Audio Video News

Personal video recorder pioneer TiVo, Inc. has initiated massive cost-cutting measures in an attempt to remain viable without the need for further external funding.

In the first week of April, the San Jose, CA–based maker of PVRs and marketer of a TV subscriber service announced a 25% cutback in its workforce. Approximately 80 of TiVo's reported 350-member workforce were laid off immediately. TiVo has also raised its lifetime subscription fee 25%, from $199 to $249, although the monthly fee for the service will remain at $9.95. Through these efforts, plus reduced manufacturing and marketing costs, the company hopes to save as much as $60 million for the fiscal year ending January 31, 2002. The news caused TiVo's stock price to jump; it closed Friday, April 6 at $5.03 per share, up more than 25% from its 52-week low of $4.00.

Cutting costs was necessary to insure the company's survival without "life support," according to TiVo executives. The recent wave of e-commerce collapses has made venture capital hard to come by in Silicon Valley. "Capital markets are a closed door the way market conditions are at this time," said TiVo public relations specialist Rebecca Baer. "As a result, we are working proactively to be more self-sufficient."

TiVo lost $216.6 million for its most recent fiscal year, ended January 31, 2001—an amount greater than its market capitalization of $175 million. The company expects its new austerity programs to reduce its operating costs by a total of 35%, thereby enabling it to stretch its cash assets of approximately $124.5 million as far as possible. The efforts aim to give TiVo "the staying power to capitalize on its leadership position in personal TV and to execute our service strategy," according to an official announcement from CEO Mike Ramsay.

TiVo has also been troubled by rumors and reports that its PVR subscribers are subject to invasions of privacy. The TiVo device, which is connected via phone lines to server computers, can track the television viewing habits of those who use it. Such information could subsequently be used as a marketing tool, or for other, more sinister purposes. At the request of members of the House of Representatives' commerce committee, Federal Trade Commission chairman Robert Pitofsky is preparing a report that addresses the legality of TiVo's data-gathering technology. Pitofsky's report should appear later this month.

With the November exit of ReplayTV from the subscriber business, TiVo is now the unquestioned leader in the field despite Microsoft's recent release of a PVR with the capability of recording two television shows simultaneously. PVR technology, which allows viewers to pause and rewind TV shows as they are being broadcast, is still a fringe phenomenon. TiVo signed up 1000 new subscribers in January of this year, and expects to add 200,000 new subscribers this year—approximately equal to the total number of PVR users now. There are more than 98 million TV households in the US, according to the Consumer Electronics Association.