TiVo makes moves with Frontier and Aereo deals — but is it enough?

 

On March 3, TiVo Inc. reported fourth quarter earnings that beat analysts’ expectations and 30 percent subscriber growth.

Growing competition with television streaming services, however, is pushing TiVo to make even bigger moves.

On Feb. 25, TiVo announced that it will partner with Frontier Communications. Frontier is the largest U.S. communications company with a focus on rural areas and small- to medium-sized cities and towns. TiVo and Frontier plan to release co-branded versions of TiVo’s suite of home products and services. The suite includes the TiVo Mini, which allows users to extend their DVR to multiple televisions; the TiVo Stream, which viewers can use to watch live or recorded television on-the-go from various devices; and the company’s web, iOS and Android apps.

More importantly, Frontier will become the first telecommunications company to deploy the new TiVo Roamio OTA. Roamio OTA is a HD-DVR model aimed at so-called “cord-cutters” — users who are not purchasing traditional cable services — that will allow users to record content both over the air and over the Internet from sources such as Netflix and Amazon. TiVo released Roamio OTA last summer as a “limited edition” model and began distributing it nationally in January. Frontier will be the first service provider to offer the product.

“This is a great opportunity for our customers and a compelling strategic product for Frontier,” Frontier Chief Operating Officer Dan McCarthy said in a statement. “We believe this is a model for a cost-effective, far-reaching video service of the future and look forward to it becoming a primary TV offer for our high-speed Internet-only customers.”

Frontier isn’t the only company that will benefit. With roughly 2.4 million subscribers currently, Frontier is now in talks with Verizon Communications to close a $10.5 billion deal to purchase wireline operations in California, Florida and Texas. If it closes, the deal will leave Frontier with a subscription base of over 4 million. Once the deal is completed, TiVo would have access to this entire customer base.

In addition to its deal with Frontier, TiVo also made a significant move on Feb. 26 by purchasing $1 million of assets from New York City-based Aereo, the now-defunct streaming startup which went to auction after the Supreme Court declared it violated copyright law. The purchase was approved by U.S. Bankruptcy Court on March 13. Before it was disbanded on June 25, 2014, Aereo used “antenna farms” to receive live television feeds and distribute them to customers for certain pricing options. It only required users to state they lived in the same area as the antenna farm to use the service and did not pay fees to any television networks.

Although the company no longer exists, there are multiple opportunities for TiVo to use its assets. At the auction, TiVo purchased both the Aereo brand name and its customer list, which could allow TiVo to build a similar service — this time legally.

Analysts speculate that TiVo might be planning to create a service model much like DISH Network Corp., which pays fees to Time Warner Inc. and The Walt Disney Company, which provide programming. By negotiating licensing agreements and establishing fees, TiVo could legally stream to Aereo’s client list as well as TiVo’s existing subscribers.

Though it is unclear exactly how many clients Aereo had, a recent story by Re/code suggested that the number was no more than 80,000 viewers. While this would certainly help cut the cost of acquiring new subscribers, 80,000 is nowhere near enough to give TiVo a competitive edge in the marketplace dominated by streaming services.

Take Hulu Plus, for example. Although its subscribers increased only 20 percent this year compared to TiVo’s 30 percent, Hulu Plus now has 6 million users. That’s 400,000 more than TiVo, even with all of Aereo’s former clients. These numbers are even more daunting considering Hulu Plus managed to gain 6 million subscribers in less than five years since it launched in 2010; while TiVo has been around since 1999.

Netflix subscribers also grew at a slower rate than TiVo in 2014 — only 12 percent. However, that 12 percent was actually 4.3 million new users, bringing Netflix’s total customer base to a whopping 57.4 million subscribers. Amazon Prime subscribers, on the other hand, grew 53 percent last year to a total of 30 million, which analysts say is a conservative estimate.

Analysts from JP Morgan and Stephens Inc. note that while TiVo has had substantial growth in the last year, it has had almost no acceleration, allowing the company to remain behind its competitors.

So what does this mean for TiVo?

Compared to its competition, TiVo’s 2014 numbers just don’t stack up. According to analysts, while TiVo’s new strategic endeavors are certainly a step in the right direction, it’s clear that TiVo has much further to go to keep up with the streaming competition.

An analyst from JP Morgan said that TiVo should be wary of this situation, as other analysts could easily lose confidence in the company if it doesn’t do something to level the playing field.

(Homepage photo courtesy of TiVo)