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CEO Tom Rogers’ efforts to persuade pay TV distributors to offer TiVo boxes to customers who want online and conventional video worked better than many investors anticipated in the three months ending in April. The company says it generated $8.1M in net income, up from a $10.3M loss in the period last year, on revenues of $107.1M, +29.7%. The top line beat analysts expectations for $86.9M. Earnings at 7 cents a share also topped estimates for 6 cents.
TiVo ended its fiscal Q1 with 4.5M subs, +33.4% from a year ago, although just 21% subscribed to the DVR service directly from the company. The rest come from pay TV providers that want a relatively easy way to provide digital age services. TiVo has deals with 15 operators including Spain’s ONO, Sweden’s Com Hem and the UK’s Virgin Media. Those using TiVo “have seen stronger competitive positions and improved operating metrics, including increased on-demand usage, lower churn, and higher revenue per subscriber,” Rogers says. He’s also optimistic about direct-to-consumer sales of TiVo’s new Roamio DVRs. The company repurchased $110M of its shares in the quarter, for a total of $225M over 15 months.
The DVR pioneer attributes its bottom line shortfall to an “unanticipated” $4.8M charge for its TiVo Research and Analytics business. But CEO Tom Rogers followed the media mogul playbook for dealing with bad news: The company increased its stock repurchase authorization by $100M, which it plans to spend in the current quarter. For the quarter that ended in January, net income of $710,000 contrasts with a $15.8M loss in the period last year due in part to a $54.4M hit for litigation expenses. Revenues came in at $106.3M, +19.7%. Revenues were well ahead of the $84.1M that analysts anticipated. But earnings at a penny a share were short of the Street’s expectation for 4 cents. Total subscriptions increased 33.7% from last year to 4.2M. This also was the first time in six years that the company reported an increase in the number of people who bought DVR service directly from TiVo as opposed to through a cable or satellite company. The number was up by 6,000 from October to 966,000. Rogers attributes the increase to the release of the the TiVo Roamio DVR that enables users to stream their TV programming at home. The company is “finding that TiVo Roamio’s value proposition is being increasingly understood by our customer base,” he says. As for the TRA charge, Rogers says that “the pace of the transition from antiquated TV measurement to something more in line with online measurement has been slower than what we expected” in 2012 when it bought the operation.
Seven of the top 10 cable operators already use Digitalsmiths’ service, the companies say in this morning’s deal announcement. The technology powers TV Everywhere video discovery for set top boxes and consumer electronics devices using iOS and Android as well as Roku, Xbox, PlayStation, and Kindle. What, exactly, does it do? The official boilerplate sounds a little creepy, but here it is: Digitalsmiths “offers personalized video search, recommendations and browsing, social trending, and mood-based discovery which can be used to instantly connect consumers to the most relevant movies, TV shows and live events available, at any time, on any screen including set-top boxes, tablets, smart phones, computers and gaming consoles.” In any event, TiVo CEO Tom Rogers says that the deal “opens new opportunities to commercialize and deploy TiVo’s cloud based services and technologies to operators, in an extremely cost effective way that can be offered either independently or in conjunction with TiVo’s renowned user interface.” What’s more, the deal could open doors for TiVo with large pay TV distributors. Up to now it has been most successful offering its DVRs and technologies to small and medium sized operators that don’t have the wherewithal to provide the state-of-the-art services available from big fish led by Comcast. TiVo tells shareholders not to worry: The deal will “help accelerate TiVo’s long-term Adjusted EBITDA [cash flow] growth.” Also helping the bottom line: Digitalsmiths has more than $20M in …
TiVo has a special relationship with the International CES. In 1999, the company helped to popularize the reputation of what was then known as the Consumer Electronics Show as a showcase for cutting-edge technology when it introduced visitors to the DVR. The device promised to revolutionize television by divorcing TV viewing from the network-dictated timetable, and empowering people to skip over ads. Now about half of all homes have a DVR, and TiVo CEO Tom Rogers is navigating his company through new changes in technology and business that will even more dramatically change where and how people watch TV. Deadline caught up with him at the Las Vegas confab this week to see what forecasts about the medium are real — and which ones are just hype. Here are his thoughts, edited for length and clarity.
DEADLINE: People at CES always sound enthusiastic about the state of TV. You have a different view.
ROGERS: If you walk out on the floor of the Consumer Electronics Show you’re hit by everything that’s cool about the future of television. The reality is that television is still playing total catch-up and is behind the eight-ball compared to where music is to the consumer. What happened to music is that the industry got crushed. But what came out of that was a consumer model where you can get anything out there and get it in streaming form or downloadable form, to any device in an aggragated form, a la carte, personalized. Really, it’s a wonderful model for the consumer. And television is not there.
