Financial analysis isn’t something I’m prepared to tackle publicly, so I’ve brought in some muscle for a multi-part series on TiVo’s numbers. Obviously this is speculative in nature and just one stockholder’s interpretation of the limited information TiVo chooses to disclose. Your mileage may vary. -DZ

Preface

One of the problems one encounters when doing research, or “digging into the numbers” is that one can always dig deeper. In digging into the later parts of this TiVo story, we discovered that we could derive much more accurate and robust figures (particularly for churn and revenue from subscriptions and advertising) than we had initially. While our general conclusions are the same, the new numbers are so much of an improvement in terms of both accuracy and reliability that we felt compelled to revise them. What follows are revised numbers, some greater detail as to the way we derived them, and some clarification (we hope) of some of the ideas presented in the earlier version. Of particular interest are Appendices A and B, which are all-new, and discuss the way we derive the important churn and revenue numbers. We have also added a new asset class to TiVo’s valuation that we did not consider before. Finally, we have dropped the discussion of ROI and MIRR as they lengthened the article and did not provide much additional insight over the “gold standard” of NPV.

As before, we try at all opportunities to make conservative assumptions. We realize that our assumptions are conservative almost to the point of pessimism, and we have been accused of just that. But TiVo is a company that lives under a great shadow of Wall Street pessimism, so any show of optimism may be seen as a lack of credibility. We leave it to the reader to decide by what factor our estimates need to be adjusted for our excesses of pessimism.

INTRODUCTION

TiVo is an enigmatic company. While management peppers us with regular press releases hyping their latest deal or newest technology, it rarely provides the kind of information we need to put a value on anything – be it a new advertising relationship, distribution deal, or their own financial statements. In this article we will engage in a bit of 8-K and10-Q exegesis in an effort to understand what is really going on at TiVo. Read the rest of this entry »

I realize that even among the people that celebrate Christmas, few celebrate it the way my family does. We have a particular gene in our DNA that leads to obscene levels of spending on Christmas presents. Yes, you could view it as rampant commercialism, but we prefer to think of it as extreme generosity.

Below is Part 1 of a list of gadgets that made it under our tree and the current status of each one:

Wheee… The Wii!

Verdict - Thumbs Up

A family friend kindly stood in line till 3 AM so my parents could provide my brother with a Nintendo Wii for Christmas. It didn’t get set up till the 26th, but it has since provided non-stop entertainment. (Too bad we don’t have a Roomba…) I’ll limit my comments to saying how much I like the feature that lets you create an avatar in your own image for Wii Sports. Here’s a thankfully-not-true-to-life rendering of my brother’s girlfriend:

Pinnacle PCTV HD Pro Stick

Survived the Set-Up

I’ll admit, the set-up for the Pro Stick took a very long time. This was a Woot daily special and I think they were giving away old ones because the device needed several software updates. Nonetheless, the Pro Stick is awesome. I don’t have an HDTV, but I can now get free, over-the-air HD on my laptop. Plus DVR functionality. Way cool. Look for a full product review in a future post.

iRecord

Still in the Box

The iRecord was a present for my husband. Think we’re into video this year? The idea here is that the iRecord will transfer video from your set-top to a portable device, like a Neuros. According to iRecord’s site, the gadget is the “world’s first H.264/AVC recorder for iPod & PSP.” I’ll let you know how it works when we get it back home.

Stay tuned for Part 2… highlighting the Dash, Squeezebox, eStarling digital photo frame, and DigiMemo.

When CinemaNow announced the addition of Showtime and A&E into their stable of network TV partners, I decided to give the service a spin with a free episode of Sleeper Cell. While iTunes does carry Showtime programming, they don’t currently offer the second Sleeper Cell mini-series… And when downloading shows via iTunes, I have to hook my laptop up to a TV via SVideo (thanks, Work) and an audio cable — Watching without the use of a remote control. Knowing that CinemaNow has a Windows Media Center Edition (MCE) widget, I hoped I might be able to stream the show from computer to television by way of my new Xbox 360.

I started by downloading the 58 minute show (@ 670MB) via Internet Explorer (no love for Firefox). On The 360, I fired up media extender functionality and entered Cinema Now’s app. After logging in and futzing around for several minutes, I realized this version only supports movie rentals and doesn’t tie into movie or television purchases. Next, I tried looking in the My Videos section of the Xbox’s extender. No movie there. And why would it be? I saved it to the Desktop folder. So my next step was to move it (on the PC of course) to the My Documents/My Videos folder. Still no love via the 360 media extender. Back to the PC, I went… moving the video to the shared My Documents/My Videos folder. Success, the Xbox sees it. I hit play and get a security error. But I’m stubborn, so I hit play again.. and it works!

