Tom Rogers Discusses Future Role of TiVo in TV Evolution

Tom Rogers, CEO, TiVo

Tom Rogers, CEO, TiVo

June 30, 2009 – TiVo’s obituary has been written many times. Yet the company is still alive and kicking.

More than ten years after TiVo ignited the consumer-is-in-control revolution, the company recently won a $103 million settlement with Echostar’s Dish Network following a five-year legal battle. In June, the courts ruled that Dish Network’s DVR copied software used by TiVo.

That money has helped keep TiVo in the black: the company’s been profitable on an EBITDA basis for the last seven quarters and logged its first profitable net income year in 2008.

“We were profitable on an operating basis last year, and we got a large reward from a patent suit that put us into very substantial profitability,” said TiVo CEO Tom Rogers.

Screenplays, as part of a three-reporter roundtable, joined in a discussion with Rogers in late June when he granted a rare on-camera interview to NBC-owned station KNTV in San Francisco. He talked about TiVo’s future, the audience research it conducts, its relationship with advertisers and whether TiVo will be best served as a hardware or software maker in the future.

Rogers summed up the company in this way: “TiVo used to be defined as a way to record network television. What TiVo has become is a way to watch anything you want when you watch. We get five million pieces of content to your TV set so we define the experience totally differently. It’s about what you want to get, when you want to get it, and the recording is only a part of that. Now [TiVo] encompasses Amazon, songs, music videos, Netflix, soon to be Blockbuster, YouTube.”

TiVo also puts a lot of stock in the audience and advertiser measurement it conducts across its 3.5 million set-top boxes. In late June the company inked a deal with Web audience measurement firm Quantcast to provide cross-platform audience analysis to correlate TV viewing with online activity. The goal of the partnership is to find that elusive one-size-fits-all measurement that could indicate viewing across online and on-air mediums.

Under the deal TiVo and Quantcast will measure viewer interaction with ads and programming across 35,000 homes to combine TiVos’ second-by-second program and ratings data with demographic information from Quantcast’s Web measurement. The goal is to understand whether an on-air ad or program drives a viewer to visit a Web site. The product will be offered later this summer.

The new offering dovetails with TiVo’s audience measurement business, which Rogers discussed in the interview.

An edited transcript of that interview follows.

ScreenPlays: One of the things that concerns me about TiVo and the DVR business in general is what we are seeing with young adults and the 18 to 34 demographic. There have been studies reporting that 70 percent never use a DVR because the Internet is their DVR. They go to Hulu or How are you dealing with this generational shift who may not need you at all?

Rogers: There are two phenomena. One, is people want to watch on their schedule and sometimes they may record it like on Tivo and sometimes, like Hulu, they may watch on-demand. The issue is they are finding TV on the Internet because on-demand television is not available on-demand on their TV set. So if you want it on-demand you [often] have to go to the Internet. You can get it for free on-demand or from Amazon if you are willing to pay for it, and we provide that service. Will on-demand television of that nature move from the Internet to the TV? In our view it is not really TV unless it’s on the TV, and that phenomenon is coming. The demographics show that younger demos love big hi-def experiences.

ScreenPlays: When you look ahead five years, how do you see the living room and the devices in it?

Rogers: There are many service providers and some people use satellite, cable and some telephone companies. Some are using game consoles as a way to frame the TV experience. We provide an answer for people who want to define the experience their way and get a standalone box through satellite and DirecTV and cable. Regardless of how you decide to bring it to the home, we frame it, find it, navigate through it. It’s the Google of the TV experience. Plus, we are taking all these things whether they came off broadcast or broadband. Does the consumer care where it’s coming from? No. We integrate across all those sources of content and make it one box, one remote, one-stop shop defined by choice and consumer control.

ScreenPlays: You have a button to “press here for more ads.” Do people do that?

Rogers: There are still a lot of people who watch commercials and we provide guidance as to what they’re watching and what they’re zapping through. You would think the highest-rated shows would have the highest-rated ads, but there are shows rated much lower but their advertising tops the week because people want to stop and watch. If you watch a car ad in 30 seconds, it’s really hard to distinguish the car. We have a long-form ad experience that people in the market for buying cars are very likely to go to. You push a button and the dealer contacts you if you want more information as opposed to something that aggravates you if it’s in the middle of a show. People learn to be more effective with their ad buys.

KNTV: Hulu on Tivo would be extraordinary. Have you talked to Hulu?

Rogers: What is at the heart of this is more than just consumer preference. They would love to get Hulu content on the television set. Who wouldn’t want that? There are business considerations that will move in that direction – if it will be available for free with ads. You have to create an advertising environment to make that worthwhile. In the Internet world, [Hulu and other sites] are up against very low priced inventory which makes the supply-demand situation of the pricing of advertising extremely difficult from a broadcaster point of view. The pricing of inventory on TV is a situation where you can control the pricing and get more inventory for premium pricing.

KNTV: What are you learning from [your data]?

Rogers: In DVR households about half of the commercials or more in primetime are skipped. TV has lost a step when it comes to the Internet. When advertisers advertise on the Internet they know every click. Understanding the return on investment from the data you get back is pretty easy. On TV there is no way to do that with granularity until we came in with second-by-second ratings We take any channel, any day part, any program, any commercial pod, down to the second and can tell you across our homes who is watching what and when and it makes it possible for advertisers to know precisely what they are getting and for broadcasters to figure out what’s working.

ScreenPlays: You need scale for that to be effective. Cable and satellite providers have their own DVR. So can you get enough information across that base for that to be meaningful for networks?

Rogers: We have 3.5 million homes nationwide. I think Nielsen’s people meters are in 16,000 to 18,000 homes. Most TV stations’ ratings are done in the same way it was done in the Eisenhower administration and that’s the quality of ratings TV stations deal with.

KNTV: Where does the growth come from in your business?

Rogers: DVR penetration is about 30 million, and most analysts believe in the next three years it will be 60 million homes so there is a lot of growth. We are also doing this with Comcast and Cox where we have a software version of TiVo. We don’t as much revenue [with the software deals], but we don’t have the cost of marketing and manufacturing. So it’s a wonderful model for us and for cable operators since they don’t have to switch out the box.

Our penetration is the growing universe of DVRs and our ability to penetrate that. What we are about is making it really easy to find whatever you want when you want it. Our role is framing the experience and making it easy to access and providing advertising that is useful…and to provide all the data to support that so television can survive very nicely as a business as opposed to what is happening in the newspaper business.