketing and free installations, as promised, it may help the retail numbers. But it seems clear the MSO side of the house is going to be the real growth engine.

Oh, there was one other interesting point. Rogers mentioned that most of TiVo’s development now serves both MSO & retail. They’re building a common code base for all platforms, MSO and retail, to better leverage their R&D spending. In the past the two sides operated pretty much independently. Remember the soft-TiVo product for Comcast & Cox was a completely new Java code base. While retail boxes remained on the conventional development path. Now MSO & retail units will be running common, if not identical, software and hardware will also be shared.

We’re already seeing that with the TiVo Premiere Q for MSOs and TiVo Premiere Elite for retail. It is basically the same box with a different hard drive capacity. And the 14.x software used by MSOs, such as RCN, and the retail units is from a common base. This means that any feature TiVo develops can be released to retail and offered to their MSO partners simultaneously – contractual issues permitting of course. (See Netflix being unavailable on MSO units.) It is also makes things more efficient, you don’t need two development teams both implementing the same thing on different platforms. Even the software for Virgin Media and ONO, which runs on third party hardware, appears to be from the common code base.

One thing I was hoping to hear, but didn’t, was news on the TiVo Preview coming to retail. I really want this and it is annoying that it is available to MSOs but not retail. It is the perfect companion to the TiVo Premiere Elite.

Overall though, I thought it was a pretty good quarter.

Via Multichannel News.

But, IMHO, the real big news came at the 08:01 mark when Tom said:“Our deal with DirecTV is moving toward launch with the DirecTV TiVo HD DVR now being manufactured. And we expect DirecTV to publicly share specific launch details in the relatively near future.” I know we’ve had numerous release date promises in the past, but DirecTV isn’t going to begin manufacturing hardware if they don’t have pretty damn solid plans to release it. Perhaps the new HD DVR DirecTV obliquely referred to on their recent financial call really was the new DirecTiVo after all.

Later in the call, during the Q&A session at the 42:26 mark Rogers talks a bit about the agreement with DirecTV including the“significant marketing obligations” DirecTV has once the new unit launches. He added that DirecTV will“have plenty of incentive to market based on those obligations.”

And finally, at the 46:42 mark he is asked about the 08:01 statement regarding the new DirecTiVo being in manufacturing, specifically if that means the code had been accepted. In response Rogers stated:“…the boxes are in the manufacturing process with our code having been delivered…” So it sounds like things really are, finally, moving forward to release and based on the statements on the call I think we’ll see the units released this year.

I’m not going to place a bet on it though. Not just yet.

As for the financial results in general, TiVo’s MSO business is starting to show positive results.

                                TIVO INC.
                               OTHER DATA

                                                      Three Months Ended
Subscriptions                                              July 31,
                                                     --------------------
            (Subscriptions in thousands)                2011       2010
                                                     ---------  ---------
TiVo-Owned Subscription Gross Additions:                    25         32        

        Subscription Net Additions/(Losses):
TiVo-Owned                                                 (43)       (48)
MSOs/Broadcasters                                           10        (77)
                                                     ---------  ---------
  Total Subscription Net Additions/(Losses)                (33)      (125)
Cumulative Subscriptions:
TiVo-Owned                                               1,165      1,366
MSOs/Broadcasters                                          763      1,018
                                                     ---------  ---------
  Total Cumulative Subscriptions                         1,928      2,384
% of TiVo-Owned Cumulative Subscriptions paying
 recurring fees                                             57%        56%

So while they continue to bleed TiVo-owned subs, losing a net 43,000 this quarter – which was down from a loss of 48,000 a year earlier, the MSO subs grew by a net 10,000. That’s an improvement of 87,000 from the loss of 77,000 subs a year earlier. I’m sure a lot of that reversal is due to Virgin Media alone adding over 50,000 subscribers, with the rest contributed by RCN, Suddenlink, & TiVo in ANZ and likely reduced losses from DirecTV. Also a positive, the average revenue per MSO subscriber increased from $1.20 a year ago to $1.94. Clearly the new subscribers are worth more to TiVo.

Update: While I was writing up this post, Dave Zatz also posted at Zatz Not Funny. The biggest piece of evidence is this new DirecTV training video which DBSTalk members noticed, and that Engadget obtained and posted:

Unfortunately the video confirms some of the earlier rumored information. It does look like the hardware is similar to the old HR-22 DirecTV DVR. The video confirms that the units do not support multi-room viewing. They do support networking and other DirecTV network-based features, so whole home support could theoretically be added via a software update. And the UI appears to be the old SD UI, as first reported a couple of years back. There had been some hope that all of the delays meant the unit had been updated. On the other hand, the new box appears to come with the same remote as the TiVo Premiere.