Sleeper Cell streamed no prob over my WiFi network. But boy was the video quality iffy. I spent the first five minutes or so complaining about the dark, grainy picture and tweaking the brightness and contrast on the 30″ HDTV. There’s no way I would recommend watching this on anything larger. (In the past I’ve watched iTunes shows and MovieLink movies via the 32″ bedroom SDTV, so the lower quality downloads weren’t a visible issue.) Once I got into the show (content is king) I did find it enjoyable. I was pleasantly surprised they provided it in 16:9 — a nice perk, well maybe once they bump the resolution.

So, what did I learn? Non-geeks won’t bother and high-def aficionados shouldn’t. Having said that, there’s a fairly high probability I will go this route (CinemaNow -> PC -> Xbox 360 -> TV) to watch the remaining Sleeper Cell episodes — but folks like me make up a tiny niche within the content-download niche, and we surely cannot sustain this business model. Which goes to show that Apple could own this market with iTV if they execute on the usability end. Given their past successes, it could be a safe bet. Of course, Microsoft would help itself by adding more content to the Xbox 360 so we can bypass these third party hacks.

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Chris Lanier turned me on to Woot’s daily deal of a refurb Linksys WMCE54AG MCE extender for a low $99. The device is wireless — supporting both A and G networks, though it doesn’t look like it offers WPA. It only connects to Windows Media Center 2005 and, given the lack of firmware updates, I wouldn’t count on Vista support. So maybe it isn’t such a great deal after all…

Another quick note about Pandora as the next-generation MySpace… They’re taking a very social-networking approach to marketing. A musician friend of mine attended an event back in November hosted by Pandora at UPenn. The event was not directed at press, but instead consisted of founder Tim Westergren talking to students and gathering feedback and suggestions for the Pandora service. (According the Philly City Paper, the student audience members were complemented by “marketing-minded men in blazers and Web geeks.”)

While every company should be doing grass roots marketing, it’s interesting to see Pandora targeting the college crowd. These are the folks that fill the MySpace and Facebook realms. Given another alternative, will this fickle crowd migrate elsewhere? Or at least the music-minded ones among them?

(Thanks, Matt!)

Software updates for both Slingbox and HAVA placeshifting devices have been released. For the most part these offer minor enhancements and tweaks.

SlingPlayer 1.4.0.206
The changes are mostly subtle, such as the inclusion of the latest Slingbox Pro HD firmware and “official” support for Slingbox Classic. What’s most interesting, and not part of the software, is the introduction of a slingmedia.com online account. What do you think that’s all about? Ideas…

HAVA 1.6.0.148
HAVA software now better supports HD input, though remember place shifted content is not high-def. The update better auto-detects source resolution (4:3 v 16:9) and format (PAL v NTSC). This software build also includes a number of bug fixes and maintenance improvements.

I installed both updates last night and didn’t notice much new. But to settle the ongoing Slingbox verus HAVA debate, I watched a few minutes of the Hawaii Bowl via my TiVo Series3 taking turns with the Slingbox Pro and HAVA Wireless. With my uncorrected near sighted vision, again I’ll say the video quality is quite comparable and I wouldn’t say one was better than the other in this particular experiment. Instead, I’d like to point out software features that one vendor has and the other does not. But they should…

Slingbox Software Pros

• Channel favorites
• Keyboard shortcuts
• Authentic Remote control skins
• Network fine tuning
• Skinless player

Hava Software Pros

• Pause/record stream
• Autodetect 4:3 v 16:9
• Customize network name

I’m not an expert Pandora user. I only discovered it this year, and I haven’t remotely finished plumbing the feature set. Mostly I just create new stations when I remember a particular artist or song I love and leave it at that. That’s one of the great things about Pandora. You can be a casual user and still thoroughly enjoy the service.

Last week, however, Michael Arrington and I got an email from the Pandora folks: Seems they’ve gone and made the service more Web 2.0′ish. Now you can find shared stations within the Pandora community, see who is listening to what, and search for songs, stations and listener profiles by keyword.

The original, innovative idea behind Pandora is music discovery, and the fact that you can do things like seed stations with specific music to discover similar works is a great one. While the latest features still clearly fall under that concept, there is also something else going on here. Check out this quote from Pandora’s blog:

Find other Pandora listeners that share your musical tastes, hometown, school, or place of work. Explore their favorite songs and artists, listen to their stations, and leave them comments. Even bookmark them so you can check what they’re into later.

Once you add in elements like “hometown” and “school,” Pandora suddenly starts to sound a lot more like MySpace or Facebook to me. And indeed, I’ve heard from a lot of companies lately suggesting that the next wave of social networking sites will be based around specific interests. Vertical social networks.

So is Pandora the new, cooler MySpace?

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