Could Amazon's DVR plans threaten TiVo's pay TV business?

TiVo Bolt DVR
TiVo Bolt (TiVo)

Amazon is reportedly building a live TV recording device, one that could eat into TiVo’s digital video recorder business. The rumor sent TiVo’s stock on a sharp decline Friday and could be bad for the company’s pay TV business.

According to Bloomberg, Amazon’s live video recording device, codenamed “Frank,” will work as a physical storage add-on for Amazon’s existing line of Fire TV devices. It would allow Fire TV users to record live television and then watch it later from anywhere on a smartphone or other connected device.

A company like Amazon, with its massive ecommerce business and big consumer electronics presence, would clearly pose a threat to TiVo’s retail business by jumping into the DVR market. But Amazon could also disrupt TiVo’s pay TV partnership business with its plans.

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TiVo’s pay TV partners include Atlantic Broadband, MetroCast Communications, RCN and TDS. The company just made its TiVo Experience 4 available to its pay TV customers. As part of that update, TiVo integrated Amazon’s Alexa for far-field voice recognition.

TiVo is already transitioning away from hardware sales to MSOs, and during the second quarter the company experienced a $6.3 million decline in hardware revenue.

“Hardware revenue is expected to continue to decline due to the planned transition away from the business and as MSO partners continue to shift to deploying the TiVo service on third-party hardware resulting in a decrease in the number of TiVo set-top boxes sold to MSO partners,” TiVo said.

But the company’s platform solutions business still pulled in $72.2 million during the quarter, and that significant revenue source will dwindle even faster if Amazon decides it wants to partner with pay TV operators for DVR hardware.

Amazon has said it wants to further integrate with pay TV operators. And the company recently got its Prime Video app onto Comcast’s X1 platform, a big step toward that goal.

“Prime Video is dedicated to making your favorite shows and movies effortless to watch. The addition of the Prime Video app to X1 will make navigating between Prime Video and live TV easier than ever,” said Greg Hart, vice president of Amazon Prime Video, in a statement. “We are excited for our Prime members to seamlessly find the shows and movies they love.”

During FierceVideo’s Pay TV Show in May, Richard Au, U.S. director of Amazon Channels, was asked by Cheddar founder Jon Steinberg about a scenario in which smaller cable operators might ask to use Fire TV Sticks and Amazon Alexa in place of cable set-top boxes. Au said Amazon would be more than willing to work on it.

With a DVR option included, an Amazon Fire TV partnership with pay TV operators makes even more sense now.