TiVo's already hot MSO business is about to grow even faster, according to Jefferies.
In a note to investors, the advisory firm said TiVo's subscriber base through its MSO partners could double over the next four or five years, from the 4.8 million reported at the end of first quarter, with Tier-2 cable operators looking to provide advanced video services to their customers.
"TiVo offers pay-TV operators the types of features that define advanced TV (whole home viewing, watch TV on iPad, etc.)," a Jefferies research note said. "With the exception of large MSOs like Comcast, almost all pay-TV operators will need to turn to a third party like TiVo to deliver these features."
While TiVo is aggressively trying to grow its retail business via its cord-cutter-targeted over-the-air DVR, the Roamio OTA, its MSO business is far and away the fastest growing part of its operation, adding 285,000 subscribers through partnerships in the first quarter alone.
By Jefferies estimation, TiVo's MSO partners—which include Atlantic Broadband, Suddenlink and Mediacom—control 13 million video subscribers, a base only about 30 percent penetrated by TiVo services.
Currently, larger cable companies like Comcast (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR) are making major investments in advanced, cloud-based video services. Other larger cable operators, like Cox Communications and Canada's Shaw Communications, are addressing the need for advanced video services technology by licensing a white-label version of Comcast's X1 platform.
However, developing or licensing expensive platforms like X1 may not be feasible for smaller and mid-sized MSOs, Jefferies said. This opens up a sizable business opportunity for TiVO, which provides comprehensive set-top and video user interface solutions.
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