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TiVo Subscribers Top 3 Million Milestone

Company Says Growth Can Be Sustained

By Mike Musgrove
Washington Post Staff Writer
Saturday, February 19, 2005; Page E01

TiVo Inc. announced yesterday that it has hit the 3 million subscriber mark for its digital television recorder, a milestone for a company still trying to prove its business model has staying power.

TiVo doubled its subscriber total over the year, though most of its new subscriptions for the machine are coming from people who also subscribe to DirecTV's satellite television service; in its fourth quarter, for example, TiVo added 698,000 subscriptions -- about 447,000 of those from DirecTV customers.

That's a pipeline of new customers and revenue that has some analysts concerned. While DirecTV and TiVo once had a tight relationship, the satellite TV company sold its stake in TiVo last year and has announced that the company will offer a non-TiVo recorder this year. It has not said whether it plans to stop offering TiVo.

Brodie Keast, executive vice president at TiVo, said that his company's business model does not depend on the satellite TV company, which is now owned by News Corp., a company with a stake in set-top box maker NDS Group PLC.

"We're fully prepared for life without DirecTV should it come to that; we're not naive about that," he said.

Tiny TiVo, however, faces stiff competition from all directions as deeper-pocketed competitors have marched into the company's market and undercut the pioneer's prices. Software giant Microsoft Corp. and cable behemoth Comcast Corp. are both trying to sell consumers on different versions of the same technology, which lets users record TV shows and movies and store them on a computer hard drive.

TiVo remains optimistic about its ability to compete.

"We think we can co-exist," Keast said. "It's not one of those things where there's going to be absolute winners ands absolute losers. It's going to be a vast market."

With TiVo, users must both buy the box, which costs as little as $99 after rebates, and pay $12.95 a month to get TV listings and other content regularly downloaded to the device so copying can be scheduled. Cable companies, on the other hand, typically don't charge upfront for the device -- customers generally pay $5 to $10 extra a month to lease a digital recorder from their cable company.

Michael Gartenberg, vice president and research director for Jupiter Research, thinks TiVo offers a superior product to the recorders that cable companies offer their customers, but most customers don't know the difference. As long as a recorder has the basic functionality of a digital recorder, most customers probably don't care whether the box itself comes from TiVo or from competitors like Motorola Inc. or Scientific-Atlanta Inc., the companies that make Comcast's recorders, he said.

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