TiVo picture gets fuzzy: Replay TV companies license technology for set-top boxes - News - Industry Overview

Electronic News, Nov 25, 2002 by Alex Romanelli

After sitting on the consumer sidelines, personal video recorders (PVRs) finally look set to be swallowed up by the big boys come 2004. The success of TiVo and Sonicblue's ReplayTV looks limited, as hardware OEMs begin to add PVR functionality to set-top boxes (STBs), pulling the rug out from the fledgling PVR industry.

"TiVo and Replay are basically doomed," said Jay Srivatsa, principal analyst with iSuppli. "Nobody is really going to buy a PVR anymore because it doesn't make sense to have a stand-alone box. You'll probably see a Motorola box having the hard drive in it, essentially offering PVR capability."

According to Michele Abraham, an analyst with In-Stat/MDR, demand for stand-alone PVRs will decline, only remaining an attractive proposition to analog cable subscribers. (In-Stat/MDR is owned by Reed Business Information, the parent company of Electronic News.) Every other TV viewer, of either digital cable or satellite, will eventually have an STB with PVR functionality.

RePlay almost went out of business as a stand-alone PVR provider but was saved by Sonicblue. TiVo has realized that the money lies not in providing the hardware but in licensing the PVR technology itself. Both companies should prepare themselves for a tough 2003, analysts said.

"Both are feeling pressure from their finances, but TiVo seems to be a little more healthy financially than Sonicblue is," said Mike Paxton, senior analyst with In-Stat/MDR. "As you see TiVo over the past six months or so move closer and closer to a being a licensing exclusive model, they've reaped greater financial rewards from that rather than trying to be a licenser and a manufacturer. Of course, they've both talked about getting away from manufacturing for the last l8 months, but we're just starting to see that happen."

Paxton questions whether the market is large enough to support both TiVo and Sonicblue, when there are competing services and products supported by major consumer electronics manufacturers. Echostar is currently a major competitor, he said, although its market share in the long term will likely decrease.

Satellite TV provider Direct TV is licensing TiVo's service and using the old cell phone business model of providing the consumer with free hardware and charging a monthly subscription fee.

"It is fair to say satellite pay-TV service providers have really been the spark behind PVR penetration in the United States," Paxton said.

In-Stat/MDR reports that expected worldwide PVR units shipped will total 124 million, with 1.05 million of those being to the United States alone. And a whopping 710,000 of those will be satellite STBs.

"We might see a greater level of adoption next year because we might see some activity in the interactive TV market," Srivatsa said. "So far, people have talked about interactive TV but nothing has really happened."

An STB with a hard drive would be capable of next-generation video-on-demand services, such as advanced forms of pay-per-view. A major corporation such as Time Warner provides both digital cable services and the content that people will watch using that service. It hopes, along with others, that the integration of PVR technology with the necessary STB represents an attractive prospect to customers.