TiVo Ups the Cable Ante

TiVo has drastically cut subscriber-acquisition costs for direct customers — just as Comcast and Cox Communications are ramping up their TiVo-branded services.

The timing indicates that the digital video recorder pioneer has high expectations for growth this year through Comcast and other pay TV providers.

For the quarter ended Jan. 31, TiVo spent $7.2 million on marketing activities related to subscriber acquisition, down 27% from the $9.9 million in the same period a year earlier. Overall, the company's cost to acquire each new TiVo-owned subscriber dropped to $138 for the most recent quarter, versus an average of $302 over the previous 12 months.

TiVo will “maintain our more limited spend on marketing while we assess the speed with which consumers recognize the value and importance of broadband distribution of digital video,” CEO Tom Rogers said on a conference call with financial analysts this month.

In its deals with Comcast and Cox, the operators are shouldering subscriber-acquisition costs on TiVo's behalf.

“It's [the cable operators'] product, so they're the ones doing the front-line marketing,” TiVo vice president of marketing and product management David Sandford said. “We work very closely with Comcast, and we will with Cox, but they are speaking to their own customers.”

TiVo's cable push dates back three years, but is just starting to yield paying customers. Comcast began marketing TiVo service in New England at the tail end of TiVo's Jan. 31 quarter.

Thus, Rogers said, there was “little offset” from the subscriber losses TiVo saw from DirecTV, which stopped offering the company's hardware in 2005 but still accounts for most TiVo subscribers.

As the operator widens the service to other markets, however, “we are looking ahead to a year with Comcast backing of TiVo that we think will be quite substantial,” Rogers told analysts.

In addition, Rogers said, TiVo is in discussions with some cable operators about distributing its forthcoming DVRs based on Tru2way, the CableLabs specification for interactive video services.

Those are cable companies, he noted, that “might not be able to look toward investing in a software approach for upgrading their boxes for whatever reasons,” as Comcast and Cox are.