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TiVo Still Seeking Cable Payoff

Jeff Baumgartner
11/26/2008

TiVo Inc. (Nasdaq: TIVO) may have some lofty ambitions when it comes to penetrating the cable market, but deals with Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cox Communications Inc. have yet to yield much in the way of revenues for the DVR pioneer.

Although the specific amount of cable-related cash that's coming through TiVo's door remains fuzzy, it's clearly not a whole heck of a lot. "The contribution from Comcast has yet to be felt in a meaningful way," TiVo CFO Anna Brunelle said Tuesday afternoon during the company's third-quarter earnings call.

TiVo and Comcast inked their original deal in March 2005. Cox signed on with TiVo in August 2006.

Granted, cable deployments of TiVo are still few and far between. So far, Comcast is the only MSO to rollout a subset of the service, on Motorola Inc. (NYSE: MOT)-made digital set-tops that are powerful enough to run "OnRamp," a middleware platform that's forward-compatible with tru2way . The combo is starting to show up in Comcast's New England properties, including Boston and parts of Connecticut. Comcast is expected to launch the service in Chicago in the first quarter of next year. (See Comcast Expands TiVo Footprint and Chi-Town Bound?)

TiVo hopes to generate some better results as Comcast markets the service through a range of direct mail, bill inserts, and cross-channel TV spots.

Cox, meanwhile, is testing TiVo in New England. (See Cox Tees Up TiVo Test Bed .) TiVo CEO Tom Rogers said Cox will be offering the service in "non-employee households" in the next couple of months.

TiVo also hopes to get a lift from DirecTV Group Inc. (NYSE: DTV). The satellite TV giant is slated to introduce a version of TiVo on its HD-DVR platform sometime in the second half of 2009. (See DirecTV & TiVo to Play It Again .)

EchoStar bump, holiday weakness
TiVo turned in a profitable third quarter, but only because the figures included a $105 million payment from EchoStar Corp. LLC (Nasdaq: SATS) that's linked to a protracted patent infringement spat. (See Dish vs. TiVo and TiVo Digs DVR Ruling .)

TiVo posted net income of $100.6 million. Without the EchoStar-related items, TiVo would have posted a net loss of $900,000, still besting the company's own predictions of a $7 million to $9 million loss.

Revenues were $64.5 million, down from $75.5 million a year ago.

The company signed on 44,000 "TiVo-owned" subscribers in the quarter, versus 69,000 gross adds a year earlier, giving it a total of 1.7 million in the category. TiVo's cumulative subscriber base finished the third quarter at 3.46 million, down from 4.07 million.

Like many other consumer electronics companies, TiVo is bracing for a weak holiday selling season.

Although retail partners such as Best Buy Co. Inc. (NYSE: BBY) expect sales of consumer electronics gear to decline as much as 15 percent this holiday, Rogers said TiVo is hopeful it will still get a lift from a promotion that ties HD set sales with hi-definition TiVo DVRs.

TiVo has already made some cost-cutting efforts to help it weather the economic storm. That includes a 7 percent workforce reduction that will result in a severance charge of about $1 million.

Rogers pointed out that TiVo has no debt and more than $200 million in cash, which "gives us the runway to know we can play out the many strategic hands we have over the next several months."

— Jeff Baumgartner, Site Editor, Cable Digital News

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