[opendtv] News: TiVo Shifts to Help Companies It Once Threatened

http://www.nytimes.com/2007/12/10/technology/10tivo.html?th&emc=th

TiVo Shifts to Help Companies It Once Threatened

By MARIA ASPAN
Published: December 10, 2007
TiVo may be getting a second chance by thinking outside the box that made it famous in the first place.
Tom Rogers, the chief executive, said TiVo would still sell DVRs, but move toward being a media company.
As the company that popularized digital video recorders, TiVo turned time-shifted, commercial-skipping television watching into a verb, only to antagonize the television industry and see cheaper, more generic DVRs undercut its success. Now it is trying to climb into the black by working with the media companies it once threatened and moving away from the hardware that it pioneered.
During the last two weeks, there were several promising developments for TiVo, which accounts for about 4 million of the more than 20 million digital video recorders in American homes.
On Nov. 28, the company reported a smaller quarterly loss than anticipated ($8.2 million, down from $11.1 million a year ago) and the next day, the Patent and Trademark Office recognized TiVo's patent on time-warp technology, which lets users record one program while watching another. Shares of TiVo, which started the two-week period at $5.60 on Nov. 26, hit a 52-week high of $8.53 a share on Friday, before closing at $8.20.
TiVo recently announced partnerships with NBC Universal and Carat, a media-buying agency, to provide second-by-second viewership data and demographic ratings information collected from a sample of 20,000 TiVo subscribers. Those deals underscored TiVo's new emphasis on subscriptions and media services rather than hardware.
Tom Rogers, the chief executive of TiVo, said in an interview that its information services would be supplementing, but not replacing, its equipment business.
"We are very much a technology company," he said. "At the same time, in the last year and a half we've substantially moved in the direction of becoming a media company."
That move - and the support from high-profile friends like NBC - is particularly unusual given that TiVo started a full-fledged panic among networks and their advertisers when it introduced the technology that allows viewers to fast-forward past commercials.
Now, TiVo is helping networks and advertisers overcome that technology by offering interactive banner ads that make sponsors' names visible as their ads are being fast-forwarded. And its ability to keep second-by-second ratings on the commercials that, after all, some viewers do still watch, also helps.
"When I got to this company two years ago, TiVo was very much viewed as a pariah within advertising circles, within network circles," Mr. Rogers said, adding that "all the networks" were now in discussions with TiVo to replicate the NBC deal. "We aggressively went out and said, 'We're going to partner with the media industry.'"
The 10-year-old company, based in Alviso, Calif., will also start carrying out contracts with two cable companies, Comcast and Cox. Those deals, signed in 2005 and 2006, will allow cable subscribers to pay a premium and download TiVo software onto their generic DVRs, which will give them access to TiVo's interface without requiring them to buy any more equipment.
"People will bring television into their home in different ways," Mr. Rogers said. "We want to make TiVo available regardless of the actual setup in their home."
According to Tony Wible, an analyst with Citigroup, television networks now "have to embrace DVR advertising, and TiVo is a leader there." He added that "the NBC deal adds a lot of credibility to that business, which I think could be as big or bigger as the current DVR business today." He predicted that TiVo could start to break even in its quarterly earnings within a year. While Mr. Rogers said that TiVo was not looking to challenge the dominance of Nielsen Media Research, TiVo's viewership and demographic information is attractive in comparison, especially since TiVo offers a sample of 20,000 subscribers versus the 3,000 DVR homes that Nielsen tracks. Without requiring the setting up of any additional equipment, TiVo's nascent rating business is low-cost and easily done; analysts said it was a low-risk way for TiVo to supplement its earnings.
"TiVo's business model doesn't depend upon measurement services revenues," said Lee Westerfield, an analyst with BMO Capital Markets. "The risk is really Nielsen's." Mr. Westerfield also called the patent office's decision a major victory for TiVo, one that makes it more attractive to investors. The time-warp patent is at the heart of an infringement lawsuit TiVo filed against EchoStar Communications, the satellite television provider, and the resolution of EchoStar's challenge to the patent may help clear the way for TiVo to take home the $90 million award it won in the case, which had been on appeal.
That $90 million would more than make up its fiscal year losses for 2007. For most of its history, TiVo, which went public in 1999, has lost money.
"They were basically a consumer electronics company with a single product, at the risk of the adoption cycle turning against them, and that's what happened," Mr. Westerfield said. Now, with the increased emphasis on software and advertising data, "TiVo's strategy at the financial level is to license its intellectual property and attract revenue streams" from both media providers and their advertisers.
Other recent developments may also help the company expand its scope. On Nov. 28, TiVo announced a partnership with a German software company, Nero, which would develop a way for the TiVo software to be downloaded to personal computers. And last week it announced partnerships with the online photo-sharing services Photobucket and Picasa Web Albums and the music-and-video network Music Choice.
Those deals, along with older partnerships with Amazon UnBox and RealNetworks' Rhapsody that allow TiVo users to download music and movies directly via their DVRs, increases the ways in which TiVo is also trying to expand its uses beyond just television.
Mr. Rogers said that as the television industry moved to more "á la carte, on-demand," TiVo's strength would be its "ability to deliver huge amounts of content on demand to people's television sets" or to their PCs. 


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