TiVo in 2012

TiVo (Nasdaq: TIVO  ) excels at time-shifting. The DVR pioneer has been giving couch potatoes the ability to pause live television, rewind, and fly through commercials for years now.  But today, I'm going where no TiVo box has gone before: to the future.

I've had a busy January, hopping into my imaginary time machine to see how several different companies are holding up in 2012. It's only fitting that I give TiVo the tomorrow treatment, too.

Thumbs down
The convergence of home theater with digital delivery was both cruel and kind to TiVo in the years leading up to 2012. Licensing its patents generated attractive gobs of high-margin royalties, but a lot of TiVo's functionality has now been replaced by advanced appliances.

From your early-2009 perspective, TiVo stands out from the crowd by offering access to Netflix (Nasdaq: NFLX  ) video streaming, RealNetworks (Nasdaq: RNWK  ) music subscriptions, and the latest clips on Google's (Nasdaq: GOOG  ) YouTube. Well, most 2012 televisions come with Web-connectivity and basic functionality built in. In other words, DVRs are gradually becoming redundant.

It also didn't help TiVo that most of the major networks moved to on-demand programming. Broadcasters still have regular show calendars, but primetime is really a state of mind these days. More and more TV buffs are dictating when primetime starts for them, as long as it's after the original airdate. Yes, that's costly for the networks -- and a boom for content-delivery networks like Akamai (Nasdaq: AKAM  ) -- but the media companies make up for it by serving up perfectly-targeted ads to individual viewers. (The ads are mostly served by Google, if you need to ask.)

All of these living-room conveniences would seem to doom TiVo -- if necessity hadn't already forced the company to evolve.

Thumbs up
TiVo's survival didn't always seem certain. As 2009 got under way, investors assumed that licensing deals through companies like cable provider Comcast (Nasdaq: CMCSA  ) and satellite television leader DirecTV (NYSE: DTV  ) would save the day, offsetting losses on the subsidized hardware side. What few realized in 2009 was that the cable and satellite TV industries were in for a world of hurt.

As networks reach out directly to the end users and penny-pinching consumers look to shave superfluous expenses, what do you think the future of premium television subscriptions will look like? With most of the country's population covered by free -- or dirt cheap -- Internet access by 2012, many people are ditching their cable and satellite television plans altogether.

However, TiVo didn't shrink in relevance. It simply learned to multitask. TiVo's ability to overlay affiliate ads -- from pizza delivery to featured product sales -- onto existing programming didn't seem like a big deal in 2008. But by 2010, it fueled an ultimately unsuccessful buyout attempt of TiVo by Google.

The attention boosted TiVo's stature, even if Google went on to develop in-house workarounds to mimic TiVo's ad-serving enhancements.

Back to the future
The moral of the story of the story is simple: Having a pause button doesn't mean you can afford to stand still. TiVo may have faded from the hardware end as technological trends shifted away from standalone DVR boxes, but the TiVo brand, patents, and innovations continue to bear fruit in 2012.

The company wears many hats, but it's mostly a tollbooth collector in 2012. Whenever someone orders a pizza or arranges to have a network send an entire series of its shows at regular intervals, TiVo is there to pocket some change as the result of its earlier brainpower.

TiVo isn't necessarily more relevant in 2012 than it was in 2008, but at least it's alive -- and consistently profitable.

In the end, that's what truly matters, whenever your time-shifting happens to take you.

More tales of the TiVo-lution:

Google and Akamai Technologies are Motley Fool Rule Breakers picks. Netflix is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't really know how to travel through time, though he would certainly correct some mistakes in the past if he could. He owns shares in TiVo and Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy loves that reassuring "plunk" sound.


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

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2009, at 4:31 PM, Dubya225 wrote:

    The Fool is always wrong about Tivo. They say it's the greatest thing ever it sits or tanks. When they say it's dead it shoots up like a rocket. Now they are trying to predict the future of product itself not just the stock. Please give it rest.

  • Report this Comment On January 27, 2009, at 5:35 PM, SPQRusa wrote:

    Yawn - TiVo will be strong in 2012 because everyone elses DVR's stink! It's non-trivial to make good consumer products. Ask Apple.

  • Report this Comment On January 29, 2009, at 10:30 AM, mysoftballcoach wrote:

    The Golden Nugget in your story is the mention of Akamai. It's difficult to predict the evolution of television, or TIVO, or Netflix in the coming years. But one thing is certain, AKAMAI is going to be a major player in the backbone of communication and how it is delivered.

    Good Luck

    Coach

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