The Trouble With TiVo

Not even a month ago, spy site ThinkSecret reported that Apple (Nasdaq: AAPL  ) was planning a new Mac Mini computer with functions similar to those found in TiVo (Nasdaq: TIVO  ) digital video recorders. I wrote then that the company needn't panic but that it was also probably time to seek a well-capitalized suitor . one like, you know, Google (Nasdaq: GOOG  ) . Today, I'm more convinced than ever that I'm right.

Allow me to explain. According to a Reuters story published on Sunday, marginalized TiVo rival ReplayTV, now owned by Tokyo-based D&M Holdings, plans to allow personal computers to tune into and record live television. The official press release came Monday. Within, it says that ReplayTV will create software to be bundled with PC-TV tuners made by Hauppauge Computer Works.

Can this possibly hurt TiVo? ReplayTV seems to think so. The lead of the release maintains that the PC is globally the "fastest growing video entertainment platform." In other words: You'll soon pull up roots from the couch, forsake your TiVo, and stare at the tube on your desk.

Or maybe not. No doubt, the announcement is interesting. And TiVo could see some problems when the integrated products become available sometime during 2006. But I think it's more important to understand what the announcement represents. Between the latest Apple rumor, DirecTV's (NYSE: DTV  ) decision to dump TiVo for generic boxes, and now ReplayTV's broadside, it's become obvious that TiVo has little left to differentiate its offering -- without, that is, a suitor.

That brings me back to Google. A potential problem for TiVo is its lack of broadband connectivity. But this is also a problem for every other DVR maker. TiVo has a budding relationship with Comcast (Nasdaq: CMCSA  ) that could end that situation and deliver a sorely needed edge in the process. Or it could team with Google to establish a cash-rich stream of advertising revenue, provided it can smartly place ads. Naturally, I think the latter makes more sense, since the intelligence gathered (after all, TiVo has a lot of information on your TV viewership habits) offers potential for a smart targeted-ad platform. But either way, it's becoming increasingly clear that the company needs something. And soon.

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Fool contributor Tim Beyers is seriously thinking about buying a TiVo at today's fire-sale prices. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


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