Once-dark picture improves for TiVo
The pioneer of digital video recording bulked up its services and struck key partnerships. It's expected to have turned its first profit in the just-completed year.
By Alex Pham
February 2, 2009
On Oct. 9, a day the Dow dropped 679 points, TiVo Inc. deposited a check for $104.6 million. The company had just won a hard-fought battle against EchoStar Communications Inc., whose Dish Network digital video recorders were found by a federal jury to infringe TiVo's patents.
"I think we were the only company doing high-fives that day," recalled TiVo Chief Executive Tom Rogers.
TiVo, whose name has become synonymous with digital video recorders, is the comeback kid of technology.
Four years ago, the Alviso, Calif., company was on deathwatch, having lost a crucial partnership to provide recorders for DirecTV Group Inc.'s satellite TV customers. Sales of its TiVo boxes were slipping, and the company was fast running out of money.
Today, TiVo is debt-free, has $200 million in cash and is expected to post its first profitable fiscal year -- the one that ended Saturday.
TiVo's stock price, which dipped as low as $3.51 on Feb. 11, 2005, has rebounded to close at $7.19 on Friday. It hit a 52-week high of $9.43 in February last year.
"Financially, they're in great shape," said Alan S. Gould, senior media analyst at Natixis Bleichroeder Inc., an investment firm in New York. "They've done a good job of turning the company around."
Even though TiVo remains vulnerable because of its declining subscriber base, the company is no longer on the brink of collapse. If anything, the nimble outfit has managed to cheat obsolescence by continuing to innovate and adapt to changing viewing habits.
"TiVo has managed to keep itself in the game by focusing on where the consumer demand is," said James McQuivey, principal analyst at Forrester Research in Cambridge, Mass. "They started the trend a decade ago. Now they're working hard to stay on top of those trends."
During its darkest hours in 2005, the company picked a new chief executive, replacing co-founder Mike Ramsay with Rogers. Though a technology newbie, Rogers had extensive experience in the world of television, having founded financial news network CNBC while president of NBC Cable.
Together with TiVo vice presidents Naveen Chopra and Tara Maitra, Rogers lashed together deals to bolster the foundering company. His strategy was two-pronged: Land services to make the TiVo device more useful, and find cable partners to distribute the TiVo service -- which includes its programming guide, search interface and other well-regarded features -- to subscribers for a licensing fee.
He made headway on both fronts, adding RealNetworks Inc.'s Rhapsody music streaming service, Amazon.com Inc.'s Video on Demand service, Google Inc.'s YouTube videos, Viacom Inc.'s Nickelodeon TV shows and Netflix Inc.'s Instant Watch video streaming service. That meant people who bought the TiVo recorder could listen to music from Rhapsody's library of 6 million songs on their TVs, watch movies or shows on demand and sample videos from the Web.
"Most of what people are watching now is on the major networks and on the Internet," McQuivey said. "Between that and Netflix, people are getting much of what they need."
For now, though, cable and satellite are still king. TiVo struck deals with Comcast Corp. and Cox Communications Inc. to license the TiVo service on their set-top cable boxes.
And the relationship with DirecTV, which is now managed by cable mogul John Malone's Liberty Media Corp., is back on track. TiVo has a contract to provide DVRs for the satellite TV company's subscribers starting in the second half of this year.
Meanwhile, TiVo put its own finances in order, cutting back advertising and promotions. Last year, it laid off 38 people, about 7% of its workforce, to save $6.5 million in annual costs. The windfall from the EchoStar ruling is expected to help TiVo post its first-ever annual profit.
And its litigation against EchoStar could yield more cash. This month, a federal judge in Texas is set to hear TiVo's claim that EchoStar has continued to violate TiVo's patents since the September 2006 verdict that resulted in the $104.6-million award.
Yet TiVo isn't completely out of the woods.
Its subscribers continue to decline. About 3.5 million paid service fees as of Oct. 31, the end of its third quarter, down from 4.1 million a year earlier. Comcast and Cox have been slow to add subscribers for TiVo. And DirecTV won't begin to offer TiVo's device until later this year.
Meanwhile, TiVo is busy trying to convince consumers that its stand-alone device, priced between $150 and $600 (depending on storage capacity and features such as support for high-definition TV and surround-sound audio) with a monthly service fee of $12.95, can help bail them out of the economic doldrums by saving them "millions."
"By that, we mean millions of pieces of content that families can enjoy for free at home," Rogers said.
The irony of a company that's come back from the dead to turn a recession into a marketing opportunity isn't lost on the CEO.
