DirecTV to Ship Combo Satellite Receiver/TiVo DVR in December
DirecTV will ship a combo satellite receiver/TiVo DVR in select markets in early December, more than two years behind the original target, TiVo officials said in a conference call. The satellite service will expand from select markets to regional distribution on the way to a national launch in early 2012, TiVo CEO Thomas Rogers said. DirecTV has a “substantial obligation” to promote the TiVo service and will absorb the marketing and hardware costs, Rogers said. DirecTV will likely initially focus on marketing the combo device to existing TiVo subscribers and those who have dropped the service. A DirecTV spokesman didn’t comment on product and marketing plans.
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TiVo will be paid a “substantial additional monthly per sub fee” by DirecTV above what it previously received, which was typically around $1. DirecTV was an early TiVo supporter, but parted with the company in 2005 when it shifted development effort to then-affiliate NDS’ platform. It signed a new seven-year agreement with TiVo in 2008, and initially was expected to field product the following spring (CED Dec 10/08 p1). The pact options extend it until 2018. TiVo had 910,000 MSO subscribers as of Oct. 31, but how many of those are DirecTV customers isn’t clear. Virgin Media has added 222,000 subscribers to the TiVo service. RCN and SuddenLink also have added TiVo subscribers and cable operator Ono in Spain had 32,000 customers pre-registered for the service prior to launch in October, Ono has said. At one point, DirecTV accounted for 2.7 million TiVo customers (CED Jan 17/06 p1).
Meanwhile, Comcast is expected to emerge from field trials with the TiVo Premiere DVR by year-end and gradually expand to other markets, Rogers said. Among the first markets is said to be San Francisco. Under a new agreement announced in June, Comcast will handle installation of Premiere DVRs purchased through TiVo or at retail that will be outfitted to deliver the cable service, including video-on-demand, a Comcast spokeswoman said. Unlike Cox Communications, Comcast will not carry the Premiere in inventory, but rely on a customer buying the device, the Comcast spokeswoman said. The Premiere typically sells for $99 with a $19.95 monthly fee. Comcast launched a test with TiVo service in the Boston market in 2008 that featured the DVR software being downloaded to Motorola set-top boxes (CED May 29/09 p1), but never expanded beyond the Boston area. Charter is expected to start marketing TiVo DVRs by year-end.
"This is a different approach and probably is more efficient so we see this as a way to move forward with the service,” the Comcast spokeswoman said.
TiVo incurred $8.2 million in legal costs in Q3 as it geared up for a patent infringement trial with AT&T and Microsoft that’s scheduled to start Jan. 9 in U.S. District Court, Marshall, Texas, the company said. It sued AT&T and Verizon in 2009, claiming the DVRs used in their U-Verse and FiOS networks infringe the company’s so-called time-warp patent that allows for recording one program while watching another. Microsoft, which provides MediaRoom software for the U-Verse and Motorola, which supplies the set-top boxes, have sued TiVo for patent infringement. The AT&T and Verizon cases were postponed to 2012. While TiVo settlement of its long-running legal battle with EchoStar could provide a “framework” for resolving the AT&T and Verizon suits, “given the uncertainty around their timing, we continue to expect the company to show operating losses through January 2013,” said BMO Capital Markets analyst Edward Williams in a note to clients. EchoStar paid $300 million immediately and is required to pay another $200 million in annual installments through 2017 leading up to the expiration of the time warp patent the following year.
TiVo’s Q3 net loss widened to $24.4 million from $20.6 million a year ago as total operating expenses grew to $54.4 million from $44.1 million, TiVo said, and R&D costs increased to $27.2 million from $20.4 million. Revenue improved to $64.7 million from $50.8 million as technology and hardware revenue jumped to $19.3 million and $12.9 million from $7 million and $9.5 million a year ago, the company said. Service revenue declined to $32.4 million from $34.2 million, it said.
TiVo’s standalone service lost 30,000 subscribers, down from a loss of 45,000 a year earlier, to finish Q3 with 1.1 million customers. It gained 147,000 net new cable subscribers in Q3, reversing a year earlier loss of 67,000, ending the quarter with 910,000, TiVo said. Overall, TiVo added 117,000 subscribers. Per-subscriber acquisition costs jumped to $296 from $157 a year ago as total acquisition costs rose to $8.8 million from $6.2 million, TiVo said. Monthly churn dropped to 1.7 percent from 2 percent, the company said. The average revenue per user for TiVo’s standalone customers increased to $8.22 from $7.59, while those from cable improved to $1.65 from $1.24. While TiVo’s DVRs are built around hard drives, it expects increased costs tied to them to be less than $1 million in Q4, company officials said. Most hard drive production is in Thailand, which sustained severe flooding during the past month that damaged many plants there.