Suddenly, TiVo (NASDAQ:TIVO) is relevant again. Last year, the stock might have been viewed as nothing more than a patent play, but with a new DVR and a profitable quarter, TiVo's operating business is worthy of discussion.
In the immediate future, there are lot of things to like about TiVo. Longer term, I have my doubts.
Roamio: the best cable box ever?
It wouldn't be unfounded to call TV's Roamio the best set-top box ever created. The Roamio is a combination of an Apple (NASDAQ:AAPL) TV, a whole-home DVR, and a Slingbox.
With the Roamio, consumers can record hundreds of hours of HD content (six shows at once) and beam that content to their mobile devices in and out of their home. The Roamio also brings in Internet-video services like Netflix and Amazon, allowing subscribers to access all of the content they pay for on one device.
But it doesn't come cheap. The fully featured Roamio Plus costs $400, and that's on top of a $15 per-month subscription fee. Cable companies often charge comparable fees for their own equipment, including the monthly charge, but new subscribers usually receive hefty discounts (as I write this, DIRECTV is offering its proprietary DVR free to new subscribers).
Sales overseas and a bucket of cash
But that's the U.S. Overseas, TiVo's opportunity could be greater. In the U.K., TiVo partnered with Virgin Media, and now 44% of Virgin Media's subscribers -- about 1.7 million -- have TiVo. Spain's ONO also offers TiVo, and a quarter of its subscribers have the product.
Meanwhile, while the patent story has fallen by the wayside (there are no more major corporations left for TiVo to sue), the cash generated from those settlements has resulted in an impressive balance sheet. TiVo currently has about $1 billion in the bank, or nearly $8 per share in cash.
Microsoft moves into TV
I can't argue with TiVo as it stands right now, but over the longer term, the company looks to be facing competition from a number of heavy-hitting tech giants. TiVo excels at standing in between consumers and cable providers, but other companies, such as Microsoft (NASDAQ:MSFT), are about to enter that space.
The upcoming Xbox One is far more than a video-game console. Rather, as its name suggests, it aims to be the one device consumers turn to for all of their entertainment needs. When Microsoft unveiled the device, it actually focused more on its TV capabilities than its gaming prowess.
By attaching an existing cable box to the Xbox One, cable subscribers can access their content through hand gestures and voice commands. Simply saying, "watch HBO" will change the channel. The Xbox One serves up recommendations, and lets owners see trending shows and movies. It allows for multitasking, Internet browsing, and live voice calls. Microsoft has partnered with the NFL for fantasy football, and plans to roll out additional features in the future.
At $500, it's more expensive than the Roamio, but unlike TiVo's offering, it can play the latest console games. For someone with the money to spend on the ultimate TV experience, the Xbox One might be the better buy.
What does Apple have up its sleeve?
Like TiVo, Apple TV doesn't play games. But a future device -- a long-rumored, all-in-one Apple television set -- could. For now, Apple's plans for the TV remain a mystery, but analysts believe the King of Cupertino will roll out a TV set at some point in the not-too-distant future. Apple's management has said it has several new products planned for this year and next, and if the hints dropped by CEO Tim Cook are any indication, a TV set could be one of those products.
Since 2011, there have been reports that Apple was working to offer channels on an a-la-carte basis. Rather than buy a bundle of channels, a subscriber could theoretically pick and choose the channels they want.
But that might be too much to ask for. No matter how much consumers hate it, bundling doesn't seem like it's going anywhere any time soon. Instead, Apple may be able to offer a handful of channels on an a-la-carte basis -- HBO, ESPN -- through access to its apps. According to Quartz, Apple is in discussions with those networks for such a deal.
Until Apple unveils the TV -- if it ever does -- it's too early to declare it a winner. But given Apple's recent track record (revolutionizing the smartphone, popularizing the tablet), I think it has a good shot at reinventing the TV.
Investing in TiVo
Right now, there's a lot to love about TiVo. The company has tons of cash, there are opportunities overseas, and the Roamio is the best product in its category. Yet I can't help but wonder if the Roamio is sort of like an amazing VCR released in the year 2000. It might be the best product for the current TV paradigm, but that paradigm looks like it's about to be shattered.
To date, TiVo has excelled at offering the ultimate TV experience, and with its new Roamio, it continues to deliver. Still, I'm concerned for a small company when big tech giants like Microsoft and Apple appear poised to enter the market.
Sam Mattera is short shares of TiVo. The Motley Fool recommends Amazon.com, Apple, DIRECTV, Google, and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Google, Microsoft, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.