After more than 19 years as an independent company, TiVo has now officially been acquired by Rovi in a deal worth $1.1 billion. With the deal closing today, the new company will move forward under the leadership of Rovi's CEO Tom Carson, but will take the TiVo name. The new entity has annual revenue of roughly $800 million, up from Rovi's prior annual revenue of approximately $500 million.
There are many ways in which the Rovi/TiVo merger strengthens the product portfolios of each individual business. However, the acquisition doesn't change TiVo's continuing struggle in the set-top hardware market. While TiVo started out as a retail hardware company, it has had to diversify over the years as hardware profits have plunged.
Rovi CFO Peter Halt acknowledged the struggle recently at the Cowen and Company Annual Technology, Media and Telecom Conference and raised the issue of whether it might be time to exit the hardware business altogether. (See TiVo May Exit Retail Hardware Business.)
Carson echoes that sentiment, noting that the consumer retail market is still very appealing to the new TiVo Inc. (Nasdaq: TIVO) company, but that it will have to evaluate whether that includes hardware sales in the future.
"TiVo just doesn't ship a lot of hardware at this point," says Carson, "and when you're in a situation where you're a very small player and a hardware product doesn't give you the cost economies that you would like, I think there's a question more for us longer term ... of is there a more efficient way to work with hardware providers to get more and more of our software technology on those devices as opposed to just trying to limit to uniquely our own products.
"No decisions have been made on any of that," Carson adds, "but I think that's the thought process we're going to have to go through in the coming months."
Carson also references some specific companies that TiVo could consider partnering with in the future that he describes as being more "attuned to the hardware business;" companies like Arris Group Inc. (Nasdaq: ARRS) and Technicolor (Euronext Paris: TCH; NYSE: TCH). Those two names are notable because they are both major suppliers to the service provider market, but not to the retail market as far as set-tops are concerned.
Carson is not definitive about retail hardware being in either Arris's or Techicolor's plans, but he notes that, "As you think about some of the FCC's interest in opening up the video platforms, you may see those hardware vendors who already have the TiVo platform integrated because they're selling the boxes that are going into the operators today ... that their desire to be able to address that consumer opportunity [becomes apparent]." (Editor's note: Does Carson know something we don't?)
Carson also adds, "But the flip side to that is whether the operators will really open up their networks to the Amazons, Apples, Google of the world, and even there, there is an integration point that already is in place. TiVo today, you can use a Fire TV stick as an end point for the TiVo platform ... so some of those integration points are happening."
Related to the retail sales topic, digital media blogger Dave Zatz reported just this week that a new TiVo product has passed through the Federal Communications Commission (FCC) filing system. Known as Mantis, the new hardware offers network DVR capabilities and is designed to take in over-the-air TV content and transcode it for distribution across other IP-connected devices.
Carson isn't willing to comment on that news specifically other than to say that TiVo hardware development continues for now, but the company will evaluate its options for the future.
On the service provider side of the business, the opportunities for new TiVo are more clear-cut. Carson talks about Rovi's traditional end-to-end guide business and says while his company is still offering a complete solution there, it is also dividing that business into some discrete products. These include conversational services (i.e. Rovi's natural language interface platform), metadata, search and recommendation technology, and the TV guide itself.
Separately, TiVo is also heavily invested in analytics and advertising, and both of these areas grow stronger with the merging of Rovi and TiVo operations. (See What's Next for Rovi & TiVo?.)
Overall in the service provider space, there is great opportunity for the new TiVo to continue to build its customer base among small and midsized operators and to expand its footprint internationally. Even among larger service providers, Carson sees continued opportunity to sell individual pieces of its end-to-end software solution.
"I think people will see us as a company that if they're doing anything in content discovery that they need to come talk to us," says Carson.
As of today, TiVo provides guide solutions to more than 25 million households, serves more than 500 pay-TV operators and is present in more than 70 countries.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading