TiVo rocks in Spain, faces cloudy UK horizon

Europe has been good to DVR maker TiVo recently, and the future would be bright but for Liberty Global’s acquisition of Virgin Media, its biggest customer there.

But at least there are no such complications for its other significant cable customer, Ono of Spain, where conversion of the customer base to the TiVo-based hybrid services has accelerated this year after an initial slow start following its launch in October 2011. Ono now has 150,000 subscribers to TiVo, 16 percent of its total pay-TV customer base of just over 900,000. After the first year of operation in October 2012, the number was just 56,000.

The recent acceleration is partly due to competitive pricing starting at just €5 a month and partly the fact that the service is now available across the operator’s entire fiber-optic network, reaching over 7 million households. It also reflects the success of TiVo’s strategy of collaborating with operators to develop hybrid DVR services in which has a stake in the intellectual property driving revenues from royalties. This has also led to high customer satisfaction rates, running at 92 percent in the case of the Ono service, helped by providing access to 2500 hours of free content.

TiVo has been equally successful on a larger scale at Virgin Media, the UK’s dominant cable operator with around 3.7 million pay TV customers, after launch of the hybrid service in December 2010 following a multi-year agreement to be its exclusive provider of middleware and UI (User Interface) software. Since then Virgin Media has successfully upsold the TiVo premium service at an accelerating rate, with around 1.4 million subscribers, or 38 percent of the total customer base, by March 2013. Typically, Virgin Media has charged £5 ($7.50) a month for the service plus £50 installation fee, but often sweetened with various introductory offers.

The plan was to roll TiVo through the customer base and use the platform as the hub of its TV Everywhere strategy, but then in February 2013 Liberty Global, the world’s second-largest cable TV group with around 20 million TV subscribers mostly in Europe, announced agreement for its $23 billion acquisition of Virgin Media.

While this will make no difference to the TiVo rollout in the UK over the next year or two, it raises long term questions over the future of the relationship, with Liberty Global CEO Mike Fries only willing to confirm that it would continue for now with no long-term commitment. Liberty Global is naturally seeking economies of scale across its multinational ecosystem, and its hybrid strategy is firmly rooted in Horizon, the platform launched in the Netherlands at IBC in September 2012.

Since then, Liberty Global has sold over 100,000 Horizon subscriptions in the Netherlands and got off to a good start in Switzerland gaining around 25,000 subs since that launch in January 2013. It plans to follow in Germany and Ireland this year, followed by its other European markets.

The Horizon project relies on a different partnership structure than TiVo’s with Virgin Media, with several key vendors involved. Samsung is there largely just as the box manufacturer, with NDS, now part of Cisco, providing the UI interface middleware with some enhancements from Liberty Global itself, Nagra the conditional access, Google, its Widevine security for the online part of the service, and Entropic MoCA silicon paired with WiFi chips from Celeno for home networking.

Fries has now confirmed that, as it rolls out, Horizon will be enhanced with new features in the light of early experience, including an updated remote control with a keyboard on the back for more advanced search, but more significantly bringing the UI to the cloud where it can be updated and managed via the web without affecting the end customer. At the same time Liberty Global will start migrating DVR to the cloud, according to Fries.“Network PVR elements of it will be enhanced. Things will get smaller. The UI will evolve as well and get slicker and we’ll bring in new apps and pieces to the puzzle,” said Fries.

Liberty Global has not confirmed when or whether the Virgin Media TiVo platform will be aligned with this strategy but it looks set to happen in the longer term. It is almost certain there will be convergence between the platforms and TiVo will hope it will continue to contribute intellectual property for middleware and the UI. But this will be difficult given Liberty’s close involvement with Cisco for the UI.