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TiVo to break heart in two, speeding up hardware exodus

Whenever Faultline Online Reporter has sat down for a chat with TiVo at various events since its $1.1 billion Rovi merger in 2016, we have tried our hardest to steer away from patent litigation chit chat. Inevitably though, we end up getting dragged down the court case corridor and away from the fundamental technologies which have brought it so much success. That might be about to change though, as reports emerged this week that TiVo fancies tearing itself in two – an outcome we suggested some six months ago.

Following a turbulent Q3 earnings release a few months back, TiVo entered a three-horse race between selling the business entirely, splitting in two and selling each side to separate buyers, or splitting in two and selling off just one arm. Now, according to sources speaking to Light Reading, the company has decided to separate its intellectual property and licensing business from its products and services division. Light Reading notes that sources gave no indication of whether TiVo plans to put either on the market, or operate one or both as separate, public businesses, or take them private.

If TiVo decides to split in half and sell off one side, we feel it would most likely keep hold of the patent-heavy IP business, in which case we might as well wave goodbye to any future conversations with the vendor.

We say that for many reasons, but primarily due to TiVo’s ongoing patent case with Comcast, which has become part of the furniture and should the case ever be settled, life will not feel the same. Although this is not a legacy two trailblazing technology companies in Rovi and TiVo will want to be remembered for. Back in October, Comcast won what seemed to be a significant patent decision in its grueling spat with TiVo over Rovi technology, until TiVo issued a statement dismissing any worth in Comcast’s victory. “Today’s decision does not have any material impact on the broader reality that Comcast has been found in violation of Rovi patents on remote record technology by the ITC and will not be able to add this feature back into the platform,” said a statement from TiVo at the time.

Should TiVo go the other way and sell off its IP arm and plow on with the products and services sector, it would probably accelerate the company’s exit from hardware. But what TiVo needs is to come to market with a cheaper, easier to install and superior voice control – not just at the top end of the market, where it has Sky and Dish using its services (around its metadata), but also in a plug and play manner, for the bottom end of the market. And much of this lies in extensions to its Experience 4, its next-gen TV experience which is being rolled out by US operators including Atlantic Broadband, RCN Telecom and Service Electric.

There are many trends in the market which move against TiVo being successful in its own right. Our worry is that a shift to Android TV, anticipated at 40 or 50 operators in the coming 20 or so months, will include one or two TiVo customers, mostly in favor of the Android Play implementation, which brings in Netflix and Amazon integrations for next to nothing, and also voice control, which TiVo is also expert at.

It also recently had to back Amazon Alexa over its in-house Nuance-based voice service, on the basis that my enemy’s enemy is my friend and Google’s Android TV threatens old TiVo revenues. This should resonate with smaller operators who love the installed superiority of Alexa, almost as much as the ubiquity of Google Voice.

TiVo issued a statement this week in response to Light Reading, saying, “As we stated on our last earnings call, it is our intention to complete the strategic review process by our fourth quarter and year-end 2018 earnings call. Unless we have something formal to announce, TiVo will not be commenting on this matter before that time.”

TiVo registered a third quarter 2018 operating loss of $7.7 million, a substantial 395% increase, on total revenues down 17% to $164.7 million. The planned transition away from hardware managed to reduce costs, but the hardware sector still made a loss of $3.9 million, although this has been slashed from the $9.9 million loss in the same period last year. TiVo’s Q4 2018 financial release is due some time in February, when we expect interim CEO Raghu Rau to shine some light on TiVo’s uncertain future.

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