By SETH SCHIESEL
Published: October 20, 2003, New York Times.
Wall Street and the television industry are taking note. TiVo pioneered the DVR and the TiVo brand - like Frisbee, Kleenex and Xerox - has become synonymous with an entire product category. Nonetheless, TiVo's original business of selling stand-alone DVR boxes, along with a monthly support service, appears in danger of being eclipsed by products that are much less expensive for consumers and are integrated with devices that many consumers are already comfortable with, like television set-top boxes.
The new DVR-ready set-top boxes offered by cable companies generally cost consumers nothing upfront and add about $10 to a monthly cable bill. That compares with having to pay at least $200 upfront to buy a stand-alone TiVo recorder and, in most cases, taking on a $12.95 monthly subscription.
And stand-alone digital recorders - not only from TiVo but also from smaller companies like ReplayTV, which is owned by Digital Networks North America. - often require cumbersome connections to existing set-top boxes and televisions.
The Yankee Group estimates that in four years, almost 25 million homes will have digital video recorders and that about two-thirds of those will be DVR's that have been integrated into satellite or cable set-top decoders. Even now, while TiVo is the best-known DVR brand, only about 17 percent of the nation's DVR's are stand-alone TiVo-brand units, according to Yankee Group estimates. By far, the leading DVR provider is the EchoStar Communications Corporation, the No. 2 satellite-television provider after DirecTV. EchoStar does business as the Dish Network and has developed a digital recording system, which it combines with a satellite television receiver. Last month, EchoStar announced that it had sold its one-millionth DVR unit.
"We believe that over time, DVR technology is going to be the standard," said Mark W. Jackson, an EchoStar senior vice president. "Everyone is going to have it. It's just a question of when - and who they get it from, of course."
Time Warner Cable, the No. 2 cable-television provider behind the Comcast Corporation, now offers set-top boxes with built-in digital recording in 28 of its 31 local markets. The company expects to soon announce that it had around 250,000 DVR subscribers at the end of the third quarter.
Meanwhile, Comcast has been concentrating mostly on video-on-demand, which allows customers to view programs stored on a centralized server operated by the cable company. Still, Comcast is also offering the Scientific-Atlanta digital recorder in a few markets and hopes to widely roll out and market a new DVR-enabled set-top box from Motorola early next year.
Those threats are a big reason why TiVo's shares have lost 40 percent of their value in recent months, closing down 31 cents, or 3.5 percent, at $8.67 on the Nasdaq on Friday. That is off their 52-week high from July of $14.51.
That same danger is also why TiVo, which is based in Alviso, Calif., is scrambling to remake its business model. While sales are expected to be robust this holiday shopping season, the long-term viability of stand-alone DVR's appears dubious. In response, the company is reinventing itself as a supplier of software to other companies that want to make their own DVR's.
