TiVo announced its results and once again the pessimists among us could point to an ailing failing business, destined to fall apart if it does not win its legal action against Dish and EchoStar, while the optimists (which includes us) can see only upside.
The raw numbers are not so encouraging with quarterly revenue down to $50.8 million compared to $57 million a year ago and a net loss of $20.6 million compared to a loss last time of $6.4 million. But the company still has $227 million in cash and in short term investments, and although year to date over nine months it burned through $38 million in running its business, it cut that substantially by making $16 million on its investments. It could continue in that vein for nine years before running out of money.
Going forward TiVo expects to lose $32 million on revenues of $40 million to $42 million in the final fourth quarter.
TiVo also added yet another European operator deal last week, with Canal Digital, to go with its Virgin Media and Ono deals in the UK and Spain. These are hybrid pay TV/OTT services which rely on the key skills where TiVo has a lead, not just DVR (where it does lead) but also cloud based search and the creation of EPGs on the fly, which are combined into multiple services in the cloud.
CEO Tom Rogers talked through his strategy which is basically to offer TiVo in the US for less up front and more per month, taking fees from $13 to close to $20 and virtually giving the hardware away. This creates bigger up front losses, but it is a formula that leads to more subscribers long term he says. This plan will take $10 million off his cash in the fourth quarter, and has only just been fully market tested.
Rogers said, ‘Additionally, last week we announced yet another distribution deal to deploy the TiVo solution in Europe with Canal Digital, the largest satellite operator in Scandinavia. This is a very important deal, not only because it brings TiVo into a sizeable and attractive international market, but because it gives us a foundational international satellite platform which can be a basis for extending TiVo to other satellite operators — a significant asset given that direct broadcast satellite remains the dominant medium for provision of pay television service outside the US. This deal will take advantage of some valuable development work we have been doing with Conax under the deal we announced with them last year and is a perfect example of how we can leverage relationships with conditional access and third party hardware vendors, to secure additional distribution deals.’
He’s not strictly correct in that Viasat is the slightly larger of the two major Scandinavian pay TV operators, although they are neck and neck.
At Faultline we don’t expect TiVo to be profitable for some time, but win or lose in the long standing patent battle with Dish, the company has been enervated with a new way forward, acquiring new European license and service revenues. So far it is by far the most prominent single technology provider on the European Pay TV Over the Top business.
And of course if it wins its patent battle with EchoStar (it is undergoing an En Banc review of the case where it won contempt of court penalties and its patents are still being challenged by Dish), then it can immediately license a dozen new pay TV providers for basic DVR technology.