By Brian L. Clark
As much as we like TiVo and its new player, the company needs to face reality: Production shortages and an extraordinarily high price have plagued the Series 3's release. How are they selling? No sales figures are available for public consumption, but there are lots of other ways to tell how TiVo is faring.
A good indicator of a product's reception can come from the stock market. At the moment, TiVo stock is about $6.61, down significantly since the Series 3 was brought to market on September 13th and far short of analysts' median expectation of $9.50. Stock price reveals investor and analyst sentiment toward the fortunes of a particular company. Apparently, they're not crazy about TiVo's performance.
Another indicator of confidence is...
the number of shares corporate executives and other insiders are actually buying. While selling shares can mean any number of things, actually buying shares is a pretty fair indication of executive confidence. Over the last six months, the percentage of TiVo's net insider shares sold significantly outweighs the number of insider shares actually bought, according to Yahoo! Finance. And that leads me to question just how much faith company insiders actually have in its future.
The CBS deal does demonstrate the company's willingness to do something, anything that allows it to compete with cable providers and emerging video services like YouTube. The question is, will it matter? When TiVo first came to market I thought the best way for the company to survive was to become a software vendor that provided solutions to box makers like Scientific Atlanta or Motorola. To that end, TiVo is to begin supplying boxes to Comcast later this year. News on that front has been sparse, so who knows when (and if) it will actually happen. TiVo also recently announced an agreement with Cox cable. Unfortunately, these deals feel like too little, too late.
Then there's the issue of subs. Frankly, TiVo's 4.5 million subscribers can only take it so far. And the cost of acquiring new subs has increased by nearly 50 percent in the last year. Not good, particularly since the vast majority of its current subscribers came from the recently ended partnership with DirecTV. As a result, analyst Michael Kelman of Susquehanna Financial says TiVo's best long-term prospects are in advertising. Ah, sweet irony—the service that allowed you to skip ads now needs advertising to survive. All that remains is to convince media buyers TiVo really has found the religion.
Which brings me back to the Series3, an $800 box that to me, represents another shovelful of dirt on TiVo's grave. "It's a premium product," says NPD Consumer Electronics Analyst Ross Rubin. That's a problem, he adds, because three-quarters of DVRs are coming directly from the cable and satellite providers. In other words, TiVo is losing its bread and butter to bigger players with far deeper pockets.
In fact, I'll let this post from the PVRwire.com message board speak for the majority of TiVo fans. Keep in mind this is from a TiVo supporter:
"$799??? Are you serious? TIVO...what's up with that? I have a cable box that already has twin HD tuners and it only costs me 12 bucks a month...."
Alas, it seems that while TiVo fiddled, cable companies found box options elsewhere. As a result, says Gene Munster, Senior Analyst at Piper Jaffray, the outlook for the company is pretty grim. "They're using the legal system to try to protect what they invented," he says, but they face "an uphill battle."
So what is TiVo's future? "They still have 4.5 million subscribers," says Munster. "So I do believe they'll be part of a larger company." After all, he adds, both Microsoft and Apple are looking to the living room, where TiVo has a foothold. With Apple's announcement of downloadable movies and the January introduction of iTV, that speculation is likely to increase.
But should techno geeks consider dropping $800 on a box that may be useless a few years from now? I wouldn't, no matter what the company tells you. And I'm not alone. Says Munster, "I wouldn't be surprised, if you look three years down the road, and TiVo's part of the history books."
Adds Kelman, "Sometimes, the best product doesn't always win."