DirecTV, TiVo Redo DVR Alliance

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The updated strategic relationship between DirecTV Inc. and TiVo Inc., its digital video recorder partner, will put more customer-service and acquisition responsibilities in the direct broadcast satellite provider's hands, the two companies said last week.

In exchange, TiVo gives up its share of the recurring revenue from DirecTV/TiVo customers and agrees to receive a fixed payment for use of its personal video recording technology.

The new relationship gives DirecTV more flexibility in pricing and positioning the TiVo service to consumers, DirecTV executive vice president Larry Chapman said.

Because TiVo will no longer have to help subsidize DVR hardware sales, the relatively small technology company will decrease its operating costs, said TiVo CEO Mike Ramsay.

The companies also announced last week that TiVo is developing "Series 2" DVR hardware for DirecTV that will incorporate broadband inputs for content-on-demand delivery to set-top boxes via satellite or digital subscriber line.

What will distinguish DirecTV's on-demand model from that of cable's video-on-demand services is its nationwide availability, Chapman said.

TWO-TUNER MODEL

Two-tuner capability in DVR-satellite receivers is important, because it affords a DBS provider greater confidence that it can deliver content which can be cached while subscribers are not using at least one of the satellite tuners.

The new hardware's storage space will vary depending on the manufacturer and model, Chapman said. TiVo plans to set aside a certain amount of space on each hard drive for DirecTV to use to deliver cached content, such as on-demand movie or music services, as well as long-form advertising and promotional trailers.

A recent Lexus-sponsored promotion on TiVo, which offered a chance to win a luxury car, drew great user response, Ramsay said.

"People like to interact with television," he said. "If you do it right, people think of it not as advertising, but as entertainment."

Series 2 technology was designed to allow new DVRs to be built for roughly half the cost of earlier TiVo hardware, Ramsay said.

Lower consumer prices should help TiVo reach a mass market more quickly, Chapman predicted.

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