DVR pioneer TiVo may be driving its product into the cable and satellite market, but it still sees retail sales, particularly of its new OTT-integrated Roamio DVR, as key to the company's business model.
"Roamio… is the first product we've launched that included the ability to access programming on DVR from outside your home," said Naveen Chopra, senior vice president and chief financial officer of TiVo, at the Stephens 2014 Spring Investment Conference in New York. "That functionality doesn't exist in any cable DVR."
TiVo is going up against both traditional set-top box manufacturers and streaming device makers like Apple TV (NASDAQ: AAPL), Google Chromecast (NASDAQ: GOOG) and Roku with the Roamio, with CEO Tom Rogers recently telling investors that while the new Amazon (NASDAQ: AMZN) Fire device is pretty good, "if you really want a great TV product all you need is a TiVo Roamio."
The DVR is selling as a standalone set-top and DVR that consumers can purchase and use in place of their cable company's STB.
TiVo has recently made inroads with mid-tier cable operators, most recently announcing a deal with GCI in Alaska to provide TiVo-enabled set-top boxes to the MSO's subscribers that allow them to access Netflix (NASDAQ: NFLX) via the boxes.
However, there are two key reasons why TiVo is also continuing to compete with MVPDs, selling its Roamio DVR directly to consumers.
"Number one, it is the foundation for our innovation," Chopra said. "(Roamio) really is the thing our MSO customers aspire to be able to deliver. That product is typically a year or so ahead of what we have in our mass distribution channel. … And we're able to leverage all of the R&D that we invest in developing those products into driving revenue growth in the MSO channel."
Second, Chopra said, its retail business is continuing to generate revenue--a little less than $100 million in 2013, "with pretty attractive gross margins." That revenue, he said, is key to funding continuing research and development. "Because of the shared nature of the R&D expense, if you were to exit that business you would not get much of a reduction in your operating costs. Therefore that revenue is effectively the thing that helps fund the R&D you need for the growth business, which is the MSO piece."
- listen to the webcast
- see this GCI press release
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