TiVo Debuts $299 HD DVR for Cable

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As part of a lobbying campaign to win the hearts and minds of cable operators, TiVo is expected to announce Tuesday a lower-priced HD digital-video recorder, the TiVo HD box, which, at $299, is nearly one-third the price of the $799 TiVo Series 3 HD DVR.

Scheduled to be available in retail channels in August, TiVo HD is designed “exclusively for cable,” according to the company, with support for multistream CableCARDs. TiVo plans to announce the product at the Cable & Telecommunications Association for Marketing’s CTAM Summit in Washington, D.C.

The launch of the TiVo HD is an element of the company’s three-prong strategy to convince cable of the benefits of embracing the company synonymous with DVRs. “All of TiVo’s product development right now is oriented toward cable,” said Jeff Klugman, senior vice president of TiVo’s service-provider and advertising-engineering division. “As a company, we are focused on supporting the cable industry.”

Added Klugman: “None of our product development is going to satellite.”

TiVo was able to cut the price of the new HD DVR partly through ongoing cost reductions, Klugman said. The “little brother” also has less storage than the Series 3, holding 180 hours of standard-definition content versus 250 for the Series 3.

Klugman claimed that the new product won’t cannibalize the Series 3, which TiVo introduced last September, because it has higher-end features like support for THX audio. The lower-cost HD DVR “is for anyone who was hesitating to buy the Series 3 because of the price.”

In the second new development aimed at cable, TiVo established a dedicated CableCARD-support group, which will field front-line calls from customers who have questions or problems installing CableCARDs.

“Cable wants to reduce their support costs. We’re stepping up to be the central point of contact on CableCARDs,” Klugman said. “We recognize that CableCARD is an important initiative for us and for cable operators to make sure that the CableCARD installation is seamless.”

The third cable-oriented TiVo initiative is exemplified by the existing agreements the DVR maker has with Comcast and Cox Communications, which are both getting ready to roll out TiVo-branded boxes later this year. In August, for example, Comcast plans to start offering TiVo boxes, running on Motorola hardware, in Boston and other areas in New England.

The reason TiVo is courting cablers is clear. For the near future, all of TiVo’s subscriber growth will come via cable, as erstwhile partner DirecTV no longer deploys TiVo DVRs.

As of April 30, TiVo had 2.6 million subscribers through DirecTV, down 10% from 2.9 million one year earlier. It had 1.7 million “TiVo-owned” customers, which are virtually all cable subscribers, compared with 1.5 million in April 2006. (Asked whether TiVo approached telcos like Verizon Communications and AT&T about partnerships, Klugman said, “There’s nothing we’ve discussed publicly.”)

The company’s cable push comes as there’s new evidence that cable companies are now the top provider of residential DVR service and that TiVo is likely to see its share dwindle over the next few years.

According to a study released earlier this month by The Carmel Group, 52% of DVRs in use are provided by cable providers, with 38% provided by direct-broadcast satellite operators.

The Carmel Group estimated that DVRs will be in 52.5 million households by 2010, 46% of the expected universe. Of those, 61% will be provided through cable operators, followed by DBS with 32% of the market, 6% by telephone companies and just 2% by TiVo and others.

Cable’s DVR penetration is currently 17.6 million homes, or about 30% of cable households. DBS-provided DVRs are in 10 million homes, translating into a 40% penetration rate, according to The Carmel Group study.

So why is it in a cable operator’s interest to actively support TiVo devices? After all, cable companies offer their own DVRs, for which they’re able to charge a premium over a standard monthly set-top fee.

According to Klugman, it’s simple: Cable companies will end up with happier customers, who are less likely to defect to satellite or telco services. Plus, he said, operators will benefit from TiVo’s “large-scale retail presence in the United States,” which promotes cable services as the exclusive way to hook up their DVRs, including the new $299 box.

“There’s an enormous amount of value that accrues to cable operators,” Klugman said, adding that most TiVo users are probably premium-cable subscribers.

To stay in the game, TiVo is throwing more resources toward supporting its devices in cable networks. That means getting CableCARD to work. With the TiVo Series 3, the first HD DVR with CableCARD support, the company experienced “the challenges that any new product will experience,” Klugman said.

And, he pointed out, to the extent that a CableCARD installation doesn’t work well out of the gate, it requires an additional visit from the cable tech. “Anytime you have to go out to a customer again, that’s not a happy customer,” he added.

TiVo claimed that its DVRs have represented the majority of CableCARD installations to date -- about 259,000 cards have been deployed by major operators, according to the National Cable & Telecommunications Association. Klugman said the company has gained the experience of being the first one to dive into the pool.

With the lower-cost $299 HD DVR on the way, TiVo reached out to all of the major operators to ensure that they can collaboratively support subscribers, according to Klugman, who added, “We’ve had a lot of behind-the-scenes conversations with operators about this.”

TiVo established procedures with big operators about escalating technical-support issues. These are not technically reciprocal support agreements; rather, TiVo identified the appropriate customer-service contacts at each operator. (Klugman declined to specify how many employees are on the TiVo CableCARD-support team.)

CableCARD has been a politically charged issue, and many operators are still adjusting to the Federal Communications Commission’s fiat that they use the cards in their own set-tops starting July 1.

But Klugman said TiVo wants to fix CableCARD-related issues collaboratively with operators. “We’ve been a very good actor,” he said. “We could have gone to government agencies and complained. Instead we’re saying, ‘Let’s work together and get this to work right.’”

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