TiVo's Series2 in short supply

Best Buy, TiVo's exclusive retail partner for TiVo-branded Series2 boxes, has sold out of the units in many of its stores, according to Best Buy spokesman Jeff Stratman. Stores are still receiving weekly shipments of recorders, but they're already sold--there are waiting lists for consumers looking forward to the 60-hour recording capacity of Series2 boxes. Stratman said he expected the inventory issue to be resolved by early June.

San Jose, Calif.-based TiVo began selling its Series2 recorder in the middle of April, several weeks ahead of schedule, catching Best Buy slightly off guard. The retailer had planned the launch of the recorders for Mother's Day.

"We knew there was pent-up demand," Stratman said. "We were in a new relationship with TiVo, and we were conservative with our initial shipment."

TiVo sales manager Doug Bieter acknowledged the inventory issue, but he added that there was no component or DVR shortage on TiVo's part and that the companies were working to strike a better balance between supply and demand. Bieter said it simply takes some time to respond to additional requests for products.

TiVo representatives said the Series2 recorders are still available through the company's Web site.

The TiVo Series2 boxes represent a change in fundamentals for the company. TiVo had subsidized its first-generation DVRs to make them more affordable to consumers and to pump up subscriber growth. However, the strategy proved to be expensive for the company and ate considerably into its cash reserves, causing many analysts to forecast a grim future for TiVo. The company is not subsidizing its Series2 DVRs and is now more focused on generating cash.

As with any anticipated product launch, there is a spike in demand initially, but things tend to level off. Bieter pointed out that because the Series2 DVRs shipped about a month ahead of schedule, advertising and promotions around the recorder have not begun and that those efforts should help sales even more.

Digital video recorders are similar to VCRs, but instead of recording shows to a tape they store them on a hard drive. TiVo maintains a service that lets subscribers program DVRs to record their favorite shows, "pause" live broadcasts and resume play without missing any material. They can also fast-forward to catch up with the live feed.

The Series2 boxes sell for $399.99 and a lifetime subscription to TiVo's service is $249. A monthly subscription costs $12.95.

Best Buy is the exclusive retailer for Series2 boxes, but TiVo is actively working to license its technology, and a licensee can opt to sell a DVR product through any channel it wants. TiVo signed a licensing deal with consumer-electronics maker Sony late last year.

TiVo is also planning to add new services to its Series2 recorders, allowing the DVRs to store and play digital audio and to display digital images. Viewers would also be able to play online games and upload video-on-demand. The new services should be available on the boxes by the 2002 holiday season, according to the company.

TiVo has already signed partnerships with RealNetworks to manage and stream audio content from the Internet as well as with Jellyvision to bring online games to its set-top box and with Radiance Technologies to bring video-on-demand capabilities to the Series2.