DVR company pulls forward at last

New TiVo chief exec Tom Rogers didn’t pull any punches in his first earnings call with analysts, outlining tough challenges for the DVR pioneer’s future, even as company reported its first-ever profit.

Late in the call, TiVo execs had good news to share as they seemed surprised to learn news was out of a trial partnership with Cablevision through which the cabler will offer TiVo as part of a package deal with digital cable and high-speed Internet to lure satellite customers.

But the overall picture from Rogers, the former NBC Cable prexy who took the reins of troubled TiVo six weeks ago, was a sober one. Topper outlined major challenges, including the loss of partner DirecTV, signing new distribution deals and driving sales in the short term.

As company waits for deployment with partner Comcast to start next year and other deals it is working on to pan out, Rogers is refocusing on retail sales to grow subscribers.

As a result, TiVo expects to shift from a small profit last quarter to a loss in the current quarter. Company had told investors it would reach sustained profitability by the end of the year, a goal it has now abandoned in place of more marketing spends and subscriber growth.

Pause on fast forward

In the long run, Rogers outlined a strategy in which TiVo’s success will be driven by its advertising solutions, through which it is already enabling marketers to run interactive ads in a DVR environment where most users fast forward through commercials.

“We see a model driven by mass deployment, monetized through advertising, and further enhanced with alliances and partnerships in the media industry with those who see TiVo as a way to realize their own ambitions in the TV marketplace of the future,” he explained.

Explaining the path that will take TiVo there, Rogers took implicit digs at priorities of former CEO Mike Ramsay. New topper said TiVo has been too slow to respond to the marketplace and didn’t have enough resources devoted to retailer relationships and marketing, with too much internal emphasis placed on engineering.

“We’re a small company in a sea of very big companies, and speed is a critical factor in our ability to make progress,” Rogers told analysts.

He was also critical of DirecTV’s decision to market its own DVR in place of TiVo’s, repeatedly calling himself “perplexed” by the move and noting that the partnership has generated a combined 2.3 million subs.

For its part, satcaster is clearly betting customers won’t mind the switch to a generic DVR, especially one that it can offer at a lower price.

But while retail sales and distribution are his main focuses, Rogers said maintaining innovation is also important so TiVo is viewed as superior to the generic DVRs offered by most cable operators and satcasters.

New deals

Besides the Comcast alliance and Cablevision trial partnership, TiVo recently signed distribution deals with National Cable Television Cooperative, a network of independent cable operators, and Cebridge Connections, the country’s 11th biggest MSO.

Rogers said talks are ongoing with numerous large- and medium-sized cable companies.

For the quarter ended July 31, TiVo had net income of $240,000, up from a $10.8 million loss a year ago, on revenue of $39.3 million, about even. Revenue from subscriptions was up 46% as TiVo has increased its customer base, but revenue from sales of its hardware fell sharply.

Company added 40,000 of its own subs last quarter and 214,000 with DirecTV. Total was down about 12% from last year.

Sub count is now 3.6 million, with 1.3 million owned by TiVo and generating significantly higher monthly fees for the company.

As sales and marketing costs increase, TiVo is expecting to lose $20 million-$25 million in the current quarter, with subscription revenue up slightly to $41 million and $43 million.

With little information on DirecTV’s plans to transition to its own DVR and its marketing plans changing, TiVo changed its policy to no longer provide guidance on sub adds, a move sure to anger Wall Streeters always eager for more information.

After rising 5% to $6.12 before earnings were announced, TiVo shares were down 10% in after-hours trading.

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