There's so much to like about TiVo (NASDAQ:TIVO). It is a great product with rave reviews and a tech-savvy, cultish following. It has been revolutionizing the way we watch TV. It continues to increase its number of subscribers. It has even been steadfastly approaching profitability.
However, while TiVo -- a Motley Fool Stock Advisor pick -- has been a pioneer, offering the ability to record, pause, and even rewind live TV, investors were shaken Thursday by hints that competitive products could spell trouble for the company.
The stock dropped more than 4% after a Reuters article voiced concerns regarding Comcast's (NASDAQ:CMCSA) plans to develop its own digital video recording (DVR) device, which it plans to roll out next year. Many hoped that TiVo would provide its own service to cable operators, much like it has in a very successful and lucrative deal with satellite provider DirecTV, a unit of Hughes Electronics (NYSE:GMH).
Jeff Hwang pointed out last month that fears of losing the DirecTV connection seem to have passed. This is a good thing, considering that DirecTV has 11 million subscribers, and that number appears to be growing.
And thank goodness for the DirecTV deal. After all, that Comcast is the No. 1 provider of cable services is a little troubling, when you think of the lost potential of a TiVo/Comcast hook-up. Comcast has 21 million subscribers. Had the two teamed up, it could have done a lot for TiVo's dominance in the market, not to mention revenues.
So far, all signs indicate that competing DVR products won't make TiVo's service obsolete, like VHS recorders did to Betamax, unless one of the competing products comes up with some serious innovations. (Allowing you to plug yourself in as an extra on your favorite show? "Choose-your-own-adventure" plot lines? Programming your TV to watch your kids while they watch it?)
Competing DVR products from a company like Comcast, easily accessible with service fees bundled onto a bill that already comes every month, could stunt TiVo's growth. However, right now it seems there's no need to panic; TiVo's got a whole lot of people evangelizing it, and the DirecTV deal provides a great deal of comfort. It still brings millions of potential subscribers to the table, who may very well all talk up the power of TiVo.
Do you think competition will rewind TiVo's potential, or is this company going to continue on the fast-forward track? Tune in to the Fool's TiVo discussion board.
Alyce Lomax welcomes your feedback at [email protected].
