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TiVo Eyes Q2 Profit, 'Entertainment Weekly' Pact

27 Aug, 2008 By: Erik Gruenwedel

Increased margins on its digital video recorders and reduced operating expenses helped TiVo post second-quarter (ended July 31) income of $2.9 million, compared to a loss of $17.7 million during the same period last year.

The Alviso, Calif.-based DVR pioneer, which had expected losses from $2 million to $4 million, recorded its first successive and third quarterly profit in its 11-year history.

Revenue fell 5.4% to $53.5 million, compared to $56.5 million last year.

The euphoria could be short-lived, however, as TiVo executives, in a call with investors, said third-quarter revenue would range from $49 million to $51 million — at least $6 million below earlier guidance. The service expects to report losses from $7 million to $9 million.

TiVo said gross subscriber additions topped 36,000, compared to 41,000 last year. However, the company acknowledged that competition from generic DVR devices offered by cable operators continued erode its subscriber base. Total subs at the end of the quarter were 3.6 million, down 600,000 from last year.

"Over time, the subscriber growth will be much more a function of cable and international distribution deals," CEO Tom Rogers told investors.

He said subscriber acquisition costs (SAC), which dropped to $135 from $758 last year, would help TiVo develop distribution deals with third-party vendors and consumer electronics manufacturers.

Rogers said Comcast Communications had bowed “TiVo on Comcast” in Connecticut and that a similar deal with Cox Communications was on track to launch in the fall.

TiVo also launched service in Australia with the Seven TV network.

Finally, Best Buy is bundling TiVo as a recommended set-top box with select high-definition TV packages.

“These efforts, along with others, will enable us to build on our standalone business while we also manage SAC and overall marketing expenditures,” Rogers said.

Separately, TiVo said it teamed with Entertainment Weekly to incorporate the consumer publication’s “What to Watch” TV programming recommendations into its service.

Slated to launch this fall, “Watch” will automatically record the magazine’s suggested programs for broadband-enabled subscribers. In addition, original video content from EW.com, including “Just a Minute,” “Ausiello TV,” “Idolatry” and related behind-the-scenes content will be available.

“[TiVo] offers a whole new viewing vehicle for our original video programming, currently only available [online],” said Scott Donaton, publisher of Entertainment Weekly.

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