TiVo: Downward Spiral
TiVo yesterday touted the fact that it turned in its first full year of profitability for fiscal year 2009, and narrowed its losses for the most recent quarter. Surely the company wished I had led with that.
Investors seemed to cheer the Q4 results, sending the stock up as much as 13% in midday trading Tuesday.
But TiVo got into the black by cutting costs, not growing revenue. Revenue in FY2009 fell 8%. Without the one-time payment from EchoStar related to the Time Warp patent litigation, TiVo would have posted a net profit of just $300,000.
Look at the bigger picture: The DVR pioneer lost 611,000 subscribers over the course of 2008, or 16% of its customers. That’s an acceleration of TiVo’s losses from the previous 12-month period. In 2007 it dropped 499,000 (11% of its 4.4 million total subs as of Jan 31, 2007).
Yes, many of those were former DirecTV subscribers finally dropping the box (the operator started offering TiVos in 2000, then switched to an NDS-developed DVR in 2005). But TiVo has been unable to make up the difference.
The question for this company — as I wrote a year and a half ago (see TiVo’s Catch-22) — remains whether it can successfully build up its indirect distribution model as its direct-to-consumer base shrinks. TiVo has high hopes that its distribution deals with Comcast, Cox, DirecTV (which plans to offer a high-end TiVo HD DVR at some point), and others will ring the cash register.
On this question the steadily dwindling number of TiVo subscribers isn’t encouraging. Note that TiVo has 225,000 subs who don’t generate a penny of revenue for the company because they bought “lifetime” service.
Clearly TiVo needs cable (and satellite) more than the other way around. Does Comcast have a burning desire to plug TiVo service? Four years and millions of dollars later, the payoff is not materializing on TiVo’s bottom line.
Wesley Pratt commented:
Tivo will be fine as long as the consumer stays up on its technological offerings. The current DVR for DirecTV is a dismal throwback to Cable with all of its limitations and problems.
Lifetime doesn't matter commented:
I\’m not sure if the people commenting on Lifetime subscription realize it, but dropping TiVo due to them leaving DirecTV is not affected by the new announcment. You can not transfer a lifetime subscription to a new unit, which you would obviously need for HD-TiVo.
DirecTv Returns to Tivo commented:
I hate to break the news to the one who said he dropped his lifetime plan on DirecTV after DirecTV discontinued it, but IT WILL BE BACK in the middle of the year.
HamSandwich commented:
I think Todd\’s point on the lifetime service was to illustrate Tivo\’s proportion of subscribers that do not contribute to quarterly revenue.
On a side note, the subscription numbers are a little misleading. Tivo is not authorized to report the number of subs they have gotten from Comcast
Todd Spangler commented:
Mainer - you’re right about the lifetime subscription plan, thanks for pointing that out. I’ve updated the post.
Seedy commented:
I was one of those DirecTV subscribers that rode my life subscription for 12 years before dropping it. Had DirecTV continued to use TiVo, I would have switched to HD with them. I now use Tivo with Verizon\’s FIOS HD service and I get all the channels I use in HD. The loss of the NFL Suday Ticket was no big deal because I only used it a few times after DirecTV was forced to black out localy covered games.
Mainer commented:
Todd,
I\’m afraid you have your blinders on. Right now, TiVo has over 200 million in cash, no debt, costs that are under control (yes they have been doing a masterful job of controlling costs in this economy) and they continue to lay a solid foundation to future partnerships. Oh, and by the way, just to illustrate how out of touch with TiVo\’s current status you are, TiVo lifetime is alive and well, and has been back for quite a while now. www3.tivo.com/store/plans.do
