Cablevision Gets Go Ahead, TiVo Slides

TiVo (TIVO) (Analyst Report) shares on Monday, June 29, 2009, lost 4.08% and fell $0.45 to close at $10.58. The slide in the price followed the U.S. Supreme Court's decision to permit Cablevision (CVC) (Snapshot Report) and other cable operators to offer network DVR (Digital Video Recorder) service.

The new service will allow subscribers to record programs on centralized servers, instead of requiring separate set-top boxes with in-built hard drives. The standard TiVo DVR records and stores TV shows on a hard drive in the set-top box, allowing consumers to playback programming and skip past ads. The new remote-storage DVR system converts every digital set-top box into a DVR, and allows users to record shows.

A number of film studios and television networks including Time Warner (TWX) (Snapshot Report), News Corporation (NWSA) (Snapshot Report), CBS Corporation (CBS) (Analyst Report) and Walt Disney (DIS) (Snapshot Report) squabbled that Cablevision's new remote-storage DVR violated federal copyright laws, as it amounts to an unauthorized rebroadcast of their programs. However, Cablevision declined the comment by arguing that the discretion to record or playback shows remains with the users.

The plan to launch remote-storage DVR was announced by Cablevision in 2006. The system has a huge implication for cable operators, since they will not be required to deploy set-top boxes with hard drives, which will save costs. The control is now centrally located on the servers, which the cable operators will operate. The cable companies could possibly pass on the savings to consumers by offering service at a lower price point than TiVo, which may result in subscriber switch from the latter. Comcast (CMCSA) (Snapshot Report) and Time Warner Cable (TWC) (Snapshot Report) have shown interest to launch a service similar to that of Cablevision. Cablevision shares on Monday June 29, 2009, jumped $0.46, or 2.44%, and closed at $19.32.

We maintain a Hold rating on TiVo with a six-month target price of $8.00.

Comments

[User 439100:]

Nothing sounds more exciting than a super sluggish 'Network' DVR that won't fast forward or reverse in an acceptable way. Don't forget the lack of features or poor user interface. And if you think the cable company is going to lower your bill ...... Too funny.

Jul 01 08:07 AM

[rajsekar:]

TiVo has one of the best consumer user experience and interface. Apart from TiVo's core patents, the UI stands out pretty well among users and all other DVR vendors. TiVo can still stay relevant by licensing their software to other MSOs. TiVo should get out of making hardware and instead focus on licensing their software and UI. Cablevision's network PVR performance depends on the level of video compression and how many users will pause and rewind the same slot in an instance. Can network bandwidth sustain such load? It's a bit early to judge this technology.

Jul 02 01:03 AM