TiVo is collecting revenue averaging out to $2 per subscriber across the nearly one dozen U.S. cable operators it provides its advanced video operating systems to, according to company CEO Tom Rogers.
Speaking to investors at the Goldman Sachs Communicopia conference in New York, Rogers outlined TiVo's operator business that is second only to top programmer ESPN in generating per-subscriber revenue in the pay-TV ecosystem.
"We will reach one billion pay-TV subscribers in the next three or four years," Rogers said. "The gross margins of that business have expanded 65 percent overall" just in the past year.
TiVo today counts around 6 million total subscribers; around 1 million of those purchase the company's services directly from TiVo and the remaining 5 million stem from cable operators that resell TiVo's services to their subscribers. In TiVo's most recent quarter, around half of the company's new 284,000 MSO customers came from international operators selling TiVo services, and the other half came from North American operators selling TiVo. Thus, much of the company's growth likely will come from overseas.
TiVo has established a beachhead with smaller cable operators, which don't have the R&D resources themselves to create advanced video delivery technology. The company just signed an agreement to forge individual deals with National Cable TV Cooperative operators.
Rogers described TiVo as "running the table with Tier 2 operators."
He described "one North American operator which has more than 1 million subscribers, and who took a $30 million write-off" when it abandoned its efforts to develop an advanced video system with a rival technology company. "We were able to get them up and running in just a few months, and we did it for a fraction of the cost that they flushed down the drain with another company," Rogers said.
He added that services for cable operators continue to generate the bulk of TiVo's income. However, revenue from its Digitalsmiths acquisition increased 65 percent year-over-year in the second quarter, with contracts with Tier 1 operators including Comcast beginning to pay dividends.
Meanwhile, TiVo has also begun to exploit in earnest data from its installed base of fully-owned set-tops sold at retail. It recently reached a deal to sell data to Viacom, for example.
- see this TiVo investor relations site
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