Ramsay
Roberts
TiVo is continuing its transformation from a hardware seller to a services provider, signing a deal with DirecTV to sell advertising on the satcaster's own digital video recorders.
Agreement saves what had been a seemingly dead relationship between the two companies. While DirecTV is obliged to offer TiVo as an option to its subscribers through 2007, it's expected to focus all its marketing muscle on its own generic DVRs, set to launch later this year.
The DirecTV/TiVo combo has been the No. 1 growth driver for TiVo, accounting for nearly two-thirds of its 3 million subs.
However, the renewed ad relationship, which also runs through 2007, gives it a way to benefit from DirecTV's own DVR sales. Under terms, TiVo will be allowed to keep all the revenue from advertisers it recruits for the service, while DirecTV does the same.
Comcast contract
Pact is similar to one TiVo recently signed with Comcast that allows it to distribute ads on the cable company's own DVRs, as well as to Comcast customers who sign up for TiVo.
The DVR pioneer is clearly hoping that by expanding its advertising reach beyond its own subs, it will be able to better scale its marketing business.
TiVo has signed up a number of major advertisers such as Chrysler and Coca-Cola and most of the major studios and networks, but associated revenue hasn't yet become big enough to make a dent in its earnings.
However, CEO Mike Ramsay recently told investors advertising is a "growth area of our business and one that has significant margins."
With TiVo struggling against the growing number of generic DVRs, the company is hoping to make advertising, along with premium services, a bigger part of its business.
Adding technology
Comcast CEO Brian Roberts underscored the growing emphasis on ads Monday night at NCTA, when he disclosed TiVo and his company are working together on technology that would insert fresh advertisements into recorded shows. The system would target ads based on imputed demographics from viewer behavior, Roberts explained.
Roberts and TiVo are hoping viewers will be less likely to skip ads that are fresh and targeted at them.
(The Associated Press contributed to this report.)
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