TiVo tried to put a brave face on its numbers, but even with all the excitement it has on the edge of legal wins, along with new potential legal problems, and with fresh European and US cable companies buying into its service, its numbers look drab and a little tired ‘ perhaps through funding too many lawyers, for too long.
It had Q4 service and technology revenues which added up to $41.4 million, not too far below this time last year, but hardware revenues fell substantially, which had always been planned with its new change of business model.
Alongside wins at Charter Communications and with Suddenlink now distributing TiVo in new markets, and what it calls a successful soft launch at Virgin Media in the UK TiVo would have us believe that everything is under control and with almost $200 million in the bank, we’d more or less agree, but with some reservations.
During the quarter gross service additions for TiVo have been good, especially those it sells direct to customers and not through an operator, up 30% year-over-year, and it says another recent win is that advertising solutions will now be offered by Turner Broadcasting to help marketers reach consumers who fast-forward through traditional commercial spots. However while gross additions were up, net additions are still going down, though not as fast, with fourth quarter losses of 55,000 down from losses last time of 72,000.
Tom Rogers, President and CEO of TiVo, said, “Over the past year, we solidified our leadership position in the rapidly evolving next generation advanced television landscape, winning several key distribution deals with operators such as Charter Communications and beginning significant deployments with Virgin Media and Suddenlink, proving that TiVo is the best choice for the operator community when it comes to a currently deployable and proven hybrid television solution.
“It’s hard to replicate what TiVo is doing. In an on-demand world, there are three critical components that are required in solutions that aspire to broad adoption: first is bringing all elements of on-demand content into one elegant environment; second is providing a first-class user experience that goes beyond just simple connectivity; and third is addressing the unique infrastructure needs of each multi-channel operator. We believe our success in these areas has opened up a path to potentially gain significant subscribers over the next several years through existing relationships with Virgin, ONO, Canal Digital, RCN, Suddenlink, and now Charter, as well as helping us to win additional distribution deals.”
If TiVo was first to spot that this process of helping operators embrace OTT was a great new market for it, it is no longer out on its own, with players like NDS, Rovi and even Technicolor, all starting to offer similar end to end solutions for doing this. But we’d concede that TiVo has more design wins than anyone else and its patent hoard (not the basic time warp patent but others) and its experience puts it ahead.
All of this meant that TiVo reported a net loss of $34.4 million, compared to one of $10 million in the year ago quarter, which was down to a decline in service and technology revenue, and a larger hardware loss due to holiday pricing that offered subsidized hardware for a lower upfront price to consumers, in exchange for higher monthly subscription fees. It is also down to higher operating expenses, which includes increased total legal spend, as well as more R&D investment. TiVo hopes that those new operators will start adding customers soon, so that service customers can begin growing once again.
Rogers added, ‘This year we expect to be engaged in a significant amount of legal activity with a decision expected at any time in our en banc proceeding versus EchoStar, currently scheduled trials in our cases against AT&T and Verizon, and our defense of counter actions from AT&T, EchoStar, Microsoft, Verizon, and now Motorola. It goes without saying that there’s no change in our view of our intellectual property and the value it could yield for our shareholders.’
TiVo offered guidance of service and technology revenues in the range of $36 million to $38 million for the coming quarter, with technology revenue off between $4 million to $5 million and says it will again report a substantial loss.