"There were so many people who counted us out strategically and financially," he said. "We've gone from being a technology pioneer to a commodity and back to an innovator again."
Tuesday, February 3, 2009
Monday, February 2, 2009
Some Fear Google’s Power in Digital Books
Some Fear Google’s Power in Digital Books
By NOAM COHEN
IN 2002, Google began to drink the milkshakes of the book world.
Back then, according to the company’s official history, it began a “secret ‘books’ project.” Today, that project is known as Google Book Search and, aided by a recent class-action settlement, it promises to transform the way information is collected: who controls the most books; who gets access to those books; how access will be sold and attained. There will be blood, in other words.
Like the oil barons in the late 19th century, Google is thirsty for a vital raw material — digital content. As Daniel J. Clancy, the engineering director for Google Book Search, put it, “our core business is about search and discovery, and search and discovery improves with more content.”
He can even sound like a prospector when he says Google began its effort to scan millions of books “because there is a ridiculous amount of information out there,” he said, later adding, “and we didn’t see anyone else doing it.”
But there is a crucial difference. Unlike Daniel Plainview, the antihero of “There Will Be Blood,” played by Daniel Day-Lewis, who cackles when describing how his rigs can suck the oil underneath other peoples’ property — drink their milkshakes, if you will — when Google copies a book the original remains.
Instead, the “property” being taken is represented by copyrights and other kinds of ownership. There will be lawsuits.
•
In the latest issue of The New York Review of Books, Robert Darnton, the head of the Harvard library system, writes about the Google class-action agreement with the passion of a Progressive Era muckraker.
“Google will enjoy what can only be called a monopoly — a monopoly of a new kind, not of railroads or steel but of access to information,” Mr. Darnton writes. “Google has no serious competitors.”
He adds, “Google alone has the wealth to digitize on a massive scale. And having settled with the authors and publishers, it can exploit its financial power from within a protective legal barrier; for the class action suit covers the entire class of authors and publishers.”
Google is certainly solidifying a dominant position in the world of books by digitizing the great collections of the world. It relies on a basic mathematical principle: no matter how many volumes Harvard or Oxford may have, each can’t have more than Oxford plus Harvard plus Michigan, and so on.
The class-action settlement (which a judge must still approve), Mr. Darnton writes, “will give Google control over the digitizing of virtually all books covered by copyright in the United States.”
As long as Google has a set of millions of books that it uniquely can offer to the public, he argues, it has a monopoly it can exploit. You want that 1953 treatise on German state planning? You’ll have to pay. Or, more seriously, your library wants unfettered access to these millions of books? You’ll have to subscribe.
While Harvard has allowed Google to digitize its public domain holdings, it has thus far not agreed to the settlement. “Contrary to many reports, Harvard has not rejected the settlement,” Mr. Darnton wrote in an e-mail message, in which he said his essay was “not meant as an attack on Google.” “It is studying the situation as the proposed accord makes its way through the court.”
To professors who track the fast-changing nature of content on the Internet, not to mention Google officials, the idea of Google as a robber baron is fanciful. Google has no interest in controlling content, Mr. Clancy said, and in the few cases where it does create its own content — maps or financial information, for instance — it tries to make it available free.
Eben Moglen, a law professor at Columbia and a free-culture advocate, puts it this way: if the fight over digitization of books is like horse-and-buggy makers against car manufacturers, Google wants to be the road.
To those who write about the significance of Google Book Search — and a bit of a cottage industry has formed online in a few months — it is not Google’s role as the owner of content that preoccupies them. Rather it is the digitization itself: the centralization — and homogenization — of information.
To Thomas Augst, an English professor at New York University who has studied the history of libraries, including those in the past that were run as businesses, what is significant is that the digitization of books is ending the distinction between circulating libraries, meant for public readers, and research libraries, meant for scholars. It’s not as if anyone from the public can walk into the Harvard library.
“A positive way to look at what Google is doing,” he said, “is that it is advancing the circulating of books and leveling these distinctions.”
•
In a final twist, however, the digital-rights class-action agreement has the potential to make physical libraries newly relevant. Each public library will have one computer with complete access to Google Book Search, a service that normally would come as part of a paid subscription.
One of Mr. Darnton’s concerns is that a single computer may not be enough to meet public demand. But Mr. Augst already can see a great benefit.
Google is “creating a new reason to go to public libraries, which I think is fantastic,” he said. “Public libraries have a communal function, a symbolic function that can only happen if people are there.”
By NOAM COHEN
IN 2002, Google began to drink the milkshakes of the book world.
