TiVo CEO Tom Rogers, along with CFO David Courtney (who is leaving the company in April) and VP of Finance Stuart West, briefed financial analysts on TiVo’s latest quarter this afternoon. Key highlights from the conference call include the fact that TiVo will be offering a no upfront fee subscription only plan, the elimination of their lifetime service option, more details on their upcoming KidZone service and other features, an update on their new Comcast initiative due out later this year and a new retail initiative with Radio Shack.
The subscription only plan announced today will offer three pricing plans which will include both the box as well as service. $19.95 per month for a one year commitment, $18.95 per month for a two year commitment and $16.95 per month for a three year commitment.
Additionally, subscribers will be able to purchase the same three plans with no monthly fee at $224 for a box and one years worth of service, $369 for a box and two years of service and $469 for a box with three years worth of service.
As mentioned earlier, the lifetime subscription option, a popular option with many diehard TiVo fans, and for someone who planned on owning their TiVo for a long time the most cost effective way to own a TiVo, has been eliminated.
This pricing plan only applies to the current Series 2 models. Rogers said that they were not ready to commit to this pricing model for the upcoming Series 3 HDTV TiVo due out later this year. Pricing on the Series 3 will be announced closer to its launch.
These new service plans will begin next week through TiVo.com and are expected to be rolled out to retail channels later this year. Additionally TiVo announced the addition of Radio Shack to their stable of retailers hawking their box.
TiVo also said that they have felt very little kick back from customers over the recent requirement for new customers to commit to a one year commitment to TiVo service. According to Rogers, with TiVo’s higher monthly fees and one year lock in they have increased the lifetime value of a TiVo customer by over $100.
Richard Baldry from First Albany Corp. asked Rogers about the timing on the rollout for TiVo’s new dual tuner HDTV Series 3 box and Rogers said that the box will not be out until after mid year but said that the box would be available for the “heaviest part of the selling season later this year.” Looks like Dave Zatz wins a lunch bet with Davis Freeberg.
Rogers revisited TiVo’s newly announced KidZone technology on the call as a key differentiator from generic DVRs and as a tool to “counter commoditization.”
Rogers also talked about their upcoming partnership with Comcast and said that it was still on track for roll out later this year. “We are excited by the idea of the generic DVRs the cable companies are rolling out,” said Rogers. Rogers cited their relationship with Comcast as an example of where TiVo service could still thrive even on non TiVo DVRs. Rogers added that TiVo was also in “solid discussion with other cable operators.”
Rogers also discussed his vision for TiVo to continue to serve as a media center for the connected home of the future citing mobile usage and other key strategic partnerships. “The TiVo service is increasingly about being the central point of video distribution in the home to other devices,” said Rogers.
On the subject of advertising on TiVo, Rogers said that TiVo’s previously announced advertising initiatives will be “rolled out in the not too distant future,” and added that Comcast is “quite interested in these features.”
Rogers also addressed the DirecTV subscriber issue and the anticipated slowing of future growth there. Although people keep bringing up the loss of DirecTV over and over and over and over again, personally I do not think that this is as great of an issue as people make it out to be. While admiting that new DirecTV subscribers would most likely be lower this year than last year due to DirecTV more aggressively marketing their own proprietary DVR, Rogers pointed out that they are succeeding as a company in a lot of other areas.
Two things people need to keep in mind with regards to DirecTV are that 1. Comcast revenue will very likely replace lost DirecTV revenue and 2. TiVo makes far more money on their standalone boxes than the pittance that they receive on their DirecTV boxes. The reduction in DirecTV business is perhaps one of the most overhyped stories out there on TiVo today. It was interesting the first time but not the 2nd and 3rd and 4th and 5th and so on and so on and so on.
Personally I think DirecTV (besides hating kids, note how they choose not to adopt TiVo’s new KidZone technology) is very short sighted in thinking that they can produce a better DVR experience than what they pay TiVo for. In fact, worth checking out is the fact that Weaknees (who customizes TiVos with bigger hardrives, etc.) has decided to no longer even sell the DirecTV R15 model PVR because “we have had many, many complaints about these boxes, and many returns. Our customer base is made up of people generally interested in and accustomed to TiVo DVRs, and this machine just falls short.”
In fact, if some of DirecTV’s customers have such bad experiences with DirecTV’s generic PVRs it would not surprise me to see these same people buy Series 3 standalone TiVo’s due out later this year which will be far more profitable to TiVo than DirecTV boxes.
Hopefully this will put the hype on TiVo losing DirecTV subscription growth to rest for once and for all.
Although TiVo has been criticized over the past few years for having negative earnings as a company, Rogers repeatedly emphasized on the call that this past year has been the first year of cash flow positive results for the company. Rogers said that sometimes people focus too much on their negative earnings without bearing their positive cash flow in mind.
Davis Freeberg Update – For the first time ever, TiVo has convienently made a podcast of today’s event available on their investor relations website. Way to go TiVo! This is a much better solution for your investors. Hopefully, we’ll see more companies adopt this format in the future.
Update #2: For more comments on this news you can check out the comments at Slashdot.
Update #3: For a complete transcript of the call you can visit the Consumer Electronics Stock Blog.