Listen to (and share) episode 61 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s financial editor talks with host David Bloom about the latest potential entrant, Cox Communications, in the cable TV consolidation sweepstakes that seem to be just about to take off via Time Warner Cable; the uncertain future of DVR maker TiVo despite a terrific quarter; a surprising shakeup at the top of No. 2 event company AEG Live; and a whole new game for Take-Two Interactive, which weeks after the billion-dollar debut of Grand Theft Auto V has bought out investor Carl Icahn, sparking analyst concerns that its stock price has peaked.
When many studios license shows to Netflix they stipulate that the content can’t be distributed in the U.S. through a pay TV operator’s set top box — but that should change, TiVo CEO Tom Rogers told analysts today. Netflix “has clearly risen to the level of a must-have” for consumers who want streamed video. And once Netflix can negotiate changes in its contracts “increasingly we’re hearing operators wanting to include Netflix in their distribution” after years of considering it a threat. It would benefit TiVo if he’s right: Its DVRs can integrate broadband video with conventional cable channels. In September, UK cable operator Virgin Media said that it would include a Netflix app on the TiVo boxes it offers to some of its subscribers – blurring the distinction between the online service and premium channels like HBO. Rogers naturally wants more U.S. cable operators to let TiVo handle their advanced services. Cable “is beginning to pay a price for not having found the right balance [between marketing broadband and video] and not highlighting how video benefits flow from broadband connectivity.” Smaller operators have turned to TiVo while big companies such as Time Warner Cable haven’t. But Rogers says that he doesn’t “see it being sustainable that somebody in suburban Anchorage, Alaska, can have a vastly better advanced television experience than somebody in the media capital of the world living on Park Avenue and 60th Street.”
The 3% jump in early trading stands out on a morning when most stocks are down. Investors are intrigued by weekend reports led by one in The Wall Street Journal that Netflix is talking to cable companies including Comcast about the possibility of making the streaming service available on their set top boxes. The company already has an arrangement like this with Virgin Media in the UK. But the U.S. is a different story. The Journal notes that talks “are in early stages and no deal is imminent” citing “people familiar with the matter.” Pay TV companies have seen Netflix as a rival. It will take a lot to persuade them that it won’t encourage subscribers to cut the cord with cable or satellite TV — or watch Netflix instead of their VOD services. Indeed, last week Liberty Media’s John Malone — the largest shareholder in Charter Communications — urged cable companies to develop their own broadband alternative to Netflix. Brean Capital’s Todd Mitchell says that he doubts Netflix will make much headway with large operators such as Comcast — but might with small ones that “are moving away from managing their own on-demand libraries.” Some are offering subscribers broadband-connected TiVo DVRs in place of a conventional set top box. There’s a school of thought that operators can put up with some video cord cutting if Netflix encouraged more people to subscribe to their highly profitable broadband …
The new arrangement with the UK cable company is a breakthrough for Netflix: It’s the first time the service, built on the Web, will appear alongside traditional cable channels on a pay TV service. Customers still need to pay extra for a Netflix subscription, but it will be accessed via an app for Virgin Media customers who use its set-top boxes from TiVo. It will first be offered to 40,000 Virgin Media TiVo households and will be available to all 1.7M by year end, according to the company that is owned by John Malone’s Liberty Global. Although the deal probably won’t result in a financial windfall for Netflix, its inclusion in a pay TV package “is an important shift in mindset, signifying that [Netflix] is viewed increasingly as another network and less as competition” for distributors, Janney Capital Markets analyst Tony Wible says. Since users can search Netflix offerings alongside traditional TV shows, he adds, “we expect to see higher utilization of the [Netflix] service, which we believe will come at the expense (at least in part) of traditional TV networks, particularly for lesser watched programming.” Investors apparently agree: Netflix shares are up nearly 4% in early trading to $306.