Back then, according to the company’s official history, it began a “secret ‘books’ project.” Today, that project is known as Google Book Search and, aided by a recent class-action settlement, it promises to transform the way information is collected: who controls the most books; who gets access to those books; how access will be sold and attained. There will be blood, in other words.
Like the oil barons in the late 19th century, Google is thirsty for a vital raw material — digital content. As Daniel J. Clancy, the engineering director for Google Book Search, put it, “our core business is about search and discovery, and search and discovery improves with more content.”
He can even sound like a prospector when he says Google began its effort to scan millions of books “because there is a ridiculous amount of information out there,” he said, later adding, “and we didn’t see anyone else doing it.”
But there is a crucial difference. Unlike Daniel Plainview, the antihero of “There Will Be Blood,” played by Daniel Day-Lewis, who cackles when describing how his rigs can suck the oil underneath other peoples’ property — drink their milkshakes, if you will — when Google copies a book the original remains.
Instead, the “property” being taken is represented by copyrights and other kinds of ownership. There will be lawsuits.
•
In the latest issue of The New York Review of Books, Robert Darnton, the head of the Harvard library system, writes about the Google class-action agreement with the passion of a Progressive Era muckraker.
“Google will enjoy what can only be called a monopoly — a monopoly of a new kind, not of railroads or steel but of access to information,” Mr. Darnton writes. “Google has no serious competitors.”
He adds, “Google alone has the wealth to digitize on a massive scale. And having settled with the authors and publishers, it can exploit its financial power from within a protective legal barrier; for the class action suit covers the entire class of authors and publishers.”
Google is certainly solidifying a dominant position in the world of books by digitizing the great collections of the world. It relies on a basic mathematical principle: no matter how many volumes Harvard or Oxford may have, each can’t have more than Oxford plus Harvard plus Michigan, and so on.
The class-action settlement (which a judge must still approve), Mr. Darnton writes, “will give Google control over the digitizing of virtually all books covered by copyright in the United States.”
As long as Google has a set of millions of books that it uniquely can offer to the public, he argues, it has a monopoly it can exploit. You want that 1953 treatise on German state planning? You’ll have to pay. Or, more seriously, your library wants unfettered access to these millions of books? You’ll have to subscribe.
While Harvard has allowed Google to digitize its public domain holdings, it has thus far not agreed to the settlement. “Contrary to many reports, Harvard has not rejected the settlement,” Mr. Darnton wrote in an e-mail message, in which he said his essay was “not meant as an attack on Google.” “It is studying the situation as the proposed accord makes its way through the court.”
To professors who track the fast-changing nature of content on the Internet, not to mention Google officials, the idea of Google as a robber baron is fanciful. Google has no interest in controlling content, Mr. Clancy said, and in the few cases where it does create its own content — maps or financial information, for instance — it tries to make it available free.
Eben Moglen, a law professor at Columbia and a free-culture advocate, puts it this way: if the fight over digitization of books is like horse-and-buggy makers against car manufacturers, Google wants to be the road.
To those who write about the significance of Google Book Search — and a bit of a cottage industry has formed online in a few months — it is not Google’s role as the owner of content that preoccupies them. Rather it is the digitization itself: the centralization — and homogenization — of information.
To Thomas Augst, an English professor at New York University who has studied the history of libraries, including those in the past that were run as businesses, what is significant is that the digitization of books is ending the distinction between circulating libraries, meant for public readers, and research libraries, meant for scholars. It’s not as if anyone from the public can walk into the Harvard library.
“A positive way to look at what Google is doing,” he said, “is that it is advancing the circulating of books and leveling these distinctions.”
•
In a final twist, however, the digital-rights class-action agreement has the potential to make physical libraries newly relevant. Each public library will have one computer with complete access to Google Book Search, a service that normally would come as part of a paid subscription.
One of Mr. Darnton’s concerns is that a single computer may not be enough to meet public demand. But Mr. Augst already can see a great benefit.
Google is “creating a new reason to go to public libraries, which I think is fantastic,” he said. “Public libraries have a communal function, a symbolic function that can only happen if people are there.”
Thursday, January 29, 2009
How Netflix got started
Netflix founder and CEO Reed Hastings tells Fortune how he got the idea for the DVD-by-mail service that now has more than eight million customers.
(Fortune Magazine) -- The genesis of Netflix came in 1997 when I got this late fee, about $40, for Apollo 13. I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there's a big market out there.
So I started to investigate the idea of how to create a movie-rental business by mail. I didn't know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.
