My Thoughts on the TiVo Conference Call Today

TiVo Third Quarter Subscription Growth Doubles; Expects Continued Growth Momentum This Holiday Season TiVo was out with their earnings after the close today. Analysts had expected TiVo to lose about 44 cents a share for the quarter ending October 31st and they only lost 33 cents a share. A year ago they were losing 11 cents a share.

In the earnings conference call after the announcement TiVo CEO Mike Ramsey was asked to discuss TiVo’s prioritization and timeline on a number initiatives. When asked to prioritize their upcoming initiatives Ramsey responded in the following order.

1. TiVo seems to be placing a great hope in the future of the TiVo/DVD recorder combo. Personally I think that this hope is misplaced. Although it’s a nice feature, ultimately with a 4.7 gig maximum storage space on a DVD you’re limited. I don’t think people really care about this and I think the longer-term sales numbers will be disappointing. Of course TiVo had to mention this as it is important to a number of their hardware partners.

2. A more interesting area is the whole concept of TiVo to Go. TiVo to Go will allow users to get content off of their TiVo boxes (although I’d imagine not off of the HDTV DirecTV unit) and transfer the file to a PC or a laptop for remote viewing. The exciting thing that came out of the conference call was that CEO Mike Ramsey said to expect this before the end of this year. Yikes! That’ s coming up quick. I’m looking forward to seeing this roll out.

3. My personal favorite – the standalone HDTV TiVo DVR. In Ramsey’s words, they have seen “huge” demand for the DirecTV HDTV unit currently on market. This demand is causing TiVo to reconsider coming to market with a standalone HDTV DVR. Not exactly an announcement but it’s nice to know that they are thinking about this.

4. Broadband content delivery. Ramsey said that the NetFlix deal is real and not just a general agreement or hype. He said to expect a rollout of this deal within the next 12 months and sees this as the starting point of a longer initiative of delivering content via broadband. TiVo envisions a living room that has content inputs from both broadband and broadcasts and wants to own the machine in the living room (as does Microsoft of course).

5. Although not as pressing of a priority right now, the last priority mentioned was continued development of the CableCARD.

Some other observations that came out of the call. TiVo has doubled their retail distribution in the last year primarily by introducing their products in Target and Costco, which provide huge distribution.

80% of TiVo owners have a broadband connection in the house. Although TiVo is not presently using this connection it can be activated with a simple software update by TiVo at any time. There are currently 2 million TiVo boxes out there that have broadband capability.

TiVo does receive ad revenue from their stand alone units as well as a share of ad revenue from the DirecTV units (although it does not appear meaningful at present).

As would be expected, this upcoming Holiday Season will be their top quarter and they have high hopes. They expect to add 575,000 to 700,000 subscribers in this upcoming quarter. 375,000 to 425,000 from DirecTV and another 200,000 to 275,000 from standalone TiVos.

Nobody asked any really hard questions or pressed TiVo much on the banner ads in the fast forward button. But then again it’s really only selected analysts that get approved to ask the questions on these calls and they were pitched some fairly easy balls by their analyst friends today.

Davenetics take.

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  1. Anonymous says:

    TiVo is betting on the wrong horse. DVD recorder combos have nowhere near the real-world appeal of, say a cable card stand-alone (how many cable subscribers in the US right now compared to satellite, like 10 to one??) or a HD stand-alone.

    They are simply hyping what they already have to market rather than looking to where the demand is actually going to be.

  2. Anonymous says:

    Actually, DVD Recorders are one of the hottest segments of the consumer electronics market and all forecasts are for dramatic increases over the next several years. VCR sales are *dead* – did you see the announcement today that Dixons, one of the largest electronics retailers in the UK, is pulling VCRs off their shelves for good? In the US Wal-Mart has dropped VCR stock to a couple of units, moving to ditch them. DVD player sales are actually on the decline now, having peaked over a year back. What are people buying? DVD Recorders. The pricing has come down far enough that people are replacing their VCRs. You can’t think like a geek and presume everyone will be buring DVDs on a PC – the bulk of the population wants something as simple a a VCR.

    Right now DVR/DVD Recorder combos are *hot*, and the market is growing like crazy. That’s why TiVo is excited about it. If they can keep pushing the retail price of the units down they should be able to ride that wave to a good share of the market.

    While CableCARD is nice, and I’ve love it, right now the market is nascent. It is too small to measure, and there are still kinks being worked out. It is unlikely that the CableCARD market will be substantial until well into 2005, so TiVo should be in a good position if they bring something to market next year.

    Not that the drive used in the newer DVD-RW TiVos is a Pioneer DVD-108, which supports dual layer DVD+R writing, for 8.5GB. Pioneer also says it will be flashable for dual layer DVD-R writing, when that is finalized. Now, the TiVo software doesn’t support dual layer at this time – or the 16x speeds the drive can support – but it leaves the door open to software upgrades. The drives *can* be flashed by a software upgrade too. So if dual layer burning gets popular, and blanks become affordable, the window is there to be opened.


  3. raianoat says:

    I really think that TiVoToGo is going to be a big hit for TiVo. I know that I can’t wait for it and many of the people that visit my site are in the same boat. TiVoToGo seems like a really attractive feature for anybody on the go. Now you’ll be able to watch your favorite shows while in the airport or on a plane :).