Here's an article I wrote on Tivo (TIVO):
Using a Tivo
After reading countless raves over the Tivo personal video recorder, I went out and bought one last weekend at a local Tweeter. I went through the installation program to set it up and then selected the various shows to record over the next 2 weeks. The interface was clean, simple, intuitive, so much so that the average couch potato should have no problems using Tivo out of the box.
The next morning, I turned on my Tivo and found that it recorded 5 programs for me according to my preferences. Never again will I have to channel surf, from now on there will always be something good to watch. I then switched to ESPN, to watch the Seattle Kingdome implosion event. After it happened even though it was live TV, with the Tivo I was able to do instant replay, frame-by-frame slow motion, rewind/fast-forward, and still frame pause. Wow! This is going to change everything.
Tivo is basically a digital VCR with no tapes that lets you record up to 30 hours of video (the high-end model) on the machine. For the more technically minded, it runs on a PowerPC processor using a open Linux-based OS with a 27 gigabyte hard-drive.
Growth and Opportunity
At the end of 1999, there were 26,000 Tivos sold through the Philips brand. I believe Tivo is going to sell very well this current quarter (Q1 2000) as they recently expanded their retail distribution to 3000 stores nationwide, alongside a flood of advertising on the radio and on TV (Philips infomercials). Moreover Sony is going to launch their Tivo receiver in the next month or so. And most importantly, customer word of mouth has been unbelievably positive.
I believe the stock is compelling at current prices (mid-30?s). They should post great revenue and subscriber growth numbers when earnings are announced in mid-April, which should bode well for the stock in the short-term.
But beyond this, Tivo has the potential to be THE interactive TV platform of the future. With the right partnerships (Sony/Philips/Liberate/Blockbuster/AOLTV/DirectTV), all the ducks are in row. As of now, there is no competitor out there that has the relationships and the ?best-of-breed? technology. Furthermore, the subscription-based $10 a month recurring revenue model, allows Tivo to incorporate future exciting interactive TV features as the Blockbuster and AOLTV partnerships come to fruition. Tivo with a current market capitalization of $1.4 billion could conceivably be a $3-5 billion company within a few years.
Attached below is more detailed research on Tivo and its market. Be sure to post your thoughts on the discussion boards:
tigerinvestor.com
tigerinvestor.com
-Tae Kim
Disclosure: At the time of writing, the author has a long position in Tivo (TIVO). Tivo is a high-risk technology company that is not forecasted to post a profit anytime in the next two years.
Market Context
-TV statistics
According to Neilson, over 98 million households (98% of all U.S. households) own a television. In 1998, the average U.S. household owned 2.4 TVs and spent 7 hours and 15 minutes a day watching television.
66 million households spend $30.9 billion for cable subscription-based services. And 10.6 million households paid $5.3 billion for receive satellite services.
-PVR Growth Numbers
According to a recent study by TechTrends Inc., they forecast sales of stand-alone DVRs (Digital Video Recorders) to grow at a 173% CAGR through 2002, resulting in 5 million DVR units sold.
-Interactive TV
Jupiter estimates that interactive television will reach 30 million U.S. households and generate $4 billion in revenue by 2004.
Tivo Customer Reiviews
Jason, Manufacturing business owner, Winnsboro, TX
"If you value your time, money, and quality of life as much as I do, you should not watch television without TiVo. Technology finally made it easy for people to watch what they want, when they want to watch it. THANK YOU!"
tivo.com
Robert Berry from North Carolina, March 8, 2000 from Amazon.com Customer Reviews
?I've had my TiVo now for just under a week, and I already can't imagine going back to watching TV without it. The ability to pause and rewind live TV is nice, but I find that with TiVo, I rarely watch live TV anymore at all. TiVo knows what shows I want to watch, and it makes sure they're available whenever I want to watch them. I also have to mention that the documentation is among the best I've ever seen with a consumer-electronics product. It's extremely well written and thorough, and even though TiVo setup can be complex, the guide presents several different scenarios with clear instructions for each.?
Competition / Lawsuits
-Replay TV, not as intuitive. Partners with Panasonic and Sharp.
-Microsoft?s WebTV
Offers Tivo-like recording features in WebTV/Echostar co-branded satellite receivers. Will go up against Tivo/Liberate/AOLTV platform.
-Gemstar Lawsuit
Gemstar filed a lawsuit against Tivo citing that Tivo?s electronic program guide infringes on Gemstar?s patents (They own VCR Plus).
Financial Performance
Q4 1999 ending December 31, 1999 Results
- Revenue of $182,000, Net Loss of $35 Million or $1.03 per share
- 26,000 Phillips Tivos sold ? 10 fold increase over previous quarter
- Expanded retail channel to over 3000 stores, up from 520 previous quarter
- Formed Partnerships with Blockbuster and Liberate Technologies
- Strengthened ties with AOL and Direct TV
- Partnerships will lead to the delivery of multiple entertainment services on the Tivo open, Linux-based
platform
Partnerships
Liberate and Tivo announced agreement to offer interactive TV services on the Tivo platform. Liberate and Tivo plan to license and bundle Tivo?s Personal TV Service and Liberate?s TV Navigator software platform to network operators. This alliance enables services such as AOLTV to be delivered through Tivo.
Barry Schuler, president of AOL Interactive Services says, ?AOL looks forward to a partnership with Tivo where AOL will enhance AOLTV by incorporating Tivo?s best of breed digital recording features. Tivo?s decision to partner with Liberate to integrate Liberate?s TV Navigator software to Tivo?s open Linux platform is fundamental to our efforts to enable these features.?
Tivo and Blockbuster announced agreement to expand Blockbuster?s traditional video rental business to an entertainment service delivered through Tivo. The companies will work together to develop and deploy a video service which will enable Tivo subscribers to obtain a selection of movies through their Tivo receivers. Tivo will be able to promote special offers to Blockbuster?s 85 million active customers.
DirectTV and Tivo will produce the first digital satellite system with DirectTV and Tivo service integrated in one receiver
Sony to introduce its first Tivo receiver in spring 2000 at around $399 price point with 30 hour recording capability.
Tivo announced on Janurary 6th, 2000 that it has selected TeraLogic?s TL750 graphic processor for their next-generation Tivo boxes. With the new processor, the next Tivo could potential offer interactive entertainment, commerce, and video-on-demand.
Analyst Expectations
Robertson Stephens forecasts subscriber growth to 295,000 by end of 2000 with a revenue estimate of $12.5 million. For 2001, they forecast 720,000 subscribers with revenues at $72.6 million. If Tivo delivers on its promise for becoming THE platform for advertising and e-commerce, they see the potential for a valuation of $3,000 per subscriber at the end of this year.
Links
-Slashdot Review of Tivo
slashdot.org
-SEC Quarterly 10Q
biz.yahoo.com
-Q4 1999 Earnings Report
biz.yahoo.com
-TigerInvestor.com Message Boards on Tivo. Active discussion:
tigerinvestor.com
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