TiVo has Q2 profit on lower costs

Turnover rate rises on MSO inclusion of DVRs

By Danny King -- Video Business, 8/27/2008

AUG. 27 | TiVo had a fiscal second-quarter profit as the company cut marketing costs by no longer giving away set-top boxes, while bundling its machines with high-definition TV sales promotions. The stock fell about 5% in extended trading after the company reported a higher subscriber-turnover rate from an expiring contract with DirecTV and the practice of more multichannel service operators including high-definition DVRs with their services.

TiVo today also struck an agreement with Entertainment Weekly, which allows customers to have the entertainment magazine’s TV recommendations automatically recorded for them. Customers with broadband connections to their TVs will be able to have Entertainment Weekly’s “What to Watch” recommendations automatically recorded as well as download videos from the entertainment magazine’s Web site.

The digital-video recorder’s net income for the quarter ended July 31 was $2.94 million, or 3¢ a share, compared with a loss of $17.7 million, or 18¢, a year earlier, TiVo said today. Sales rose 4.1% to $65.2 million.

TiVo’s marketing costs plunged to $888,000 from $9.02 million a year earlier after the company reduced advertising and bundled its hardware with HDTVs sold at U.S. electronics retail leader Best Buy and on Internet giant Amazon.com’s Web site. TiVo-owned subscriptions were little changed from a year earlier at 1.69 million.

“We believe we have the key growth drivers in place to build upon our solid financial footing,” TiVo CEO Tom Rogers said in a conference call with analysts today. The company was expected to lose 2¢ a share on sales of $55.4 million, the average analyst estimates in a Thomson Financial survey.

Sales may grow on the company’s agreement with No. 1 U.S. cable company Comcast, which this year started offering TiVo set-top boxes to its New England-area customers, said Rogers, who added that No. 3 U.S. cable company Cox Communications will start a similar promotion later this year.

TiVo’s monthly subscriber-turnover rate rose to 1.5% from 1.2% a year earlier as U.S. satellite-TV leader DirecTV stopped including TiVo DVRs with its new subscriptions after discontinuing its licensing deal. More satellite and cable companies offered high-definition DVRs to subscribers, TiVo interim CEO Cal Hoagland said on today’s call.