The DVR pioneer today reported Q2 adjusted earnings of $115.4 million, which exceeded analysts’ expectations, and its loss of 9 cents a share was actually a penny better than assumed. Guidance had expected TiVo‘s earnings before taxes, depreciation and amortization to be in the range of a $1 million or even $2 million loss. In after-hours trading, the stock was up and down and is ahead 2.1% right now. Boosted by recent legal settlements, the company reported its highest quarterly net income in its history with a profit of $268.9 million in the quarter, or $1.96 a share, on revenue of $100.09 million. Today saw a marked change from the same period a year ago, when TiVo lost $27.7 million, or 23 cents a share, on $65.3 million in sales. “This was a very strong quarter for our business. We recorded the highest revenue and highest profit ever, continued positive momentum in our operator business, launched the new TiVo Roamio, which includes significant product enhancements that benefit both our retail and operator businesses, and we brought our pending litigation with Cisco and Motorola to an end, significantly strengthening our financial profile,” said TiVo president and CEO Tom Rogers in a statement. Today’s report come just less than three months after TiVo disclosed it had accepted $490 million in settling its patent-infringement suits with Motorola, Cisco, and Time Warner Cable. While that brings …
TiVo says its new Roamio DVRs are like “Roku, Apple TV, Slingbox, Google TV, your cable DVR – rolled into one.” The suite of products includes three devices which can record up to six shows at once and store up to 450 hours. The bigger news is that via the Roamio devices, subscribers will soon be able to stream to iPhones and iPads in or out of the house. Shows can also be downloaded to mobile devices for later viewing. Although the out-of-home option is not available at launch, TiVo president and CEO Tom Rogers touted its arrival saying, “Now, wherever you roam your TiVo Roamio is there. In the next room, in the kitchen, in a hotel room across the world – connecting you right to your living room TV recordings.” The basic Roamio will record four shows simultaneously and store up to 75 hours; it requires TiVo Stream be purchased separately for streaming to mobile devices. Roamio Plus can record four shows at once and store up to 150 hours while Roamio Pro can record six shows and store 450 hours. The latter two have built-in streaming capability. The devices retail for $199.99, $399.99 and $599.99, respectively and went on sale today. The software has also been upgraded to make it easier to find and record or stream shows via recommendations and a channel guide …
Shareholders at TiVo’s annual meeting yesterday approved the company’s $11.5M compensation last year for CEO Tom Rogers, rejecting pleas by two leading proxy advisory firms to challenge the salary package. Nearly 60% of the votes cast for or against supported the board’s award for Rogers while 40% opposed in the federally mandated “Say On Pay” advisory vote, according to an SEC filing today. Most CEOs win overwhelming support. Rogers’ pay became an issue after advisory firm Glass Lewis gave TiVo an “F” grade for failing to adequately link pay to performance. Institutional Shareholder Services raised similar objections, and said that TiVo benchmarked Rogers’ pay against CEOs at much larger companies. The board said that Roger’s compensation reflected the company’s “strong” operating results, and the 24.9% appreciation in the stock price during the fiscal year. They also said that they made a “strong linkage between pay and performance.”
This may sound counterintuititve to those who see Netflix as a haven for cord-cutters, or viewers who want an alternative to primetime’s current sitcoms, dramas, and reality shows. But TiVo Research and Analytics says today that data from 9,956 TiVo subscribers collected in May shows that there’s “no significant difference” between those who subscribe to Netflix, and those who don’t, in the amount of time spent with the 28 most-watched networks. Netflix “offers a way for TV lovers to watch more of the kinds of programs they love,” says TRA chief Mark Lieberman (no relation). “The future of television may tell a different story, but as of today we’ve found that the Netflix subscribers in our study are not watching less traditional TV.” Other tidbits: Netflix users who viewed its series House Of Cards watched 85% more HBO than non-Netflix households. House Of Cards viewers also watched Showtime’s Homeland 125% more than those who don’t subscribe to Netflix. About 57% of the homes in the sample use Netflix. About half said that they subscribe to Amazon Prime, while 18% have Hulu Plus — and 8% have all three.
Two of the most prominent proxy advisory firms, Glass Lewis and Institutional Shareholder Services (ISS), want investors to oppose TiVo CEO Tom Rogers’ package at the July 31 annual meeting in Menlo Park, Cal. The so-called “Say On Pay” vote is strictly advisory, but shareholders rarely break with management. A rejection would be deeply embarrassing for Rogers and the board. Directors agreed to a $11.5M compensation package for Rogers for the year that ended in January 2013, up from $6.7M in 2012 and $1.7M in 2011. TiVo shares appreciated 24.9% during the last fiscal year. But Glass Lewis gives TiVo an “F” grade for failing to adequately link pay to performance. TiVo “does not utilize a sufficiently objective, formula-based approach,” the firm says. It adds that directors inflated Rogers pay by benchmarking it to compensation for CEOs at companies that are at least twice TiVo’s size measured by annual revenues. ISS raised similar objections, and listed 23 companies that it says would provide more appropriate benchmarks.
