06.14.2004 12:00 PM
TiVo moves toward a new gateway

Broadcast, cable and satellite television operators are bracing for a high-profile new competitor. TiVo, a pioneer in personal video recording, is now working on a new service that will allow its subscribers to download television content directly from the Internet.



Today’s TiVo service allows users to watch broadcast, cable or satellite programs at any time. Pictured the DVR-810H.

Although today’s TiVo service allows users to watch broadcast, cable or satellite programs at any time, the new technology will make it possible for them to mix content from the Internet with those programs.

Tom Wolzien, an analyst at Bernstein Investment Research and Management, told the New York Times that this is the fourth electronic video service, and it is an alternative to cable, satellite and broadcast television. Those traditional services, he said, have been the monster gatekeepers, but this is a way for content providers to get past them.

In the new world of Internet-connected television, viewers will not have to worry about when a show is scheduled or from where it comes.

Michael Ramsay, chairman and chief executive of TiVo, said that the company is fully committed to developing an entertainment experience you can’t get over normal broadcast television.

In a strategy aimed at establishing its digital video recorder as the entertainment hub of the home, TiVo also announced that both wired and wireless home networking features will now be standard with all its devices and that users can now schedule recordings online.

A timetable for introducing the new Internet video service has not been set, nor has its price. But the technology has reached viability, and TiVo is moving quickly to differentiate itself as cable and satellite services migrate toward their own personal recording technologies.

DirecTV, one of TiVo’s largest sources of new subscribers, last week sold its entire equity stake of 3.4 million shares in TiVo as part of a program to shed unnecessary assets. Shares of TiVo dropped more than 14 percent to close at $6.41 just after the sale.

There is some speculation in the industry, said a Times report, that DirecTV is developing its own digital video recorder. Several analysts suggested TiVo is moving toward Internet downloading as a way to insulate itself against potential competition from DirecTV.

Last year TiVo, which has 1.6 million subscribers who use its digital video recorder with cable or DirecTV, acquired Strangeberry, a small Silicon Valley start-up that had developed a new technology to view Internet video streams. TiVo is now developing that technology with its new acquisition and plans to integrate it into the TiVo system next year.

Because most broadband cable and DSL Internet connections do not yet reliably support the data speeds needed to view standard-definition video in real time as it is streamed, most video services using broadband delivery require that programs first be downloaded and stored on a hard drive before viewing. Though this non-real-time method is now available for SD programs, it is not yet viable for downloading HDTV content, which requires vastly increased bandwidth.

For standard video quality, the economics may already work, according to a recent Bernstein Research report. It costs just 15 cents an hour to stream standard video across a DSL connection, Wolzien said, and even those costs are falling.

Because the new delivery technology offers a low-cost alternative to today’s media conglomerates, the field is expected to grow rapidly. Both Verizon and SBC telephone companies are engaged in trials and deployment of fiber-optic networks, which offer significantly higher speeds than existing DSL services.

Video distributors such as Netflix, RealNetworks and Blockbuster are also exploring the possibility of delivering feature-length movies via the Internet to users for delayed viewing.

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