TiVo has cut its second deal in Europe, following on from the major move it made in the UK with Virgin Media last November, this one with Conax a European conditional access company owned by Telenor.
The deal allows for Conax to act as prime contractor in building systems which use the new TiVo Premiere box, built to offer a way forward for free to air and pay TV services alike, by integrating these services with open VoD services over the public internet. TiVo has a retail partner in Best Buy already set up to make the Premiere box a pure retail proposition in the US.
The assumption is that all Telenor’s pay TV services including its Canal Digital, with 2.9 million video customers across Norway, Sweden, Finland and Denmark, will be the first in line to take the Conax version of TiVo service, before trying it out with the other 100 TV operators that Conax works with. TiVo could overnight become a leading TV DVR in Scandinavia and other parts of Europe.
The new TiVo platform can integrate internet content with cable, satellite or DVB-T, in a new User Interface which makes all the content appear to come from a single source. TiVo’s off platform search engine leverages from server software in the cloud, and uses all of the TiVo click stream (data that has been acquired through remote control key presses) as well as a full set of content metadata, which is mixed and matched in the cloud as well.
Somehow TiVo has managed to take 3rd party services in the US, such as Netflix and Amazon Unboxed Video and extract all the search data to enable searches. It can then facilitate direct video streaming from the 3rd party service to its devices, complete with copy protection services and accurate billing and revenue sharing. This is all done without the TiVo user having to know anything about the other service or its peculiarities.
Conax will be able to set up TiVo servers services in Europe and may also target its customers in India as well.
Virgin in the UK will be opening up TiVo not only to its existing 3.7 million cable TV video customers, but will be selling the TiVo boxes outside of its footprint, offering a pure TV over broadband service.
IPTV players have suggested to us that TiVo is in advanced negotiations in other major European countries like Germany and France for similar deals to the Conax and/or Virgin one.
The TiVo share prices has been on fire, with the company almost doubling its valuation to $1.8 billion, since March 4th, when the Appeals Court in the US confirmed what a lower court said all along, that Dish Networks was indeed in contempt of court over failing to either license or withdraw its DVRs after they had been found to infringe on TiVo patents. That decision virtually releases $300 million out of a total $400 million, into TiVo coffers, and opens the door for more licensing discussions with operators around the world. Also TiVo has only been paid by Dish up until July 1st 2009, so it can expect yet another fat check from Dish in the future.
It is that court case which has opened the doors at companies like Virgin and Conax, but also, given that Europe has the fatal combination of a high penetration of free to air digital broadcasting, high broadband penetration and weaker than US pay TV services, it means it is ready for wide spread uptake of Over The Top video services. That looks like playing into TiVo’s hands, and its device looks like a Canvas killer (Canvas is the BBC inspired hybrid set top).
Geir Bj’rndal, Executive Vice President of Products & Markets at Conax, said, “While the European market is ripe for VOD and other interactive services, many operators are stifled by the expensive integration efforts needed to convert roadmaps into reality. TiVo has a phenomenal reputation in the US, not only for inventing the PVR, but for creating the market’s most comprehensive hybrid broadcast/broadband platform. They are the only player that has successfully integrated top-tier content from diverse Internet sources like Netflix, Blockbuster, YouTube, and Amazon VOD along with linear television into a single, vivid user interface already available to consumers in the United States. Our European customers have made clear that they plan to deploy similar capabilities and we can’t imagine a better technology partner than TiVo to help us make it happen, and strengthen our competitive market position.”
TiVo also announced its fourth quarter results this week, which weren’t too spectacular, but more steady. The company increased cash balances by $40 million over the course of the year, and conceded that it spent more on R&D this quarter because it wanted to get the Premiere TiVo Series 4 out, and it knew that its losses were going to be below expectation.
For the fourth quarter, service and technology revenues were $45.3 million, down from $48.5 million and it reported a net loss of $10.2 million for the fourth quarter, compared to guidance of a net loss of $13 million to $15 million.
The Virgin deal was described to us as being most like the RCN deal that TiVo signed about a year ago which is now going live, which will give RCN customers a universal cable box, plus a vast collection of internet held content from broadband sources, a significant VoD library, and a diverse music jukebox, in one device. However RCN has only 364,000 video cable customers, something like 10% of those at either Virgin or Telenor, so once service revenues from these partners kick in, probably around a year from now, TiVo is likely to gain continued profitability and cash generation. Our guess is that some up front revenue will come from both deals, to be shown in perhaps the third or fourth quarter this year. TiVo is already well placed to begin counting TiVo Service revenue (it charges per box for its search services) from deals cut last year in Australia and New Zealand.
In announcing TiVo’s results the company said that it was seeing an increasing amount of interest from international operators and that payments from DirecTV on its new deal with TiVo, since DirecTV was acquired by Liberty Media, were substantially higher per household than previous deals with DirecTV.
For the coming quarter TiVo said it anticipates service and technology revenues in the range of $41 million to $43 million, and says it will make a net loss between $19 million and $21 million due to increased litigation spend, higher research and development and higher marketing spend relating to the launch of TiVo Premiere.