Comcast Accord Gives TiVo a Lift

Mar 21, 2005  •  Post A Comment

Talk about a change of luck.

After largely being left for dead by Wall Street amid management turmoil and a cloudy future due to a shaky relationship with a key partner, digital video recorder maker TiVo got a huge boost last week when the company struck an agreement to develop a customized version of the TiVo service for cable giant Comcast Corp.

Under the deal, whose financial terms were not disclosed, TiVo will develop customized software for Comcast’s current DVR platform and incorporate that technology into the cable company’s existing network. The service will be marketed with the TiVo brand and should be available in the majority of Comcast’s markets by mid- to late 2006.

News of the alliance sent TiVo shares soaring more than 60 percent Tuesday morning as investors reacted to the news that TiVo had finally partnered with a cable company. Though the shares dropped from the week’s highs by Friday, TiVo’s stock was still more than 40 percent higher than where it was at the start of the week.

“The thing that this [deal] clearly demonstrates is that TiVo is here to stay,” TiVo Vice Chairman Tom Rogers said in an interview. “This puts away that talk that TiVo has lost its leadership position.”

Mr. Rogers noted that the Comcast deal will enable the cable operator to extend the functionality of its DVRs beyond the simple playback of recorded programming found on most cable companies’ DVR offerings. TiVo is developing technology that makes recorded content portable and enables people to use their PCs to remotely program their DVRs.

The alliance is a huge boost for TiVo, whose future had clouded in recent months.

Though the company doubled its subscriber base to more than 3 million in the 12 months ended Jan. 31, much of that growth came from its alliance with satellite operator DirecTV Group; the long-term future of that partnership is in doubt. DirecTV, which in late 2003 came under the control of Rupert Murdoch’s News Corp., has repeatedly said it plans to rely less on TiVo for DVR technology in favor of software from NDS Group, a TiVo rival that is controlled by News Corp.

On top of that, TiVo has experienced management turmoil, with Chairman and CEO Michael Ramsay announcing in January that he is stepping down as CEO, and, a few weeks later, President Martin Yudkovitz announcing he too is resigning.

Until its deal with Comcast, TiVo was having a difficult time breaking into the world of cable, whose players have been more keen on developing their own DVR solutions. Now, with Comcast as a partner, TiVo has the possibility of getting its products in front of the 21.5 million Comcast subscribers.

Mr. Rogers said the Comcast deal was the result of persistence on the part of former President Martin Yudkovitz and Mr. Rogers’ years-long relationship with Comcast CEO Brian Roberts and Chief Operating Officer Stephen Burke.

“It was increasingly clear to us the extent to which we could be a part of advanced digital television offerings of the biggest distributor [in the United States],” Mr. Rogers said. “That put the dialogue [with Comcast] on a different footing. And given our history of trust, we could work cooperatively.”

The addition of the TiVo service will enhance Comcast’s DVR product, which is currently developed by its main set-top box maker, Motorola, which until recently had been slow to unveil a DVR-equipped cable box. Comcast last week struck a deal with Motorola to buy $1 billion worth of set-top boxes and develop and license set-top box software for Comcast and other cable operators.