Quarterly Subscriber Change, TVbytheNumbers
TiVo held their quarterly call yesterday and, at first glance, I’m not seeing any surprises. Subscriber count continues to decline, from 3.2 million a year ago to 2.5m as of 4/30. But TiVo’s got plenty of cash in the bank (~$250m) and zero debt, along with a number of lawsuits and partnerships in various stages of development. Speaking of which, Cox, Comcast, and DirecTV are merely sputtering along, whereas RCN is deploying the TiVo Premiere (with On Demand!) at a rapid pace. The relevant docs:
My writing partner Davis Freeberg follows TiVo closer than most, as a customer and an optimistic investor, and covered TiVo’s call on FriendFeed in real-time yesterday. His unedited stream:
- Warning spoiler alerts.
- Analysts are bearish for TiVo going into the results predicting that they will lose .16 cents a share and that revenue will be down 12% at $43 million
- TiVo released news ahead of their results this morning about building Non-DVR TiVo software directly into Insignia TVs. I’m hoping that we’ll get more information about the economics of the deal (is it exclusive, is is a per user royalty, etc.) as well as more info on how it might actually work. If this can be used as a TiVo streaming device, this TV may find it’s way into the homes of many current TiVo owners.
- I also expect that we’ll hear some information about TiVo’s patent battle with Dish, although there won’t be much that they can say about the en banc review. Most importantly, I will be looking for language that will help clue us off as to whether or not there is any price that Dish can pay to make TiVo settle. Whether TiVo tries to extract money from Dish or uses their ability to exclude them from having a DVR at all will say a lot about where their focus is and how they’ll drive the company forward.
- The numbers are out
- Tech revenue came in at $43.2 million, but net revenue was 61.4. The net loss of $14.2 million represents .13 cents a share.
- Interestingly enough, this qtr. was the first time in their history that they made money on the hardware. I guess the TiVo premieres are priced at a sweet spot for them.
- What they don’t make very clear in their press release is that they lost another 100,000 subscribers in the quarter and now have just 2.5 million subs.
- Avg. revenue per TiVo owned subscriber is $7.54. For MSO owned sub it’s $1.12. This is exactly the reason why they shouldn’t take a settlement for Dish and should instead use the lawsuit as bargaining power with the other MSOs.
- Tom Rogers is starting the call by addressing the en banc decision. He says it’s important to note that the en banc review doesn’t address TiVo’s patent, as much as seeks to clarify patent law. Basically what should happen when someone gets an injunction, but then someone says we changed our product so it doesn’t infringe. Should Dish be able to force TiVo to keep suing over and over again or should a trial judge have the ability to issue broad injunctions?
- Rogers says that if the En Banc goes against TiVo it will weaken the patent system and make the victims pay for enforcement.
- Balance sheet grew by $11 million cash in the qtr. now over a quarter of a billion. – Davis Freeberg
- Rogers says that they are seeing “increased interest” in operators for the TiVo premiere interface. He’s used this phrase before, so I wouldn’t pin any hopes on it.
- RCN’s distribution is how TiVo would like to do it with everyone. They are hoping to use it as an ideal blueprint for how TiVo could rollout quickly.
- TiVo is one of only a couple solutions for bringing linear tv (broadcast, cable, etc.) with internet content.
- Over the quarter TiVo announced a deal with Technicolor who is the #3 set top box user. It will let TiVo port directly to their box so international operators can license TiVo. They are in discussions w/ mulitple operators and hope to have more to share this year. The Technicolor deal could really end up opening up Europe to TiVo.
- Stand alone broadband boxes can’t record tv
- The TiVo Premiere is a more cost efficient box than previous models, so they generated a positive net hardware margins. They are hoping to augment the box with software updates over the next month?s?
- If TiVo is turning a profit on the premieres it would go a long way towards solving a problem for them. For years, they’ve subsidized the box in exchange for the service revenue, but hopefully this means that they can start to have their cake and eat it too.
- They continue to make partners in the audience measurement space, but Rogers doesn’t address the subscriber attrition. TiVo has a lot of potential to be a huge player in the ad biz, but not with 1.5 million subs. What do they need to do in order to fast forward their sub growth again?
- TiVo is getting over $100k per month from the interest on $250 million in cash, if they invested in that in some Dish bonds, they could get their income up to $1 million ;)
- We are still waiting for DTV and Virgin to go live before sub growth resumes. I wish we had a better understanding of why it takes so long to go from announcement to realization and better clarity on what our expectations should actually be.
- Woo-hoo, R&D spending is up, new toys to play with.
- They hope that “additional investments” in coming years will create growth, does this mean that TiVo has decided against paying a Dish dividend or doing a share buy back in lieu of being a growth company through acquisitions?
- Q&A time
- Comcast still hasn’t rolled out of Boston, Rogers says that it’s very important that RCN rolled out as quick as it did. Now that they have a real product to show the cable industry, it gives them “one more path” to talk to the industry.
- Tru2way still has question marks, as a result of that TiVo is looking for alternative way to bring TiVo to an MSOs. Big question in the room is why hasn’t Comcast adopted the premiere strategy if tru2way is vaporware.
- Analyst is asking a question about how many premiere boxes have sold . . . the 1st qtr isn’t much of an indication of sales because 2/3rds of the qtr it wasn’t available. They are focused more on fall when they’ll spend more on marketing to take advantage of the TV season. IHe says that it continues to be something existing subscribers are upgrading to, but doesn’t define what that is.
- GoogleTV is a real contrast compared to premiere. TiVo is a one box solution, GoogleTV won’t be able to address linear programming. Consumers want Hulu and that’s the only piece TiVo is missing. Real ? about whether or not GoogleTV will be able to do what other TV software providers haven’t
- Analyst is asking why the appeals court is picking on TiVo – Rogers doesn’t have any insight on why. It’s only about a 3% chance of being accepted. From what I understand 75% of the cases they take end up being modified in one way or another. – Rogers says that the bottom line on the case is that it’s about how much time should it take for an infringer to get justice. If you have an aggressive offender (cough: Dish), it could take 10 years to be able to get an injunction.
- The DTV deal kicked in on Feb. 15th (meaning that they are getting cash each months from DTV), but until they have a product they can’t start to recognize it.
- An analyst just asked if, from a technical perspective, you could put a “browser” in TiVo that would let you go to Hulu? – Rogers says that the idea could be done, but there are ways that content providers could defeat for purposes of display. It comes down to whether or not Google could do it without a deal.
- An analyst is trying to trick Rogers into talking about what the worst case scenario with Dish could be, but he isn’t falling for it. It’s like when a prosecutor asks someone to hold a knife and then proceeds to tell the jury about how awful a slashing was. Psychologically it shows weakness.
- AT&T and Verizon continue to move along.
- I just don’t understand why the analysts are so in love with GoogleTV.
- The call just ended, thanks everybody for tuning in