TiVo's Show Isn't Ending Yet


By Cliff Edwards Is it time to trade in your TiVo (TIVO)? After all, the digital video recording (DVR) pioneer's already long odds for survival as an independent company appeared to get longer on Jan. 6.

DirecTV, the satellite-TV provider that has been aggressively marketing TiVo DVRs as a differentiator from cable operators, announced at the Consumer Electronics Show in Las Vegas that it would begin selling DVRs from a sister outfit, NDS, later this year. While TiVo's contract with DirecTV runs through early 2007, the competition is sure to slow TiVo's recent explosive subscriber growth.

The move would appear to be the final blow for the creator of digital recording, which allows viewers to record shows to a hard drive so they can watch programs at their leisure. Cable concerns such as Comcast (CMCSA) and Cox Communications (COX) are rolling out their own DVRs that mimic TiVo's basic functions and cost less per month to the consumer -- about $6 per month compared to TiVo's $12.

DIVERSIFYING REVENUE STREAMS. However, TiVo Chief Executive Michael Ramsay hopes to keep his company one step ahead of the competition with a series of deals and initiatives that could give TiVo the shot in the arm it needs. One such move created the biggest buzz on the first day of CES, a three-day electronics confab in Las Vegas. Microsoft (MSFT) Chairman William Gates announced that the software giant is partnering with TiVo to let non-DirecTV TiVo subscribers download shows to Windows Mobile devices, including Pocket PC personal digital assistants and Portable Media Centers -- small hard-drive music and video players like those recently offered by Samsung, Creative (CREAF), and iRiver.

Then Ramsay announced that TiVo will roll out later this year new services, code-named "Tahiti," which would let TiVo users take advantage of broadband connections to do everything from watching movie trailers and other digital content to purchasing tickets and DVDs with the touch of a remote.

For TiVo customers, the new service would offer great gee-whiz features and potentially lead to greater subscriber growth -- even without DirecTV. But Tahiti has bigger implications for TiVo's bottom line. Ramsay aims to take a cut of any sales or downloads that occur. Analysts have said TiVo must diversify its revenue stream and get the majority of its sales from advertising, licensing, and other third-party sales to survive long-term.

A CUT ABOVE? TiVo also announced that by next year it will launch its own high-definition digital cable-ready recorder. This will take advantage of so-called CableCARD technology, which TiVo and other players are rushing to adopt because it would allow them to break the stranglehold cable operators have kept on their equipment.

Consumer-electronics manufacturers, under new federal rules, can build cable set-top boxes directly into their equipment. That frees consumers from buying such boxes, and with new CableCARD technology, consumers could simply move into a new cable territory and ask to have a new access card mailed to them to get digital content. The CableCARD can be plugged into TiVo's new recorder, giving users TiVo's interface and services.

Ramsay believes TiVo's service is a cut above the competition and could prove attractive to cable's 73 million customers. "I wouldn't wait for my cable company to provide it because you may wait a long time," he says. If he's right, TiVo has a more compelling future ahead. Edwards is a correspondent in BusinessWeek's Silicon Valley bureau


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