Tivo Under Pressure as High Court Allows Network DVR

Includes: CVC, TIVO
by: Eric Savitz

TiVo (NASDAQ:TIVO) shares are coming under pressure following Monday’s Supreme Court ruling that will allow Cablevision (NYSE:CVC) and other cable operators to offer network DVR service, allowing consumers to record programs on centralized servers, rather than on set-top box hard drives.

Tony Wible, an analyst with Janney Montgomery Scott, writes in a research note that the potential impact on TiVo from the ruling on the company is not all clear.

  • Moving storage off the set-top box and into the cloud will make it far cheaper for cable companies to offer DVR service - consumers would in theory be able to record shows with any digital set-top box. TiVo has cut licensing deals for its user interface with a number of cable companies, including Comcast and Cox; the ruling has the potential to seriously increase the potential target audience.
  • There’s also the possibility that TiVo will attempt to enforce its DVR patents on the cable companies.
  • Another potential issue (which Wible does not address) is that this has potential to trigger much lower pricing for DVR service: the cable companies could give back some of the costs they’ll save on lower cost set-top boxes in the form of reduced pricing for the service. That might make consumers less inclined to pay the extra costs for a TiVo box.

TIVO Monday is down 49 cents, or 4.4%, to $10.54.

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