Don't be afraid to change the model
Early on, the first concept we launched was rental by mail, but it wasn't subscription based, so it worked more like Blockbuster. Some people liked it, but it wasn't very popular. I remember thinking, God, this whole thing could go down, and we said, Let's try the more radical subscription idea. We knew it wouldn't be terrible, but we didn't know if it would be great. We launched the service on Sept. 23, 1999, and we could tell within a month that we had a renewal rate. It was a free trial, but only 20% didn't go from the free trial to the paid. We're up to 90% renewal now.
You know it's working when...
I was down in Arizona in 2003 visiting one of our distribution centers on the outskirts of Phoenix. It was raining, and my umbrella wasn't working, so I walked the half mile from the distribution center to the hotel. I got the message on my BlackBerry that we hit a million [subscribers] that day while I was walking in the rain. It was this beautiful moment where I was just so elated that we were going to make it, and that was also the first quarter that we turned profitable. It was a magic walk.
In my queue
I've seen well over 1,000 movies. The one I remember most was Sophie's Choice, because I was taking European history in college at the time, and I was totally bored with the topic. And then I saw the movie, and I started to care. It changed my perspective. I could relate to the trauma after seeing the movie in a way that I couldn't by studying it.
Secrets of my success
* Target a specific niche: When there's an ache, you want to be like aspirin, not vitamins. Aspirin solves a very particular problem someone has, whereas vitamins are a general "nice to have" market. [The Netflix idea] was certainly aspirin.
* Stay flexible: We named the company Netflix (NFLX), not DVDs by Mail because we knew that eventually we would deliver movies directly over the Internet. DVDs will be around a long time, but we're building for the day when they're not.
* Never underestimate the competition: We erroneously concluded that Blockbuster (BBI, Fortune 500) probably wasn't going to launch a competitive effort when they hadn't by 2003. Then, in 2004, they did. We thought, Well, they won't put much money behind it. Over the past four years they've invested more than $500 million against us.
* There are no shortcuts: Occasionally great wealth is created in a short amount of time, but it's through a lot of luck in those situations. You just have to think of building an organization as a lot of work. It may or may not turn into great wealth.
(Fortune Magazine) -- The genesis of Netflix came in 1997 when I got this late fee, about $40, for Apollo 13. I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there's a big market out there.
So I started to investigate the idea of how to create a movie-rental business by mail. I didn't know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.
Don't be afraid to change the model
Early on, the first concept we launched was rental by mail, but it wasn't subscription based, so it worked more like Blockbuster. Some people liked it, but it wasn't very popular. I remember thinking, God, this whole thing could go down, and we said, Let's try the more radical subscription idea. We knew it wouldn't be terrible, but we didn't know if it would be great. We launched the service on Sept. 23, 1999, and we could tell within a month that we had a renewal rate. It was a free trial, but only 20% didn't go from the free trial to the paid. We're up to 90% renewal now.
You know it's working when...
I was down in Arizona in 2003 visiting one of our distribution centers on the outskirts of Phoenix. It was raining, and my umbrella wasn't working, so I walked the half mile from the distribution center to the hotel. I got the message on my BlackBerry that we hit a million [subscribers] that day while I was walking in the rain. It was this beautiful moment where I was just so elated that we were going to make it, and that was also the first quarter that we turned profitable. It was a magic walk.
In my queue
I've seen well over 1,000 movies. The one I remember most was Sophie's Choice, because I was taking European history in college at the time, and I was totally bored with the topic. And then I saw the movie, and I started to care. It changed my perspective. I could relate to the trauma after seeing the movie in a way that I couldn't by studying it.
Secrets of my success
* Target a specific niche: When there's an ache, you want to be like aspirin, not vitamins. Aspirin solves a very particular problem someone has, whereas vitamins are a general "nice to have" market. [The Netflix idea] was certainly aspirin.
* Stay flexible: We named the company Netflix (NFLX), not DVDs by Mail because we knew that eventually we would deliver movies directly over the Internet. DVDs will be around a long time, but we're building for the day when they're not.
* Never underestimate the competition: We erroneously concluded that Blockbuster (BBI, Fortune 500) probably wasn't going to launch a competitive effort when they hadn't by 2003. Then, in 2004, they did. We thought, Well, they won't put much money behind it. Over the past four years they've invested more than $500 million against us.
* There are no shortcuts: Occasionally great wealth is created in a short amount of time, but it's through a lot of luck in those situations. You just have to think of building an organization as a lot of work. It may or may not turn into great wealth.
Sunday, October 5, 2008
Monday, August 25, 2008
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