Remember when we all thought TiVo was dead meat? Cable and satellite companies, which years ago began integrating DVR functionality into set tops, were going kill the scrappy DVR pioneer. Fast forward to today, and the TiVo narrative has changed significantly. Hand it to pres/CEO Tom Rogers: He never stopped believing (or fighting with patent lawsuits)—and he’s now reaping the benefits of the cable/satellite industry’s gradual and perhaps reluctant admission that… you know what… TiVo still does boxes better than anyone else. This is a company that knows something about a great customer experience. And while cable operators can try and try again to put out set tops that keep up with consumer demands for features and “sleekness,” it can seem like a losing battle because of the sunk costs of those old, existing boxes and the need to tailor navigation software to the lowest common denominator.
That’s why the deal announced Mon between TiVo and Charter Comm is so significant. Charter is the 3rd cable operator to embrace TiVo as its “default” DVR box provider (TiVo struck deals with RCN and Suddenlink in 2009 and 2010, respectively). This is the question: At what point do cable’s old, clunky boxes create such a competitive disadvantage that they must be abandoned altogether? Is the retail model—in which a customer owns rather than rents a box—a better future course for cable? And what are the balance-sheet and competitive implications of giving customers more equipment flexibility? Here’s the truth: Over-the-top options—made even more scintillating by third-party set tops and gaming consoles that blow existing cable set tops out of the water—are gradually forcing cable ops to abandon the idea that they “must control it all.” And generally that’s a good thing.
Understand, however, that cable hardly wants to become a dumb pipe. And although some pundits have argued that ultimately a dumb-pipe scenario might benefit operators if they were allowed to meter usage, the industry isn’t yet ready to run the numbers on such a radical business-model shift. But could TiVo be a stop-gap measure between the old linear, closed-cable world and a new age of network openness? Is this the beginning of the end of the old-school cable operating ethos? Well, let’s not get ahead of ourselves, but it’s interesting to speculate.
No matter what the future holds, these TiVo deals suggest that distributors can embrace a third-party box maker without surrendering to it. In fact, these deals really marry the best of both worlds: A superior navigation system coupled with seamless integration between linear, VOD and Internet video. And whether or not the Internet content is technically over the top, these kind of deals keep the navigation sequestered within the cable-branded universe. That’s a much better situation for operators than one in which random content comes in through an XBox, Playstation3, Roku, Boxee, Apple TV, etc—all of which override the cable set top rather than integrate with it.
At this point, TiVo has a growing and increasingly impressive list of distributor deals under its belt. Its longstanding deal with DirecTV gave it early legitimacy, but cable has been a tougher nut as deals with Comcast and Cox were limited in scope. With RCN and Suddenlink under its belt, TiVo’s Charter deal represents its first box deployment with a top-5 cable operator. That’s big progress. Of course, TiVo still faces challenges. It’s embroiled in patent lawsuits with DISH, AT&T and Verizon. And while suing big potential customers usually isn’t good for business, TiVo may end up with immense leverage over those distributors if the courts rule in its favor. If TiVo wins, these distributors are unlikely to switch out their wares, so a pro-TiVo ruling would just mean… ka-ching… more license fees for TiVo.
With this week’s Charter deal, TiVo continues to gain traction in the cable universe as it works to expand deals with other ops and integrate its actual boxes with their linear and VOD systems. It’s not easy for cable operators to “let go” of its old ways when it comes to controlling all aspects of the navigation interface. But with Verizon and FiOS not hobbled by the same legacy issues as cable, TiVo could help cable compete on a more even level with the telcos’ newer boxes—and give consumers a better experience in the process. These deals are always complicated, and they have to work for both sides in order for them to prosper over long periods. But TiVo’s recent progress deserves some recognition.

(Michael Grebb is executive editor of CableFAX).

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