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Exec exodus puts TiVo on pause

Prexy Yudkovitz ankled DVR co. Monday

Just a few weeks after topper Mike Ramsay announced he’s ankling, TiVo has lost its No. 2 exec and key liaison with Hollywood. The exit of prexy Marty Yudkovitz, a former NBC exec who joined TiVo less than two years ago, sent the DVR pioneer into further disarray Tuesday and its stock down 4%.

Yudkovitz, who resigned Monday, had been charged with forging distribution deals with cable and satellite companies and generating new revenue from advertisers. He is widely regarded as having succeeded only in the latter task.

Company is not looking to replace Yudkovitz and reps said the decision doesn’t signal a change in policy. “There’s no strategic shift indicated by this,” vice chairman Tom Rogers told Daily Variety. “This was the right time for him to make his intentions known.”

Yudkovitz’s resignation came on the last day of TiVo’s fiscal year.

Many analysts, however, took his ankling as further evidence that TiVo has all but given up hopes of moving from a niche player to a mass-market product with broad distribution via partnerships.

“That’s consistent with their new content strategy that seems to place them in more of a competitive role with pay television providers rather than a potential partner,” said William Kidd, an analyst at Vintage Research.

With Ramsay planning to serve only as chairman once a new CEO is named, TiVo will be taking on new leadership just as it faces unprecedented competition from generic DVR services.

Company took its biggest blow a few weeks ago at the Consumer Electronics Show, where DirecTV revealed its DVR, which it will soon start marketing as a lower-cost alternative to its TiVo-branded DVR.

The satcaster accounted for 1.4 million of TiVo’s 2.3 million subscribers as of Oct. 31.

While DirecTV is contractually obliged to continue offering TiVo through 2007, it will focus future marketing exclusively on its service.

When Yudkovitz joined TiVo in May 2003, company had very little advertising revenue and was hoping to jumpstart growth via new partnerships beyond one it had already signed with DirecTV.

Exec was unable to sign any deals, though, in part because TiVo wasn’t able to enforce its patents and generic competitors stepped in to offer cable providers and satcasters similar services at prices TiVo was unable to match.

As a result, investors became increasingly concerned as TiVo’s growth continued to rely primarily on DirecTV. In response, TiVo invested $50 million last year in a marketing campaign to boost its retail sales. As of Oct. 31, that effort netted only modest gains at the low end of the company’s guidance.

“That has forced TiVo to spend heavily to build up its retail business to remain relevant from an investment point of view,” noted Kidd. “But it’s a difficult road to sell DVRs when cable and satellite are giving them away.”

Yudkovitz in large part succeeded, however, at turning TiVo from a company feared by Hollywood because it enables users to skip commercials to one so trusted that many studios now advertise on the service. Though they’re not yet big enough to be broken out in TiVo earnings, ad dollars have become a growing part of the company’s business. And it is developing new ways to reap them, such as TiVo-inserted blurbs over commercials through which users fast-forward.

“If you look at how TiVo has gone from something of a pariah just a year ago to a service that’s increasingly part of their future media planning, it’s clear Marty made a lot of progress on that front,” Rogers said.

Rogers, former president of NBC Cable, added that he’s confident the bonds Yudkovitz forged for TiVo with Hollywood will remain firm. Both Rogers and current NBC U Cable prexy David Zaslav will aid in that effort.

NBC is a minority shareholder in TiVo and appointed Zaslav to the board.

Though Rogers insisted cable partnerships remain a possibility, TiVo’s new strategy debuted at CES, dubbed Tahiti, positions it as a premium competitor to generic pay TV DVRs. Tahiti includes content downloaded from the Internet and home-networking connectivity that TiVo is hoping will make its service worth additional money to consumers.

TiVo currently charges $12.95 a month on top of the cost of its hardware, while cable and satellite providers are giving customers DVRs for free and typically charging service costs of $5 a month or less.

In a statement, Yudkovitz said he decided to ankle primarily to end the strain of commuting between coasts and to spend more time with his family. Before joining TiVo, he previously served as an exec veep at NBC, where he helped launch CNBC and MSNBC. He will continue to consult with TiVo for an unspecified period of time.

TiVo shares closed at $3.84 on Tuesday. Its stock is down 64% from a year ago.

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