Your browser is not supported. Please update it.

9 January 2020

TiVo dongle arrives years too late, as Xperi merger stops split

TiVo embraced the present at CES with its entrance into the streaming dongle market already dominated by Roku, Google and Amazon. Going up against the big guns is a gutsy move to stabilize the company’s hardware arm, as the DVR darling approaches yet another direction change on its recent rollercoaster journey.

Just imagine what TiVo could have achieved had the company reacted immediately to the burgeoning connected TV landscape. The thought was undoubtedly there, likely suffering from a case of more pressing business restructuring priorities.

Announced just as Faultline closed out its final issue of 2019 a fortnight ago, the ever-changing face of TiVo found a merger partner in the form of semiconductor and audio technology firm Xperi. This put an abrupt halt to the company’s drawn-out plans to split TiVo into two separate product and IP businesses.

Valued at $3 billion, the merger comes less than four years after TiVo’s $1.1 billion takeover by Rovi (keeping the TiVo brand of course), forming a patent behemoth which spent most of its efforts in the preceding years engaged in court battles with Comcast and virtually bereft of anything resembling innovation.

This is precisely why the arrival of TiVo’s new streaming hardware venture has been so well received. Critical to the launch of the new Android TV-based TiVo Stream 4K – an HDMI dongle priced at $69.99 (after the initial $49.99 promotional offer ends) – is access to the recently unveiled TiVo Plus content network in tandem with a tie up with Sling TV.

Without TiVo+ and Sling TV, it would be easy to write off TiVo’s chances of squeezing any market share from the congested connected TV market, particularly at a price point some $30 higher than Roku’s 4K streaming stick and $20 more than the Firestick 4K. Although the TiVo Stream 4K is on par with the pricing of Google’s Chromecast Ultra with 4K support, all of which of course require a 4K capable TV set.

TiVo+ is the company’s response to Roku launching its own channels within its own hardware environment. TiVo+ is also bucking a trend, delivering live streaming channels and on-demand content in an app-free environment, which the company suggests eases the content discovery process. Going app-free is ideal for those accustomed to the cable TV ecosystem and reluctant to move outside it, but again the trend is leaning towards TV app environments with Android TV being a prime example.

In any case, TiVo+ has partnered with publishers including Xumo and Jukin Media to knock up a number of live streaming channels served on a carefully curated platter. This sounds to us like all Xumo’s doing. Functioning as an ad-supported OTT video specialist, Xumo has carved itself a niche in the smart TV sector and has since been embraced by the cable sector with Comcast and now TiVo recruiting the firm.

With Roku clearly its primary target, why TiVo Stream 4K is priced so much higher than Roku is frankly nonsensical and because of this we feel TiVo could run into trouble and be forced to slash prices in line with Roku, unless it can prove a superior user experience.

The downside of the Sling TV partnership is the lack of discount, costing TiVo Stream 4K users the same as everyone else, at between $30 and $45 a month. However, Sling TV content will be displayed on the TiVo Stream 4K EPG along with TiVo+ channels, while all the usual third-party apps streaming apps can be accessed.

So, what of TiVo’s long-term future? Based in San Jose, California, its new merger partner Xperi is best known for chip packaging technology, but also owns several technology firms including DTS, which has developed a variety of multichannel audio and surround sound technologies.

First impressions are that TiVo and Xperi are less suited than TiVo and Rovi were back in April 2016, yet the company has come a long way since then. Merging with a chipset technology specialist today makes sense for TiVo in the long-term, together capable of creating a credible IP licensing platform spanning addressable markets in entertainment, consumer electronics and semiconductors.

If you thought TiVo + Rovi created a patent powerhouse, then the resulting merger with Xperi is something else – together boasting over 10,000 patents and applications, supposedly with a minimal licensee overlap. The combined R&D clout will also be a force to be reckoned with and Xperi’s experience in automotive, mobile and home device ecosystems gives TiVo technology and patents in-roads into potential new customer pools.

Financially speaking, Xperi says the new company had $1.1 billion in TiVo revenue and Xperi billings (which Xperi prefers to use as a key measure of performance since billings closely aligns with its cash collection), as well as $250 million in operating cash flow for the year ended September 2019.

That isn’t the full picture, however, as our coverage of TiVo’s Q3 2019 results portrayed. The company filed revenues of $158.5 million for the quarter, down marginally at 4%, as operating costs grew by $123.9 million, or 73%, from $172.4 million to $296 million. Net revenue from the Product segment was $82.8 million, representing a 13% year on year decline. On a quarterly basis, IP net revenues were down 17% to $75.7 million in Q3.

Certainly, there will be a few changes within TiVo and the arrival of the TiVo Stream 4K device is the tip of the iceberg. With Nielsen-owned Gracenote making a push for its OTT guide into Europe this week (see separate story in this issue), TiVo has more than accelerated cord cutting to worry about.

In nearly a decade, TiVo has gone from pioneering the DVR market, setting out to change the world back in late 2012 with the first mention of the term cloud DVR, along with companies like Boxee and Pace, to becoming a patent powerhouse pursuing opportunities in the chipset industry, while keeping a toe in the streaming hardware pool, for now.