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DailyFinance  Mar 13  Comment 
AMSTERDAM, THE NETHERLANDS -- (Marketwired) -- 03/13/14 -- TiVo Inc. (NASDAQ: TIVO), a global leader in the advanced television entertainment market, today announced that TiVo has surpassed 2.5 million subscribers across Europe as consumers...
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DailyFinance  Mar 3  Comment 
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SeekingAlpha  Mar 3  Comment 
By Stone Fox Capital: Once in a while an interesting stock comes across our desk that is making a turnaround, yet the market doesn't appear to appreciate the new dynamics. In this case, TiVo (TIVO) once led the digital video recorder (DVR)...




 

TiVo, Inc. (NASDAQ: TIVO) is the creator and leader of television services for digital video recorders (DVRs). In addition to hardware revenues, TiVo diversifies its revenue streams through agreements to provide its TiVo service to advertisers and television service providers such as Comcast and DirecTV[1]. Through a subscription-based service, it provides consumers with a way to record, watch, and control live television. In fiscal year 2010, TiVo recorded revenues of $219.6 million and net loss of $84.5 million. Often criticized within the industry for allowing users to fast-forward through advertisements, TiVo announced that it is seeking to sync its TV digital recording service with the contents of TV online free media provider Hulu.com, which contains advertisements that cannot be skipped[2].

Company Overview

Headquartered in Alviso, California, Tivo launched its first trials of the TiVo device and service in late 1998. Today, Tivo's primary product is the marketing and subscription services for its Tivo branded digital video recorder.

Business Segments

In fiscal year 2010, TiVo recorded revenues of $219.6 million and net loss of $84.5 million. TiVo's business is divided into the Service, Technology, and Hardware segments.

Service (62% of revenue in 4Q11)

TiVo generates service revenues from recurring and prepaid subscription fees for providing the TiVo service to consumers and through the sale of advertising and audience research measurement servicesallowing advertisers to evaluate consumer demand and advertising campaign effectiveness. TiVo's technology allows for more targeted advertising because the company is able to collect data reflective of each DVR owner's television tastes.

Service revenues have been decreased due to several reasons. DirecTV decided not to offer new TiVo service subscriptions to its customers until the launch of its new High Definition platform, shrinking TiVo's cumulative subscription base. Additionally, DirecTV overestimated its subscriptions, so TiVo had to recognize a $1.8 million revenue reduction adjustment to account for this.

Technology (12% of revenue in 4Q11)

TiVo generates technology revenues through licensing and engineering service agreements with strategic partners such as Comcast, DirecTV, and Seven/Hybrid TV.

Hardware (26% of revenue in 4Q11)

The recent decline in hardware revenues can be attributed to a decline in the number of TiVo boxes sold as consumers, weathering the economic downturn, cut back on discretionary spending[3].

Trends and Forces

Strategic Partnerships, New Markets, and Revenue Stream Diversification

TiVo has used its platform to change how consumers use their televisions, and how the entertainment industry researches consumer behavior. Specifically, TiVo and Amazon.com have partnered to allow TiVo subcribers to purchase items from Amazon.com directly on their television using their TiVo remote. TiVo has also used its service as platform for collecting data on television viewing habits and advertising strategies. TiVo licenses this data to advertisers and major networks who use it to study and develop advertising and programming strategies. If the DVR market continues to grow the data TiVo has access to could be very valuable for advertisers as they develop new ways to reach DVR users.

  • Cable and Satellite TV Providers: TiVo provides several subscription packages through DirecTV, Comcast, and Cox Cable that do not require TiVo's proprietary hardware but whose software is compatible with third party DVRs. These partnerships give TiVo access to the majority of the U.S. cable subscribers[4].
  • Amazon Video on Demand: In September 2006, Amazon launched its on-demand service known as "Amazon Unbox", rebranded as "Amazon Video on Demand" in 2008, that allows customers to download films, television shows and other video entertainment. TiVo and Amazon partnered to begin providing this service to TiVo subscribers, allowing customers to rent movies directly to their TV using their TiVo remote[5].
  • Market Research & Advertising: TiVo partnered with Nielsen Media Research to provide research on consumer television viewing habits. Nielsen launched a monthly television rating service using data from 5,000-10,000 TiVo households. TiVo has also formed partnerships with major television networks, including NBC and CBS, to research television viewing habits and advertising strategies.[6].
  • Movie Rentals: TiVo has partnerships with entertainment providers like Brightcove, an internet video pioneer, and Netflix, a mail-based DVD rental company. These partnerships have allowed subscribers to view movies through their TiVo service.[7]

The DVR Effect Allows TiVo to Revolutionize Digital Advertising

Perhaps the most significant change that DVRs bring to television is how advertisements are placed and viewed. The ability to fast-forward through a recorded program allows DVR users to skip through advertisements entirely. As such, TiVo's advertisements are built directly into the TiVo interface as banner ads rather than commercials displayed during a program. TiVo can also use its software to suggest programs to viewers, and to promote content for companies that advertise through TiVo. For example, movie studios pay TiVo to distribute movie previews to their subscribers[8].

Patents Tied to DVR Technology Pose Legal Challenges to TiVo

The protection of intellectual property rights is a serious business conce
rn for TiVo, as many patents covering interactive television technologies have been issued to other parties but not yet commercialized.

In 2001, TiVo received patents for its DVR hardware and software and for its core DVR functions and home networking capabilities. In 2004 TiVo sued EchoStar, a leading satellite television provider and owner of DISH network, claiming EchoStar had infringed on these patents. EchoStar was found guilty of patent infringement in April 2006. Additionally, on June 3, 2009, EchoStar was found guilty of infringing upon TiVo's patent and ordered to pay TiVo $103 million in addition to the $105 million Echostar paid in August 2008.[9]

Competition

TiVo competes with companies from four different industries: satellite and cable DVR providers, consumer electronics providers, data licensing companies and audience research companies. Interestingly, many of TiVo's competitors are also partners. For instance, TiVo competes with Neilsen in the audience research space but the two companies also have a partnership under which Nielsen uses TiVo's audience research in its television rankings[6].

  • Satellite and Cable DVR Providers: TiVo competes with major cable and satellite providers who are now offering DVR services to their subscribers. Satellite companies Echostar and DirecTV both offer standard- and high-definition DVR services to their clients, although DirecTV also offers the TiVo interface and software.
  • Consumer Electronics Providers: TiVo competes with companies that provide standard- and high-definition DVR systems such as Motorola, Time Warner Cable, and Cisco Systems. TiVo also competes with companies like Dell and Hewlett-Packard that produce personal computers with DVR software. Due to the increasing consumer demand for DVR service more companies are expected to begin incorporating DVR technology into their products.
  • Licensing: TiVo earns some of its revenue through licensing fees paid by companies that use TiVo's technology. TiVo competes for these revenues against makers of similar digital video recording hardware and software producers, including Gemstar, Microsoft, and Digeo.

References

  1. "TiVo Seeks to Link Hulu Web TV with Digital Recording Service" MercuryNews.com,10/09/2009
  2. "Top 25 MSOs", National Cable & Telecommunications Association, retrieved September 21, 2008.
  3. "Tivo, Amazon unveil download deal", www.macworld.com, February 7, 2007
  4. 6.0 6.1 "TIVO INC. - COMPANY PROFILE", DATAMONITOR Independent Research,[1], August 7, 2008
  5. "TIVO INC", Kaufman Brothers Equity Research, June 24, 2008
  6. TIVO's Stock Gains in Fast Forward. The Razor's Edge (June 3, 2009).
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