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TiVo sets price increase for April 1

TiVo users will be getting an e-mail or postcard from the company soon. In an effort to make the subscription part of its business profitable, it is raising its monthly subscriber fee.

In an effort to bring the subscription part of its business to profitability, digital video recorder company TiVo is raising its monthly subscriber fee for the first time in three years, the company said Wednesday.

With TiVo's service and DVR device, subscribers record shows onto a hard drive. The digital technology boasts features unavailable through tape-based machines, such as the ability to pause live shows.

The San Jose, Calif.-based company will increase its monthly service fee from $9.95 to $12.95 starting April 1. The price increase will not be applied to TiVo subscribers who access the service through a DirecTV satellite subscription.

TiVo offered no details other than to say the price increase is aimed at helping the service part of its business reach profitability. More information may come up at the company's fiscal fourth-quarter financial-results call, scheduled for March 7.

TiVo also announced a promotion for current monthly subscribers that gives them the option of signing up for lifetime service for $199, instead of the usual $249.

Subscribers are being notified through e-mail and postcards of the price increase and the promotion, which ends April 1.

TiVo has been focusing on licensing its technology, signing a deal with Sony and a distribution deal with AT&T. The company wants this area to contribute more to overall revenue in the coming years. However, subscriptions remain the largest moneymaker for the company.

As of Oct. 31, TiVo had about 280,000 subscribers. During the company's third-quarter financial conference call, TiVo Chief Executive Mike Ramsay said the company had achieved goals that brought it closer to profitability.

According to a report from Thomas Weisel Partners analyst Gordon Hodge, TiVo had strong recorder sales over the holiday season. However, the company has been looking for additional funding and recently struck a deal with the Acqua Wellington North America Equities Fund to sell up to $14 million in common stock over the next 14 months. TiVo will use the proceeds as working capital.

TiVo and DirecTV restructured their partnership last week. Hodge said in a research note that the new arrangement could save TiVo between $15 million and $20 million a year.

Under the new deal, DirecTV will develop and manufacture an advanced TiVo-branded set-top box for its subscribers, based on TiVo's Series2 technology. The device will have new, advanced features, such as video on demand, online gaming, and the ability to display digital images and play digital audio files. Previously, TiVo had to pay about $150 per box for manufacturing.

TiVo aims to be cash flow breakeven by the end of January 2004.