DirecTV sent an on-screen message to subscribers over the weekend informing them that beginning Nov. 1 the monthly fee for TiVo's DVR service would be cut from $9.95 to $4.99. Since October 2000, DirecTV has been bundling its satellite television service with TiVo's DVR service to attract viewers. To access DirecTV satellite broadcasts and TiVo's DVR service, customers must have a combination set-top box with a satellite receiver and hard drive.
Earlier this year, the two companiestheir relationship to change the way the combination satellite and DVR set-top boxes are sold and managed in an effort to boost consumer interest. The price cut for TiVo's service is part of those changes, as are future marketing efforts for the DVR service on the DirecTV platform. Analysts believe that the restructured deal could save TiVo between $15 million and $20 million a year.
"This is part of a transition that DirecTV announced earlier this year, where they are taking more ownership of the subscribers," said TiVo spokeswoman Rebecca Baer.
DirecTV has taken over the pricing, marketing and naming of the DVR service on its satellite network so customers won't see the TiVo name on DirecTV, according to DirecTV spokesman Bob Marsocci.
"It's almost like an OEM deal," said TiVo's Baer, "where they take on the cost of marketing, while TiVo still benefits in the sense of a growing subscriber base."
Another part of the deal with TiVo is for DirecTV to sell a combination satellite and DVR set-top box using 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. It will go on sale later this month for about $200, Marsocci said.
"The current group of subscribers to the combination service are among our most loyal customers," Marsocci said. "What we are looking to do is reduce churn," or subscriber turnover.
DirecTV is looking to compete more effectively with cable television networks, which are gradually rolling out video-on-demand services, Marsocci said. The addition of DVR has been effective for rival EchoStar, which has around 600,000 of its subscribers with DVR capabilities, said Aditya Kishore, an analyst with research firm The Yankee Group. EchoStar does not charge a fee for its DVR service.
DirecTV customers make up a "healthy proportion" of TiVo's 464,000 subscribers, Baer added. DirecTV has more than 10.7 million subscribers and is the market share leader in satellite television.
The price cut will go into effect asbegin selling TiVo's Series2 recorders. It will also kick in at a critical time for TiVo: the holidays. Last year, TiVo had around the holidays, and many expect the company to do well once again.
"TiVo is looking to build their subscriber numbers, and they are timing their efforts for a holiday rush," said Phillip Swann, president of industry-news Web site TVpredictions.com. "It worked to some extent last year, and Wall Street took notice. They have to have a similar boost this year and it has to be bigger."