Our coverage of TiVo’s fourth quarter results last week is definitely due a revisit, with its earnings call littered with too many significant points regarding the company’s roadmap to cover in one fell swoop – notably its plan for Android TV operator tier and there was even mention of a mobile-focused product.
So, TiVo has now confirmed its vision for division following the late-January rumors, separating the products business from its licensing and intellectual property operations, with the aim of reducing “complexities” around the business – by which it means making certain workings within the company easier to sell.
We refrained from going fully smug when the rumors were first surfaced by sources speaking to Light Reading, as Faultline Online Reporter first offered up the suggestion TiVo should split in two some 7 or 8 months ago, to little attention. Nevertheless, the sources were bang on in terms of the separation, although these same sources gave no indication at the time of whether the surgery would involve placing either side directly on the market, or if it would rather operate one or both separately as public companies, or take them private.
This remains the case officially for now, although these same Light Reading sources have reportedly said potential buyers want either products or licensing but not both, and TiVo has at least come out and admitted several unnamed companies are interested.
Interim CEO Raghu Rau said on TiVo’s Q4 earnings call late last week, “We continue to make progress with our strategic review process and are still in ongoing discussions with parties interested in each of our Product and IP Licensing businesses. As we said last quarter, this process is taking longer than we hoped due to the unique nature of our Product and IP Licensing businesses.”
Until the strategic review process completes, TiVo plans in tandem to improve its two businesses with a new five pillar strategy, which Rau said has been announced internally and embraced by employees.
Thankfully Rau graced us all with an overview of the five pillar plan. First up is the launch of a new content discovery platform combining its “expertise in pay TV and OTT to build a unique, integrated entertainment discovery platform for the streaming era.”
We’re not entirely sure what Rau means by combining pay TV and OTT in a technological sense, assuming he means bringing streaming functionality to TiVo’s pay TV operator customer base. He notes powering natural language voice interactions as being a central focus area, as are TiVo’s well-known personalized content discovery capabilities.
The second pillar is all about a big push into data-driven monetization through targeted advertising. “We view monetizing our discovery footprint via transactional revenue as a great opportunity for us,” said Rau, who then reeled off Sponsored Discovery, Content Merchandising, UX Display Promotions, DVR playback Advertising, and Promotion Windows as its main avenues for monetization around pure play IP content.
Thirdly and crucially is investment in Android through the launch of an IPTV service on the Android Platform to take advantage of its TiVo Experience 4 IPTV product – on the basis that costs associated with deploying QAM-based TV services have hindered deployment of next generation services. There is more than a strong suggestion that this relates to an Android TV operator tier project, based on the Android TV launcher TiVo was showcasing at this year’s CES. Android TV has seen significant growth within the last year and this target market could be make or break for TiVo’s products business.
Fourth, we have a direct to consumer approach with a focus on IPTV and Android, planning to give consumers a low-cost entry point to entertainment as TiVo transitions from its subscription model to a transactional model.
Fifth and finally is the intention to grow the IP licensing business with continued investments in new markets, citing the growth of OTT and mobile-first video beyond traditional TV as a great opportunity.
Ultimately, these five pillars are designed to underpin a new TiVo, while right now the TiVo pillars represent something more like the Greek titan Atlas – condemned to holding up the celestial heavens for eternity. The heavens here being traditional pay TV.
A better understanding of how these pillars will come into practice comes from TiVo’s latest set of financial results. Total revenues for the fourth quarter dived 21% to $168.5 million, making an operating loss of $273.5 million, an exorbitant increase of 9,390% year on year. For the year, revenue was down in just about all categories, with platform solutions slipping over the year from $334 million to $315 million, while software and services dipped from $85 million to $76.2 million. IP licensing revenue tumbled by over 25% from $402.9 million to $295.1 million, leaving new media and the rest up nominally from $72.7 million to $73.5 million.
As for a time frame regarding the split, Rau could only say, “We’re hoping that we’ll give you another update the next quarter based on the ongoing discussions that we are having. But beyond that, I’m not willing to put a time limit on when this will happen because the interest of the Board and the management is to ensure that we get the best outcome for the shareholders and that’s what this whole review process has been focused on.”