When I read Wednesday that News Corp.'s (NYSE: NWS ) Fox brokered a deal to make available several of its shows at Apple's (Nasdaq: AAPL ) iTunes music store, my mind immediately went to TiVo (Nasdaq: TIVO ) . "So, this is how it ends," I thought.
What I mean is that the bigwigs at the networks know that live TV, save for sports events, is over. TiVo won.
Not that couch potato surfing will go away immediately, of course. Television advertising remains a $100 billion-plus business, after all. But The Carmel Group reports that 15.6 million of us -- or roughly 15% of the TV-watching households in the U.S. -- own a digital video recorder (DVR). That means at least 15.6 million of us primarily watch recorded TV, which, in turn, means we swat ads like flies.
Fewer ads can only mean lower revenue for broadcasters. And they know it. That's why you're seeing Fox, Disney's (NYSE: DIS ) ABC, General Electric's (NYSE: GE ) NBC, and CBS (NYSE: CBS ) flocking to iTunes. They're hoping downloads will help replace some of the revenue that's bound to be lost when the rest of us go TiVo-crazy.
Frankly, I've no idea if that plan will work. And I don't really care, either. That's not what interests me as an investor. Instead, I'm fascinated by how much TiVo has changed our viewing habits. It's no longer just about saving time; it's that we seek only the most valuable content and then save that for viewing at a time and place of our own choosing.
Think about that, and then think about this: Video downloads are increasing in popularity. Many TiVo boxes sport broadband connectivity. Isn't it a short trip between you downloading 24 from iTunes and playing the episode on your TiVo, commercial-free? I'll answer that: Yes, it is.
I've said before that Google (Nasdaq: GOOG ) should buy TiVo. I still believe that. But this latest rush to downloads ought to have Apple also thinking buyout. Consider: TiVo's recent court win over EchoStar (Nasdaq: DISH ) opens the possibility to royalties from DVR makers. Does Apple really want to be among that crowd? Or would it rather control the pipe and collect royalties? The same thinking applies for blending the Web and TV on a DVR, for TiVo bought the patent for that from IBM (NYSE: IBM ) .
I'm willing to conjecture that given the passage of time, Google won't be able to continue growing into its valuation without help from TV ads. But Apple can't let anyone else get in the middle of its downloading business. TiVo is there now with TiVoToGo for the iPod, and could be there once the rights management processes are in place to support downloads to DVRs.
In other words, both firms have legitimate reasons to want TiVo while the stock is still cheap. Can a bidding war really be that far off? Not in my book. You read it here first.
TiVois a Motley Fool Stock Advisor selection. Ask for an all-access pass, and you'll get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by more than 35% each as of this writing. It's free for 30 days. All you have to lose is the prospect of a richer portfolio.
Fool contributor Tim Beyers has more than 100 hours of TV stored on two DVRs, including Wednesday night's episode of Alias. Don't tell him what happened, please. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out which stocks he owns by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.