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ANDREA FIGLER
ReplayTV's move to target cable operators as the main market for its personal video recorders isn't guaranteed to rescue it, cable officials say.
The market for personalized video recorders, or PVRs, is just too competitive and complex right now, they say, and ReplayTV does not have any special connection with MSOs.
Comcast Communications, for instance, started trials with both ReplayTV and arch-rival TiVo this fall to find out which service is better.
"We are really trying to dip our toes into the water," says Andy Addis, Comcast's VP-marketing.
Comcast wants to see which PVR service its customers prefer, as well as which service works best with its own cable system, Addis explains. The latter part of this equation is what ReplayTV plans to capitalize on.
ReplayTV last week said it had to revise its business model and lay off employees because it was burning cash too fast. Under its old model, ReplayTV had to subsidize its boxes because it did not charge subscription fees. It relied on a revenue stream from advertisers instead.
After the company failed to gain enough subscribers and cable operators fought for control of this new advertising revenue stream, ReplayTV decided to change its ways. Now, ReplayTV will forego its brand name and provide personalized services to cable operators themselves.
"Now, we're happy to be the guts behind TV Guide," ReplayTV VP Steve Shannon says of losing ReplayTV's display menu to the existing cable system's TV Guide menu. "That's the wall we've been banging our heads against for years."
ReplayTV will no longer market to consumers in general.
Instead, the company will charge the cable operators, or satellite companies, a licensing fee for its software to bring in cash flow, which should improve the cash-burn rate fivefold, Shannon says.
While many industry gurus see this as a smart move, one source says it wouldn't make ReplayTV stand out from the rest.
"TiVo would integrate with us as well," Comcast's Addis says.
Cable operators may turn to TiVo despite ReplayTV's cable-friendly plan because so many consumers have already chosen TiVo. TiVo totaled 73,000 subscribers at the end of September. ReplayTV's levels rank far below, in the 30,000 range, a news report says.
TiVo's consumer draw has prompted AT&T Broadband, which has plans to start trials with ReplayTV later this month, to research TiVo as well, a few sources say.
Pete Gatseos, AT&T Broadband's VP-corporate marketing, would not comment on the TiVo deal but says AT&T Broadband likes to keep its options open.
"We just want to learn how we can best apply it in the future," he says.
TiVo has caught the attention of other MSOs as well. Cox Communications started a trial with TiVo in Las Vegas, and Cablevision executives, while not partial to any one PVR provider, have installed TiVos in their homes to monitor the new technology, a Cablevision spokesman says.
The problem with a TiVo deal, however, stems from its business model. Like ReplayTV's old business plan, TiVo wants to keep some of the advertising revenue stream created by new pop-up screens and promotional packaging on PVR systems, says Morgan Guenther, VP-development for TiVo.
"The question is: `What is the split going to be?'" Guenther says of negotiations with cable operators.
After being reminded that MSOs frown upon revenue splits, Guenther quickly adds TiVo would work with cable operators in any form. TiVo will even consider a licensing fee agreement similar to ReplayTV, he said last week.
If TiVo refuses to give up advertising control, cable operators have another choice.
A new company formed last year, Keen Personal Media, announced its PVR system in September. A wholly owned subsidiary of Western Digital, the company has been planning to target cable operators all along.
Greg Kalsow, Keen's VP-marketing, says the company is in discussions with six undisclosed MSOs and plans to announce PVR trials next year. Keen will base its revenue stream on licensing fees and upgrades.
"We don't want to change the MSOs' comfort zone right now," Kalsow says.
If cable operators want more choices, they can always turn to Microsoft. Microsoft has been working with direct-broadcast-satellite provider DirecTV, a huge competitor to the cable companies, to offer a PVR service called UltimateTV.
But, sources say, cable companies will probably shy away from working with such a strong partner as Microsoft. Another legal battle with the U.S. government is not what the industry needs right now.
In the end, sources say, whatever PVR company wins the competitive race to cut deals with the cable operators will definitely reap many rewards. The market for personal video recorders is expected to grow from about 800,000 this year to about 53 million in 2005, according to Forrester Research news reports.
* Bertelsmann is reportedly talking to RecordTV.com, a Web site that allows viewers to watch recorded television shows online. RecordTV, which sees its service as similar to a VCR, is being sued by the major studios for copyright infringement.
* CNN staffers were bracing for layoffs afer a memo from top executives warned that "aggressive changes" in programming and personnel assignments were on the way. The news network is preparing to play a key role as part of the combined America Online Time Warner.
* Hollywood studios, led by Sony and Walt Disney, are looking to create their own video-on-demand services for the Internet. As consumers get broadband access, sending movie-length video digitally will become a big business, and they want to ensure they get a substantial cut of the revenue.
* CNBC Europe named Richard Cotton chief executive. Cotton was the longtime EVP/ general counsel for NBC.
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