Furthermore, Zatz Not Funny received an anonymous comment claiming the new units will be delivered on 9/25/11. Though perhaps there is another model in the pipeliine, as rumored at DBSTalk.

Kingwood, TX residents, or (potential) Suddenlink customers in general, should see suddenlink.com/tivo for more info.

• Comcast: Checking their website it doesn’t look like anything has changed since last week. There are still FAQs saying that you need a professional install, but CED Magazine is reporting that they’re allowing self-installs now:
  

  “Certain markets have had limited self-install options for CableCards since about 2007,” said Comcast spokeswoman Jenni Moyer. “Beginning in early August, we’ll start rolling out a CableCard self-install program across our footprint where customers will be able to go into our sales, service or payment centers and pick up a CableCard self-install kit, go home, install it, and then call in to activate it.”

  Comcast doesn’t ship the CableCard self-install kits to customers.

• Time Warner Cable: As expected, TWC has started allowing CableCARD self-installs. They’ve even created help guides for InfiniTV, Moxi, and TiVo.
• Cox Communications: They were already allowing CableCARD self-installs before the mandate. They have an instruction sheet online.
• Charter Communications: Their website gives mixed signals. The FAQ still says professional installation, but they have a self-install page. I think they just missed updating the page:
  

  Due to the technical complexity associated with the pairing of the devices, all installations of a CableCARD MUST be completed by a Charter Technician. Self-installation of CableCARDs is NOT an option for customers and thus customers cannot pick up a CableCARD from a local office

• Verizon FiOS: As with Cox, they were already offering CableCARD self-installs. You can order your CableCARD online.
• Cablevision: They’ve also been offering CableCARD self-installs. The information is on their site.
• Bright House Networks: They allow self-installs for Road Runner broadband, which means they should be allowing CableCARD self-installs as of August 8th. But I can’t find info on self-installs on their site, and there is a page that still says they’ll be allowed soon:
  

  CableCARDs are professionally installed by Bright House Networks. The option to install a CableCARD yourself will be available in the near future.

  If anyone knows of information on their site indicating CableCARD self-installs, leave a comment.

• Suddenlink Communications: According to their CableCARD FAQ they are allowing self-installs.
• Mediacom Communications: I couldn’t find a good reference on their website, but a post on their support forum by one of their reps on Saturday indicates they are allowing users to pick up CableCARDs and do self-installs:
  

  You can pick-up or have a tech install a cable card for you for a minor fee. This would be $1.99 per month for each card.

• Insight Communications: I couldn’t find anything useful on their site. Searching their site for ‘CableCARD’ only returns four hits. It looks like they offer broadband self-installs, so they should be covered by the August 8th mandate. If you have more info, let us know in a comment.
• CableOne: Same as Insight, nothing clear from their site. It seems like they offer broadband and cable box self-installs, so they should also be covered under the August 8th mandate. Leave a comment if you have any info, thanks.
• WideOpenWest Networks: Their website still says they require a technician to install CableCARD, it is under the ‘Equipment’ section of the FAQ.
  

  Can I install a CableCARD by myself?

  No. To ensure that your installation is performed properly, a technician is required to install and activate your CableCARD. Please contact us to set up an installation appointment.

  They do seem to allow cable modem self-installs, so they should be under the mandate.

• RCN: I couldn’t find a good page on their site, but I did find a forum post on DSLReports dated July 28th, by Jason Nealis, RCN’s Sr. Director, Video Product and Video Operations:
  

  The way this will work is that a customer can receive a kit via mail or they can pick one up at a local office.

  In the Kit it will have instructions on whom to call, basically you will install the card and then go thru a IVR and have the work order closed and a hit sent to the card.

  Then you will have to call in with your pairing information and have the card paired to receive encrypted channels.

OK, I think that’s deep enough. These smaller provider’s tend to have sites that aren’t as useful when it comes to finding info, and those I’ve listed already cover the vast majority of cable customers in the US.

If you have any additional info, please leave a comment.

EDIT 8/11: Matthew Zinn, Senior Vice President of General Counsel for TiVo, today made a blog post about the new CableCARD rules which included a few useful links:

In the meantime, for additional information regarding CableCARDs and consumers’ rights visit www.fcc.gov/guides/cablecard-know-your-rights or www.fcc.gov/guides/digital-cable-compatibility-cablecards-plug-and-play.

If you have questions as to whether your cable operator is complying with the CableCARD rules, you can email the FCC at CableCARDEnf@fcc.gov or call (202) 418-1160. To file a complaint, visit www.fcc.gov/complaints.

If your cable provider isn’t following the new rules, report them to the FCC.