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. 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.
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.
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.
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.
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.
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.
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.
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.
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.