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TIVO Talks

Posted on Friday, May 26th 2006

Well, just as I was pointing to TiVO’s spinning, last night’s earnings report and following conference call issues indications that TiVO is indeed thinking about licensing its software and getting out of the complete dependency on the low-margin hardware game. Read this article on the topic.

But let’s go back to the future. In light of the promising court results, the company can now get excited about TiVo knockoffs from competing manufacturers like Cisco (Nasdaq: CSCO). You see, if lawsuits force rival DVR makers to pay homage to TiVo’s patents, every wannabe TiVo box could be upgraded with Tivo-provided software, belatedly making it into the Real Thing.

It’s a beautiful plan. Someone else gets to worry about manufacturing and the thin-to-negative margins of selling hardware, while customers still get the full TiVo experience and the company itself rakes in patent-backed licensing revenue. Customer acquisition costs fall through the floor, margins go through the roof, and both revenue and profits should grow in between.

TiVO has recently won a lawsuit against Echostar, which puts its fundamental innovation in a protected position, and now allows for an IP and Technology licensing strategy.

Finally, it accounts for an exit strategy into Comcast, for example, who is dead serious about building a sustainable edge in Home Entertainment and the future of television, and putting a significant emphasis on software as the place to build new core competency in.

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