TiVo May Offer DVR Features for ‘Tier One’ Cable User Interfaces

TiVo has landed pacts with smaller operators including Atlantic Broadband, RCN, Ono, Suddenlink and Virgin Media, but it hasn’t gained traction in tier one U.S. cable systems, and control of the user interface, Rogers said. “There are large operators who have a particular interest in control of the user interface and we are certainly in a position that we could offer the TiVo service elements that are highly valued to a larger operator’s interface,” Rogers said. “The integrated solution is one of the most sought-after to date. But as to the views of how this is going to evolve and the importance of what we offer,” the potential for adding TiVo features to a cable operator’s user interface “exists for us,” Rogers said.

TiVo has agreements with Comcast, under which the cable operator is selling a stand-alone TiVo DVR integrated with Xfinity on Demand in eight markets (CED Feb 28 p6). And Charter Communications is continuing discussions with TiVo on possibly including its software as a cloud-based service’s interface option, Charter officials have said (CED Oct 11 p10). Among the features that TiVo could integrate into a user interface would be metadata, personalization that allows for the grouping of programs by individual interests, search and recommendation engines, Rogers said. TiVo also could add audience measurement and “certain” advertising capabilities, TiVo Chief Financial Officer Naveen Chopra said. TiVo demonstrated a combo QAM/IP and IPTV DVR at the IBC conference in September as part of its cloud-based effort, company officials said. It has moved search and recommendation to a cloud-based strategy, Rogers said.

"I think there are going to be a very small number of tier one cable operators that can make very substantial investments that will carry them through with enough innovation for some period of time,” with internal R&D as their “primary path,” Rogers said. “I see that as being a very limited group and that mindset will be under constant challenges. People who really specialize in this effort can innovate faster than others in the marketplace and provide to other operators a superior service."

TiVo also is moving to have Netflix built into cable set-tops equipped with its software. Virgin Media added Netflix to its TiVo DVRs in the U.K. in September and Scandinavian cable operator Com Hem will add Netflix in December, Rogers said. TiVo’s software is deployed systemwide in Com Hem’s IP-based network, he said. Netflix in the past has had restrictions in its agreements with movie studios that prevent it from being distributed through cable set-tops in the U.S., but had no such barriers in international markets, Rogers said. While U.S. cable operators have had a “mixed view” of Netflix in the past, “we're hearing they want to include it in their distribution,” Rogers said. “To the extent those restrictions get worked out, we'll be in a position to help out partners implement on that front,” Rogers said. Netflix spokesman Joris Evers in an email declined “specific comment” on the Rogers remarks.

Intel’s reported efforts to sell its proposed OnCue broadband service for $500 million could boost TiVo since the “implied valuation for what we have would be vastly beyond where we are today,” Rogers said. Intel had planned to launch OnCue in September, but postponed its debut to 2014. “I think the key thing about Intel closing down its pursuit is that it was attempting to provide a full service of linear and over-the-top content using the broadband pipe of the cable operator in direct competition with the cable operator,” Rogers said. “We have the ability to be more successful working with the cable operators than trying to work around them as Intel was attempting to do.” Intel spokesman Chuck Mulloy acknowledged there has been “widespread speculation concerning our plans” for OnCue. “However, as is our normal practice, we will not discuss or otherwise comment on speculation,” Mulloy told us by email.

TiVo’s Q3 net income plummeted to $12.4 million from $59 million a year earlier, when it recorded a payment from Verizon as part of a settlement of a patent infringement suit. Total Q3 revenue rose to $117.2 million from $82 million as the company added a net 274,000 subscribers. Its loss of 21,000 TiVo stand-alone subscribers was offset by a gain of 295,000 from cable operators, the company said. It ended Q3 with 2.93 million cable subscribers, up from 1.89 million a year ago. It had 960,000 stand-alone TiVo customers, down from 1.04 million a year ago. TiVo’s monthly average revenue per user (ARPU) for cable customers declined to $1.03 from $1.45 a year earlier, while ARPU from stand-alone subscribers slipped to $8.55 from $8.73, the company said. Per subscriber acquisition costs fell to $160 from $171, the company said. Monthly churn rose to 1.8 percent from 1.4 percent a year ago, largely from the loss of 12,000 subscribers who were part of a corporate agreement with Healthcast, which used standard definition TiVo DVRs, it said.

TiVo service revenue dropped to $33.5 million from $35.2 million a year ago, while technology sales rose to $48.1 million from $25.7 million, the company said. Hardware sales improved to $35.5 million from $21 million, the company said. TiVo suffered a “weak quarter” in its advertising and research business compared with Q2, Chopra said.