"I see this much more as them going away as a competitor," TiVo chief executive Michael Ramsay told CNET News.com on Monday. "There is nothing about Replay's decision that has fundamentally changed our thinking."
Last week, privately held ReplayTV announced it will exit the business of selling its line of digital video recorders directly to consumers. Digital video recorders are set-top boxes that use a hard drive instead of videotape to record TV shows, allowing consumers to pause live television or create their own instant replays.
Since ReplayTV's announcement, TiVo's stock has steadily dropped.
Right now, TiVo and ReplayTV's services primarily are encased in their own set-top boxes. Ramsay, however, is keenly aware of the investment community's fears that recording shows onto a hard drive could become just another feature on other companies' set-top boxes.
Speaking to a crowd of venture capitalists at the Technology Outlook 2000 conference here, Ramsay took pains to point out that TiVo is working quickly to do that work itself: integrating its service into other types of set-top boxes, such as those for cable, satellite or interactive TV.
TiVo's service, for example, is already available in combination with a DirecTV set-top box. And by next year, it will be a standard part of America Online's interactive AOLTV.
But many industry watchers wonder whether others--instead of TiVo--will be the ones to capitalize on TiVo's plans.
In his opening remarks at the conference, one venture capitalist doubted that digital video recording will remain a standalone service.
"My sense is it is just going to become a feature before it becomes a business," said John Sculley, the former Apple Computer CEO who is now a partner at the Sculley Brothers venture capital firm.
"The problem is they became a commodity before they became a real business."
Although the first TiVo units had only 14 hours of recording time, today that has reached 60 hours. And the company asserts that, in the next couple of years, the hard drive will be capable of holding 200 or 300 hours of programming.
And in all honesty, that is more capacity than TiVo needs to power a digital video recorder alone.
Eventually, Ramsay also sees TiVo taking on the roll of real estate broker for a hard drive that could provide numerous services throughout the living room. For example, TiVo could partner with video game or music companies that could use the extra disk space to distribute their content over TiVo's Linux-based platform.
"The disk is real estate, and you can sell real estate," Ramsay said.
While TiVo is actively looking to boost the number of companies that incorporate TiVo service into a multiuse set-top box, Ramsay said that exiting the business of selling directly to consumers would be a mistake. For one thing, Ramsay notes that many partnerships take a long time to come to market.
Creating a multiple-use machine takes a lot more effort than just adding a hard drive to a set-top box, Ramsay said. And there are plenty of digital-cable and satellite set-top boxes still being built that don't have a hard drive, he said.
Although the current scenario may create a potential market for standalone TiVo boxes, Ramsay concedes that it costs more for TiVo to acquire customers for its singular service than when it works with other companies.
Ramsay also acknowledges that TiVo is a cash-intensive business, saying he expects the publicly traded company to look for additional financing next year.
"We don't have to," he said. "But we probably will."