Listen to (and share) episode 38 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s Executive Editor talks with host David Bloom about the recent trip by Microsoft’s Steve Ballmer and Nancy Tellem to romance Hollywood moguls with the Xbox One ahead of next week’s E3 videogame convention; Google’s pitch for movie marketers for their ad dollars; whether Amazon Prime can move beyond the shadow of Netflix with deals such as this week’s Viacom arrangement; and why Wall Street punished Tivo’s stock price after its latest lawsuit settlements.
This is as good a theory as any I’ve heard today for TiVo‘s startling and mysterious decision to settle two patent-infringement cases for far less than anyone expected, which resulted in a 19% drop in its stock price. It seems that last month the European Patent Office revoked TiVo’s patent for the process that enables a DVR to record one show while you watch another, Susquehanna Financial Group’s Thomas Clapps discovered. That “appears to be the same … patent that was at issue” in TiVo’s disputes with Motorola and Cisco. The ruling was made May 17 and posted on the European Patent Register website on May 29 — which was “in the middle of pretrial preparations for the Motorola case” originally scheduled to begin June 10. TiVo said this morning that it accepted $490M to settle its disputes with the two rival DVR manufacturers in cases that also involved Time Warner Cable. The news led Barclays’ Kannan Venkat to lower his stock recommendation for TiVo to “equal weight” from “overweight,” noting that the settlement “implies that TiVo received much less per subscriber than any of its past settlements” with EchoStar/Dish Network, AT&T, and Verizon.
Shares plummeted about 18% in early trading after the DVR pioneer disclosed that it accepted $490M — far less than the Street anticipated — to settle its patent infringement suits with Motorola, Cisco, and Time Warner Cable. TiVo says that it will use the cash to double its stock repurchase effort, to $200M, and extend it for two years to August 2015. Still, analysts were stunned; many had expected TiVo to collect twice as much to settle just the Motorola case which was scheduled to go to trial next week. Shares rose 8.3% yesterday when news of a settlement broke. Lazard Capital Markets’ Barton Crockett downgraded TiVo to “neutral” this morning saying that the $490M payment is “way below our estimate of $1.7B to come from both” cases. Susquehanna Financial Group’s Thomas Claps says the deal ”indicates that TiVo was more fearful of its litigation prospects than it appeared.” He adds that “TiVo has spoken at length about how this [Motorola] case is bigger than [settlements with] EchoStar, AT&T and Verizon combined — and those cases resulted in $1B+ cash to TiVo.” Company CEO Tom Rogers cast the settlement as a clear win for his company. It includes licensing agreements with Motorola owners Google and Arris, as well as Cisco, and Time Warner Cable. That “further underscores the significant value our distribution partners derive from TiVo’s technological innovations.” In addition, he says, the cash “significantly enhances our already strong …
No details on the terms yet, but TiVo stock closed +8.3% after the court in Texas where the trial was to begin on June 10 confirmed that the case has been settled. TiVo had alleged that Motorola DVRs used by Time Warner Cable infringed on its patents for common processes including the ability to watch one show while recording another. Susquehanna Financial Group’s Thomas Claps had forecast that TiVo would prevail with a settlement that could go as high as $1B. Brean Capital’s Todd Mitchell said recently that “TiVo is well positioned for this case based on precedent, and we estimate potential damages could be as high at $800 million.” Prior to this case, the DVR pioneer was batting 3-for-3 in similar patent cases, winning settlements with Dish Network, AT&T, and Verizon. TiVo has no comment on the case. It will face off with Time Warner Cable again next year in a similar patent dispute involving Cisco.
The DVR pioneer says that it added 277,000 subscriptions from cable and satellite companies, the biggest increase from pay TV providers in more than seven years. And although TiVo continues to spill red ink, it wasn’t as bad as the Street envisioned. The company says it had a net loss of $10.3M in the three months that ended in April, down from a $20.8M loss in the period a year ago, on revenues of $82.6M, +21.8%. The top line far exceeded the $61.9M that analysts expected. The net loss at 9 cents a share also beat predictions for a 14 cent loss. The loss includes $10.9M in litigation expenses as TiVo prepares for a potentially important copyright infringement trial against Motorola which is due to begin on June 10 in Texas. TiVo had 3.4M subscriptions at the end of April, +8.1% vs the end of January. The growth is all due to sales of TiVo subscriptions by pay TV companies including UK’s Virgin Media, Spain’s ONO and U.S. providers including DirecTV and Suddenlink. Just 29.6% of customers receive the service directly from the company to a TiVo box — the lowest percentage ever. Still, CEO Tom Rogers says that “it is clear from our results that our vision for the future of TV is playing out as we expected it to.” He projects that, even with legal expenses, the company will be cash flow positive in the year that ends …