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The Honolulu Advertiser

Posted on: Tuesday, January 18, 2005

Competitors closing in on TiVo

By May Wong
Associated Press

SAN JOSE, Calif. — TiVo has been synonymous with digital video recording since it pioneered the industry five years ago, controlling an estimated one-third of the market in 2004.

Alex Wilkas shows the features of the new Comcast Corp.'s Digital Video Recorder — which, unlike other cable set-top boxes, supports high-definition TV — at his home in Foster City, Calif.

Jeff Chiu • Associated Press

That lofty perch is now beginning to crumble.

Competition in the growing and lucrative industry is intensifying as cable providers, satellite operators and consumer electronics companies push ahead with models of their own, giving consumers more choices while threatening to significantly blunt TiVo Inc.'s edge.

"They're facing a very, very difficult year this year. It'll be increasingly difficult for them to sign up new subscribers," said Josh Bernoff, an analyst at Forrester Research. "Why do you need a TiVo when there's a cable DVR (digital video recorder) for free?"

Many agree that TiVo's service remains the best of breed, with its easy navigational controls and advanced search and record functions.

Its subscribers, who tend to be an evangelistic bunch, account for one in three of the estimated 6.5 million U.S. households with digital video recorders.

But the small company based in the south San Francisco Bay community of Alviso is now playing in a land of giants, faced with a mass market of consumers looking for convenience and low prices.

Even with its latest innovations, TiVo will find it difficult to compete against the clones of deep-pocketed cable or satellite operators. Those companies can afford to subsidize hardware costs and already have tens of millions of customers on their rosters.

The rivals also charge consumers less per month for digital recording — about $5 to $10, compared with TiVo's $13.

Consider Alex Wilkas, who appreciates the latest gadgetry but won't hesitate to trade it in if another has a better price or better features.

COMPETITION HEATS UP

TiVo, the leader in digital video recording since it pioneered the technology five years ago, now faces competition in the growing and lucrative industry from cable providers, satellite operators and consumer electronics companies:

News Corp.'s DirecTV plans to introduce later this year a new media receiver that employs the DVR software of its sister company, NDS Group PLC.

Scientific-Atlanta Inc. announced the first deployment of its multiroom DVR to some Time Warner Cable customers.

EchoStar's Dish Network unveiled a DVR receiver that also will have 100 hours of space for video-on-demand content, a fast-growing revenue generator for cable companies.

Hewlett-Packard Co. introduced a media hub using the Linux operating system, a machine that includes a DVR and two high-definition TV tuners, enabling recording of two channels simultaneously.

Wilkas lives in the San Francisco Bay area, where the digital recorder battle escalated in December after the local cable company, Comcast Corp., started rolling out its newest DVR-equipped set-top box to customers.

Comcast heavily advertised the advanced digital service. But while some customers were waiting for the boxes to arrive, TiVo gave away 2,000 of its DVRs to anyone who could show a Comcast bill.

That's right, gave them away.

Then EchoStar Communications Corp. took out a full-page advertisement in a local newspaper panning Comcast and reminding potential customers that the satellite company also offered a DVR service.

So which new set-top box arrived in Wilkas' Foster City home two weeks ago? Comcast's DVR, which allows users to record two channels at once.

The main reason, says the 60-year-old real-estate agent, was that unlike the others, there was no upfront cost for the equipment — only the monthly service fee of $9.95. Plus, the Comcast box supports high-definition TV signals.

Score one for Comcast, the nation's largest cable provider.

But there are millions more potential customers to go in the nascent market of digital recording, which lets viewers record shows to a hard drive, fast forward through commercials and pause live TV.

A snapshot of how TiVo is being attacked from many fronts emerged earlier this month at the International Consumer Electronics Show.

News Corp.'s DirecTV, a longtime partner whose satellite customers accounted for about two-thirds of TiVo's subscribers by the end of October, said that it will introduce later this year a new media receiver that employs the DVR software of its sister company, NDS Group PLC. DirecTV is also expected to continue offering TiVo-based recorders at least through early 2007, when its contract with TiVo ends.

Scientific-Atlanta Inc., a provider of cable boxes whose DVR models made up almost 40 percent of its third-quarter shipments, announced the first deployment of its multiroom DVR to some Time Warner Cable customers.

The company said it would debut a DVR later this year with a DVD recorder so users can take their recorded programs on the road.

EchoStar's Dish Network unveiled a DVR receiver that also will have 100 hours of space for video-on-demand content, a fast-growing revenue generator for cable companies.

Motorola Inc., another cable box provider whose DVR models are now shipping at a frenzied rate to Comcast and others, has plans to deploy more souped-up versions later this year, including one using Digeo Inc.'s widely praised Moxi platform.

Hewlett-Packard Co. introduced a media hub using the Linux operating system, a machine that includes a DVR and two high-definition TV tuners, enabling recording of two channels simultaneously.

TiVo has failed to ally with major cable companies but has announced a number of initiatives, including a service to debut later this year that will let users access video content from the Internet.