thanks for clarifying. i stand corrected about the sub adds--i was looking at the guidance figures for current Q. this accounts for your $20 mil.
however, obviously that 20mil is not a runrate type of number. looking at their Dec quarters for 04 and 03, they have a clear seasonal sales pattern. last Q was 50mil H/W out of yearly 111mil.
thus, focusing on what they received in the last Q for lifetimes is rather like looking at calendar Q4 sales in retail stores and ignoring the rest of the year. mgmt themselves have guided for just 65-75K owned subs in current Q. a pretty steep dropoff from 251K in last Q. but that's what happens in businesses on a retail Christmas cycle. nothing wrong with it, as long as you don't give the impression that every month is December.
as a business would you rather have a new lifetimer (revenue generated: $6.25 per month for 48 months) or a new standalone subscriber (paying $12.95 a month)?
obviously the standalone could be better...depending on the attrition rate. and this is where i start wondering. looking at the previous year, they seemed to have pretty low rebates. but this last Q, the rebates were huge. this means if subs walk, overall margins would seem to be pressured much more intensely.
i noticed in their K is a rather large rampup YoY in "Rebates, rev share & other payments to channel", which they deduct against "Hardware sales". here are the YoY quarterly numbers:
12/31/05 12/31/04
Hardware sales 50,452 25,537
Rebates... (25,188) (4,114)
Reb/Hardware 50% 16.1%
notice that hardware sales nearly doubled, but Rebates... more than quintupled. this raised rebates as a percentage of hardware sales (calculated by moi) from around 16% to about 50%. at the same time, i think they did not lower their subscription rates (lifetime, etc.) YoY, at least nearly as significantly--correct me if i'm wrong.
if they'd kept rebates at the same percenage of sales, what would've happened to sales? alternatively, if they'd only booked the same percentage of rebates (16.1%) against sales and booked the rest against subscriptions, what would have happened to service revenues net of these rebates?
Apples to apples please. Unless Microsoft is giving away media center PCs and/or extenders for free.
i think long-term, the "apples" would be the extenders, given that most people already have the PC. as for extenders, i read that they are going to offer one for the Xbox. maybe it will be built into the next-gen Xbox. as for ultimate pricing, who knows. but on the face of it, the bill of goods for an extender would seem to be a lot less than the Tivo bill of goods--the Tivo has a hard drive, after all, and probably a lot more processing power since it's all self-contained. by contrast, the "extender" is basically just a relay with some hookups. in the long run, how much does that kind of thing really need to cost? maybe it is eventually simple enough that they can just embed it in DVD players.
as for "give away", it seems Tivo basically sells its hardware at slightly above cost already (50,452 in h/w sales vs. 52,267 in cost of h/w sales), and in fact is losing quite a bit (around 50% in the latest Q) once you factor in the rebates (-25,188). do you know why they ramped up the rebates so much? |
