Led by a rapid rollout of TiVo boxes to Britain's Virgin Media (Nasdaq: VMED ) subscribers, TiVo added 117,000 net new subscribers in the quarter. Revenues jumped 27% year-over-year. The company lost $0.21 per share, worse than the $0.18 net loss per share of a year ago but $0.02 better than Street expectations.
Virgin's fiber-optic service, similar to the Verizon (NYSE: VZ ) FiOS we have here in the States, now offers TiVo-branded boxes for DVR services. According to TiVo CEO Tom Rogers, 40% of TiVo-box buyers are new customers to Virgin Media. In other words, lots of people seem to sign up for Virgin Service thanks to the pull of the TiVo feature. Expect Rogers to bring this up every time he's talking to Verizon, Time Warner Cable (NYSE: TWC ) , or any other unsigned broadcast service provider from now on. "Hey, these boxes will bring new customers to our doorstep. Where do I sign?"
Indeed, DirecTV (Nasdaq: DTV ) is expected to launch a similar TiVo program in early December, and Comcast is already running field trials. This could be the first of many growth quarters if other providers see the same kind of TiVo-based success that Virgin is enjoying.
This empire-building strategy rests at least partially on the settlement with DISH Network (Nasdaq: DISH ) , which reinforced the value of TiVo's technology. Court costs are jumping in the near future as similar cases against AT&T (NYSE: T ) and Microsoft head to trial and ITC hearings, but TiVo expects to slash legal spending after that. The big, expensive battles are either happening now or are already in the rearview mirror, and there's no need to go suit-slinging afterwards.
I bought TiVo shares 11 months ago, fully intending to sell when the DISH lawsuit and other courtroom dramas had played out. But my thesis is changing. I really like the prospects of a technology-licensing TiVo that can sell its services as a value-added customer attraction feature. I'm still not sure whether I'll own TiVo five years from now as fully digital solutions make DVR technologies obsolete, but I think I'll stay for a while.
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