Motley Fool Stock Advisor
Plenty of investors are skeptical over TiVo's business model, myself included. When making sound investment decisions, it's crucial to gather facts and employ objective analysis. It helps to go to the source itself -- TiVo's executive leadership. In the latest Fool On Call, join me in an in-depth look into the company's latest quarterly earnings conference call. We'll investigate these three areas:
- The TiVo brand power post-litigation
- A new revenue stream via advertising solutions
- Differentiation through product innovation
King of the DVR hill?
In the opening remarks of the call, CEO Tom Rogers stated, "Our progress on a number of initiatives during the quarter helped us to solidify our undisputed standing as the only brand name in the DVR marketplace, the only DVR-based advertising solution, and the only DVR to offer users a totally differentiated set of features relative to the generic DVRs that are currently on the market." I'll explore these three points in more detail.
On the topic of TiVo being the DVR marketplace's sole brand, we must note the recent patent litigation victory with EchoStar
We will want to see whether TiVo can continue capitalizing from its brand positioning by selling more hardware units and inking additional licensing deals. It was pointed out during the call that there was a "net decline" in the number of TiVo subscriptions through DirecTV
As far as hardware goes, the deal with RadioShack essentially doubles its current brick-and-mortar retailing presence. Additionally, TiVo just entered its first agreement with a DSL provider, BellSouth
DVR-based advertising solutions
TiVo's ability to attract additional licensing agreements relies upon two points: DVR-based advertising solutions and a unique feature set that separates it from generic DVRs. The company created a new division called Audience Research and Management (ARM) to provide real-time "second-by-second" data to advertisers, an unprecedented level of detail.
Advertisers are scrambling to join up. Recently, TiVo signed its second agencywide partnership with Omnicom Media Group
Differentiation through feature set innovations
TiVo will also strive for differentiation by adding new features to its service. Beating EchoStar in the courtroom is only part of the battle; winning customers to the TiVo brand in the face of generic competitors is a whole other challenge.
The company wants to offer an attractive user interface with a deep feature set, all at a "modest up-charge relative to what the [price of the] generic DVR is," states Rogers in response to one analyst. Look for new content like TiVo Guru Guide, TiVoCast, and TiVo KidZone to help separate its services from the pack.
Foolish final analysis
Beyond product developments to its feature set and user interface, TiVo is hoping its new hardware offerings, like a dual-tuner unit to record two shows simultaneously, will help it capitalize on its status as the only DVR brand available to TV viewers. Time will tell whether inroads made in the cable and DSL markets, as well the formation of an entirely new revenue stream with its revolutionary advertising analysis biz, will be enough to stop the bleeding of red ink on its quarterly reports.
Exciting developments are under way at TiVo, making this show one definitely worth watching. But as encouraging as all of these announcements sound, perhaps it's the "Doubting Thomas" in me that keeps from getting too excited about a company until it can prove it has a sustainable business model in place to bring long-term value to shareholders.
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