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.