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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.
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.
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.”
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.”
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.
Unlike in computers and the Internet, the TV industry “hasn’t had an upgrade to its look and feel for quite a long time,” TiVo CEO Tom Rogers says. Three guesses what he wants pay TV providers to do to fix that. Although many people still think of the DVR pioneer as a seller of boxes, “we are in the business of distributing the user experience” which increasingly comes from pay TV providers who port TiVo software and interface into other manufacturers’ hardware. Indeed, Rogers says that TiVo loses money on most of the boxes it sells — except for the very high-end ones that can record as many as four shows simultaneously. That’s been popular because “we’re finding that a lot of people watch Sunday night television like they’re going to Costco” — stocking up on shows to view later in the week. TiVo’s had the most success with small and mid-sized cable companies. The big guys want to design their own user interfaces. But TiVo now has deals to offer software and services with nine of the 21 top pay TV providers, and Rogers says more will come. “We were viewed as the guys who had been rejected by the cable industry…We reinvented the notion of what TiVo should be.” Rogers also is optimistic about what seems to be his company’s main business: Suing others for patent infringement. TiVo’s suit against Motorola Mobility goes to court this …
TiVo’s own data shows that its users can’t wait to skip past ads. But unlike Dish Network’s Charlie Ergen — who has infuriated the media industry with his Hopper DVR that helps viewers to automate the process — TiVo CEO Tom Rogers keeps looking for ways to please everybody by making advertising more palatable. That brings him back to an idea that’s at least as old as the Full Service Network, Time Warner’s failed interactive TV experiment in the 1990s: TiVo says today that it is uniting with PayPal to offer viewers opportunities to instantly buy products that they see in certain interactive ads. If you own a TiVo DVR, or receive its service via a pay TV provider, you’ll be able to “instantly purchase products with just a few clicks of the remote after an easy, one-time account setup,” says TiVo GM for Content and Media Sales Tara Maitra. “PayPal’s expertise in online payments, customer service, and working directly with merchants and sellers makes the entire payment process easy and trustworthy and will create a valuable experience for TiVo users and advertisers.” PayPal will take care of the transaction and the advertiser will handle fulfillment.The DVR company says that it will sound out advertisers to develop PayPal-enabled TiVo ads in time for the fall 2012 television season. Will it work? I’m pessimistic. People who want to shop from their living rooms can easily turn to QVC or HSN, or …
TiVo‘s stock price is down about 2% in after-market trading — following a 3% drop earlier today. The DVR pioneer ended its fiscal Q1 in April with a net loss of $20.8M, down from a $139M profit in the period last year, on revenues of $67.8M, up 48.1%. (Last year’s profit included $175.7M from Dish Network as part of the settlement of TiVo’s patent infringement suit against the satellite company.) The revenue figure was far ahead of the $54.9M that analysts expected. But the loss exceeded the maximum of $20M that TiVo projected three months ago. The 17 cents a share deficit also exceeded the 15 cent loss that the Street anticipated. TiVo ended the quarter with 2.5M subscribers, up 206,000 from the period that ended in January. But all of the gains came from cable and satellite companies offering TiVo services. The number of people paying TiVo directly declined by 29,000 and now represents 43.5% of its total customer base. The company’s losses will increase to as much as $30M in the current quarter, TiVo warns. Research and development costs should rise as the company develops software and products for pay TV providers. Also, the company expects legal expenses to increase due to its patent infringement cases against Verizon, Motorola, and Time Warner Cable. CEO Tom Rogers, who’s eager to line up licensing deals with pay TV providers, says that TiVo plans to launch …
It’s hard to begrudge TiVo CEO Tom Rogers for sounding cocky on a day when his company’s stock shot up 10.1%. That was the result of last night’s announcement that AT&T agreed to pay $215M to resolve the DVR pioneer’s patent infringement law suit. The victory, following a similar one last year with Dish Network, means “we won’t hesitate to be as aggressive as we need to be” with other challenges including one against Verizon, Rogers told bankers and analysts at Citigroup’s Global Entertainment, Media and Telecommunications Conference. The news helped to support his larger theme that TiVo has finally turned the corner after years of declining subscriptions and financial losses. “We are getting much, much closer to our goal of EBITDA (cash flow) profitability,” Rogers says. TiVo subscriptions will rise as the company establishes itself as an ally for cable and satellite providers who feel threatened by Google and Apple’s efforts to break into the TV business. Earlier Wednesday Charter CEO Mike Lovett told the Citigroup audience that his company’s plan to offer TiVo DVRs is “a game changer” and “a way to take it to the
UPDATE, 3:10 PM: TiVo told analysts in a conference call that litigation expenses will grow as the company gears up for battles to defend its DVR patents. The U.S. International Trade Commission holds a hearing in December. In January TiVo’s case against AT&T goes to trial in Texas; there are other court actions involving Verizon and Microsoft. The judge in the Texas case — who also oversaw TiVo’s successful suits against Dish Network — is due to retire in March. “Obviously there’ll be some delay,” TiVo General Counsel Matthew Zinn says. Research and development costs also will rise as TiVo tweaks its software to work with DVRs used by its growing number of partners including DirecTV, Comcast, RCN, Virgin Media, and Spanish broadband company ONO. “We’re investing substantially additional dollars this year to build a common code base” that would work on multiple platforms, CEO Tom Rogers says. He adds that TiVo is developing a product that integrates Comcast’s Xfinity broadband service. Consumers will buy it as a retail product. ”We think that’s an attractive model” for cable operators that want to offer advanced services without spending a lot on equipment, Rogers says. He wouldn’t disclose how much TiVo collects from the customers who go through cable and satellite services, but noted that they “contribute in a significant way (to earnings) once we get past the R&D costs.”
TiVo says it still has an ample supply of hard drives despite the floods in Thailand this …
TiVo today reported a second-quarter loss of $19.6 million, or 17 cents a share, compared with a $15.3 million loss, or 13 cents a share, a year ago. That beats analysts’ estimates of a 20 cent loss but can’t hide the fact that its subscriber base continues to shrink (its sub total has dipped below 2 million). Still, revenue rose 19% to $61.2 million, beating the Street, thanks to licensing deals for the DVR pioneer’s patented technology, especially from overseas. That’s the technology the company has protected in the courts; during the quarter, it settled its long-time lawsuit with Dish Network for $500 million, and it has similar suits pending against AT&T and Verizon. On Aug. 12, CEO Tom Rogers unveiled a $100 million stock buyback as TiVo’s share price had dipped 25% during the past month. On Wednesday, TiVo’s stock closed down 1.6% at $8.12 but rose almost 7% after-hours when the quarterly earnings were released.