TiVo announced on Friday it would no longer manufacture its own digital video recording (DVR) boxes, although a yet-to-be-named partner would continue manufacturing and selling boxes branded as TiVo on the company’s behalf.
The news, first reported by the website MultiChannel, signals TiVo’s continuing shift out of the hardware market with a focus on its intellectual property and software divisions.
TiVo has been losing money on its hardware DVRs and other devices over the last several years. In the first quarter of 2017, TiVo’s revenue from hardware was slightly over $15 million; this year, TiVo’s first quarter revenue from hardware was $3.7 million, according to a press release on its website.
TiVo said branded DVR boxes and other hardware would continue to be manufactured by a third party. That third party will handle manufacturing and retail distribution of the hardware. A TiVo executive said on a conference call Friday that the company would continue to sell branded DVR boxes and hardware via its website, but only as a reseller, not as a manufacturer.
“In that sense, we’re acting as a distribution channel,” TiVo executive Enrique Rodriguez said on a conference call Friday, adding that the company would be “completely out” of transactions involving Best Buy, Amazon and other stores.
First introduced in 1999, TiVo boxes offered a significant advantage for in-home TV recording over videotape recorders. An on-screen TV guide made it easier to set up recordings, and TiVo’s proprietary algorithm suggested new shows viewers might be interested in based on a thumbs-up, thumbs-down ranking system. A small hard drive inside the unit was one of the first all-digital recording methods for general consumers and made searching for videotapes a thing of the past.
TiVo users pay a subscription fee for access to TV listings and other functionality. When TiVo debuted, customers had the option to pay a monthly fee of $10 a month or opt for a one-time charge of $200. Today, that fee has jumped to $14.99 a month or a single payment of $600. Hardware capable of recording broadcast and cable TV was manufactured by Philips and Sony and cost a few hundred dollars per unit; in the mid-2000s, TiVo signed an exclusive deal with DirecTV to bring the company’s DVR technology to satellite.
The company no longer makes the bulk of its money from DVR hardware or subscriptions. The majority of its revenue comes in the form of intellectual property and patent agreements with manufacturers like Vizio, which the company announced recently it had renewed. TiVo also licenses its software and intellectual property to over-the-top streaming services like one offered by Starz.
This quarter, TiVo said it had just 22 million subscribers around the world. Those numbers include customers of regional cable services who offer TiVo hardware, so-called “cord-cutters” and international users.