A deal between TiVo and Comcast was cut way back in March 2005, and it was supposed to include a 15 month deadline for TiVo to port its software to existing Motorola Digital Video Recorders in such a way that the TiVo experience would integrate with the Motorola encrypted EPG, so that Comcast customers could enjoy the TiVo service.
Now 27 months later Comcast says that TiVo managed to get the software to work just before its final, final deadline, and that it will test it this Summer and begin trial commercial deployments in the Boston area this August.
When the deal was announced, it was heralded as the saving grace of TiVo, and looked like a replacement revenue stream for the DirecTV DVR service which had moved to an NDS designed box, taking away a contract which previously accounted for around two thirds of new TiVo customers.
There are no pricing details out yet but this is a way for TiVo to finally get out of the hardware business, and move more and more into the software and intellectual property game. The deal was also supposed to allow Comcast access to all TiVo IPR, with a special mention of advertising technologies which are designed to allow DVRs to act as a new revenue stream for pay TV operators.
The delay in the porting of the software is likely to be as much Motorola dragging its heals on ensuring that its own encryption processes cannot be breached, as a tricky software port. The hurdles here are at least as much political as technical.
News sources this week are talking about the extra features including the ability to search VoD content, hinting that perhaps later, TiVo’s new Universal Swivel Search, which searches the internet, the hard drive and other remote sources, could be added to the service, but these are not in from the start.
But the original features that were mentioned at the signing included systems based on the TiVo smart recording technology, WishList search, Season Pass recordings, as well as TiVoToGo. The WishList facility of TiVo allows a DVR to record favorite actors, sports or directors whenever they are on. Season Pass allows viewers to never miss a single episode of favorite TV series, with the ability to bypass repeats, and to record shows that the viewer is personally unaware of, while the TiVoToGo service takes TiVo saved programs and puts them first on a Microsoft Media Player PC and subsequently onto a portable viewer, so customers can watch TiVo recorded programs on the road. Presumably all these features are part and parcel of the services that TiVo will be offering via Comcast.
But also at the time TiVo said it would develop a new advertising management system for the provision of local and national advertising to Comcast subscribers. So addressable advertising that can be delivered on a demographic basis.
Comcast paid a big upfront fee, which included integrating the advertising on the DVR with Comcast management systems, but will now also pay TiVo a recurring monthly fee for every Comcast subscriber who takes the TiVo service through Comcast. The deal was signed as a 7 years deal which it can renew, in one year chunks, for a further 8 years.
One of the major coups at the time for TiVo was that it retained the rights to some of the revenue from the advertising, so either it is on a cut, or some ad spaces are left open for TiVo to load. While we haven’t actually seen the current advertising system from TiVo we understand that it is a combination of static advertising icons that are persistent through fast forwarding, which can be used as links to disk resident advertising, which is long form and has to be watched voluntarily. All of this is encompassed in TiVo’s Interactive Advertising Management System, but the deliverables for this to Comcast are not due until the later date of February 15, 2008. Part and parcel with this will be its ratings measurement system, and already TiVo sells ratings data separately from its own TiVo devices.
About the same time that TiVo signed this deal with Comcast, it also signed a similar agreement with DirecTV, to extend support for the customers of DirecTV that already have TiVo, and to keep DirecTV up to date with advertising breakthroughs. Funnily enough the TiVo delays on integrating its software onto the Motorola DVRs, were paralleled by NDS delays in getting the devices to market for DirecTV which replaced TiVo boxes . The net result has been that instead of TiVo revenues collapsing a year ago, they have slowly dwindled from DirecTV, giving it a chance to increase revenues elsewhere. TiVo finally had a profitable quarter last quarter for the first time in its history, and will, at the end of this year, drop the consumer rebates which it has been using to attract new TiVo customers. It currently has 4.3 million customers.
Given that, and the prospect of an out and out win against EchoStar in its patent dispute, which still has to survive an appeal hearing, the prospects at TiVo have never looked stronger, and Cox cable has plans to use the same software as Comcast, and other cable operators may follow suit. But you wouldn’t know it from the share value, which sits below the level it was at four years ago when we first started following TiVo.