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Poor, Poor, Pitiful TiVo

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Poor, misunderstood TiVo (Nasdaq: TIVO  ) . The Rodney Dangerfield of entertainment services can't get any respect from customers or investors.

The digital video recording pioneer's first-quarter results run against the trend, and not in a good way. Sales fell 10% year over year to $54.9 million and last year's $0.04 of earnings per share turned into $0.04 of losses per share. TiVo has 16% fewer paying customers now than they did a year ago amid a monthly 1.4% churn rate (or about 4.3% per quarter). No respect.

This comes at a time when DVD mailer Netflix (Nasdaq: NFLX  ) is beating expectations and raising targets, DirecTV (Nasdaq: DTV  ) and the cable guys keep growing their TV subscriber counts comfortably despite the recession, and entertainment seems like the last safe haven in this stormy recession.

TiVo CEO Tom Rogers says that he's suffering from a marketing problem. "The biggest confusion that's been sowed out there in the marketplace about TiVo is that the cable industry generic DVR is the equivalent," Rogers told analysts in the earnings call.

The challenge right now is to spread the word that a recent-generation TiVo that connects both to your TV signal feed and to a broadband Internet connection can do much more than a generic DVR. Through partnerships with (Nasdaq: AMZN  ) , Netflix, and Blockbuster (NYSE: BBI  ) , TiVo subscribers can access a smorgasbord of streamed or downloaded movies.

Another recent deal with on-demand expert  SeaChange International (Nasdaq: SEAC  ) lets some TiVo users access their participating cable provider's on-demand videos without a separate set-top box for that. That could remove the last roadblocks to shipping out TiVo boxes instead of the usual Motorola (NYSE: MOT  ) or Scientific Atlanta boxes to cable subscribers' living rooms.

But these advantages are not obvious to a consumer who already talks about TiVoing "American Idol" on his no-name DVR, provided by the cable company. And the SeaChange partnership is too new to have produced any revenue-making cable contracts yet. No respect.

But TiVo's balance sheet looks debt-free, cash-rich, and very healthy. Despite the GAAP losses, the company actually saw $3.4 million of positive free cash flows this quarter. There may be legal windfalls waiting around the corner, and brand-new distribution deals feeding off of that. Oh yes, I think TiVo will do just fine -- even if nobody respects 'em right now.

Further time-shifted Foolishness: and Netflix are Motley Fool Stock Advisor  selections. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Netflix, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (3) | Recommend This Article (4)

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  • Report this Comment On May 28, 2009, at 3:47 PM, jkellynewyork wrote:

    Tivo is to expensive. Yes it has a nicer user interface than generic cable box, but the premium price is not worth it to the average consumer. You probably pay as much each month for an HD cable box as you do for the Tivo service. But you also have to shell out something like $300 dollars for a unit which almost doubles you monthly cost for the next five years. Plus, the consumer is on the hook if the Tivo unit failes, whereas the cable company generic route does not pose this problem.

    Plus, most of the cable HD dvrs allow consumers to record two programs at one time, whereas the HD Tivo would rquire the consumer to rent an additional set top box or cable card to do this.

    So you have to ask is all of this extra money worth a nicer user interface, and a couple more bells and whistles. Not for my it is. For internet streaming I plug my computer into my tv, for the few times I do that.

    Plus, another annoying thing with Tivo is that if you dont have the cable card, which most will not, you have to use Tivo's IR blaster to change the channels on the remote control - there are times when Tivo does not change the channel properly - even one or two times happening in every few months can be devastating if you miss one of you tv series shows. With the Cable DVR this NEVER happens - so the generic cable DVR is much more reliable.

    I have had my Tivo since 2001 - an early adopter - but have since moved on and barely use it anymore. Unless they are bought out, I do not see the stock as much of an investment, especially after the cable companies introduce next generation cable boxes and more people adopt the new TVs with widgets built in.

    I would not go long based on its lack of prospects and I would not go short because it seems to be at a low price and could be acquired.

  • Report this Comment On May 28, 2009, at 7:46 PM, aine101 wrote:

    Clarification to jkellynewyork post:

    TiVo records two programs at once very nicely, with no set top box and only a single (multistream) CableCARD that costs you about $2/month.

    You just need to ask for a "multi-stream" CableCARD from your cable company, which lets you record two things at once. I have one, and it has worked perfectly since the day I got it. I have never missed a recording ever.

    Yes, you need to buy the TiVo unit, but the monthly cost is similar to the Cable Company's DVR, and in many cases LESS when you breakdown what the cable company charges for their converter box and the DVR service.

  • Report this Comment On May 28, 2009, at 8:48 PM, jkellynewyork wrote:

    yes you are correct about the cable card recording the channels nicely, but with the cable card you lose the ability to use the cable companies video on demand - and that is a HUGE negative - and if you want the video on demand (which is a must have for at least me because of HD VOD) you have to get a cable box anyway, which costs extra and defeats the purpose

    Tivo also charges for service which is $12.95 a month

    MY cable company RCN HD DVR is $14.95 a month.

    SO if I get TIVO HD DVR - I have to pay $12.95 and shell out another $300 for the HD box (another $5 a month all in advance assuming the HD has life of five years)

    that is $3 more a month - plus I lose the ability to record two channels at once, lose the reliability of recording the proper channels, plus i assume the risk of losing my $300 investment if the tivo breaks -

    this does not work - it is just cheaper and much easier for the average joe to just get the HD DVR from the cable company

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