The Challenges Facing TiVo’s New President

May 19, 2003  •  Post A Comment

TiVo is the talk of the town. The digital video recorder service, which enables viewers to pause live TV and fast-forward through commercials, has been called “God’s Machine” by Federal Communications Commission chief Michael Powell. However, after five years, TiVo has fewer than 700,000 subscribers. In addition, cable TV operators have decided to use non-TiVo, unbranded DVR services. For that reason and others, TiVo’s sub growth in the last quarter of 2002 fell short of Wall Street estimates.
So, can TiVo turn buzz into buys? And will it ever land a major cable TV deal?
I recently interviewed Marty Yudkovitz, TiVo’s new president. The former NBC executive VP made a number of surprising remarks, including:
* TiVo doesn’t need to reach critical mass to be a success;
TiVo is “late to the game” in persuading cable operators to license the company’s technology;
* TiVo would consider offering a cable operator an equity stake as part of a licensing agreement.
Here are excerpts from my interview with TiVo’s Marty Yudkovitz:
Swann: What is your top priority as TiVo’s new president?
Mr. Yudkovitz: I have at least a dozen No. 1 priorities. But there is no priority more important than [landing a cable TV deal]. Because [several cable TV operators have already launched DVR services] we are pretty late to the game. So the time pressure increases that priority.
Swann: Can TiVo survive without a cable deal?
Mr. Yudkovitz: Yes. TiVo is on a path to profitability. [Cable TV] is not a matter of life and death. … As we start to reach (1 million subscribers) it will become more apparent to everyone that TV without TiVo will be unacceptable to a growing segment of viewers.
Swann: Without cable, won’t your audience consists almost entirely of satellite TV viewers? (DirecTV, which has an equity stake in TiVo, sells a combo DirecTV/TiVo receiver.)
Mr. Yudkovitz: No. Right now, a strong percentage is coming from satellite and a strong percentage is coming from standalone set-top sales. (TiVo sells a “standalone” receiver at retail that can be used for cable, satellite or broadcast signals.)
Swann: Won’t your stand-alone business dry up if most people have a DVR service in their cable and satellite boxes?
Mr. Yudkovitz: There’s no question that to hit the numbers, we are going to need some of these mass distributors [cable and satellite operators]. But if [cable operators] go down a different DVR path, it doesn’t close the door to us. Consumers are not satisfied with knockoff DVRs.
Swann: Wouldn’t a cable TV operator help DirecTV if it uses TiVo-because of DirecTV’s equity stake in TiVo?
Mr, Yudkovitz: Cable’s main objective is to attract and retain subs. … We can help them do that. …The second thing is that we’re open on a deal basis to almost any kind of conversation with any potential major customer.
Swann: So if a cable operator came to you and said, `Hey, I want to buy 5 percent of TiVo,’ that’s open to discussion?
Mr. Yudkovitz: It’s a whole new game. We’re starting with a blank slate. Everything can be put on the table.
Swann: Let’s say you don’t crack the cable TV market and you never reach more than 8 million to 10 million homes. Can TiVo be successful without reaching critical mass?
Mr. Yudkovitz: Absolutely. Don’t forget, our audience is a high-end audience. If you’re a programmer or advertiser, there are 20 million people that you really want to reach, and TiVo can reach a high percentage of those. That will make us a great buy. … However, I want the biggest number possible. I want this thing to be truly a major force in media.
Phillip Swann is president and publisher of TVPredictions .com. He can be reached at Swann@TVPredictions.com.