Video Interactivity Gets Boost with RCN-TiVo Deal
A deal Tuesday for a cable overbuilder to distribute broadband-connected TiVo DVRs may prompt other pay-TV companies to make similar arrangements, executives and analysts told us. RCN said it will provide TiVos starting early next year to video subscribers who order DVRs. Unlike TiVos used by other pay-TV companies, these will allow customers to search RCN VoD titles and online content from companies such as YouTube and to buy pay- per-view applications using a remote control, said Jason Nealis, RCN senior director of video operations.
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Other overbuilders and small and midsized cable operators may make similar deals to use TiVo DVRs, instead of putting the vendor’s software in their systems as Comcast is doing, analysts and executives said. That would expand DVR access to Internet content in ways that don’t require pay-TV providers to use tru2way for interactive plug-and-play features, they said. “There are a lot of enhanced features that TiVo offers such as access to Web content that none of the other cable or satellite partners have bothered to enact,” said analyst Daniel Ernst of Hudson Square Research. Large cable operators deploying tru2way “are having a hard time getting out of their own way,” said RCN Chief Financial Officer Mike Sicoli. “This is how tru2way should be done anyway. Why run Internet traffic over your video platform?”
The deal with TiVo will run three years after RCN starts providing the DVRs to subscribers, Sicoli said. He said it doesn’t involve sharing revenue and isn’t exclusive. TiVo will get a monthly license fee, and customers will pay about $20 a month to lease the DVRs, he said. “The reason why TiVo is in this position … goes back to the whole FCC issue” of CableCARD rules, said analyst Todd Mitchell of Kaufman Bros. The commission requires set-top boxes leased by cable operators after July 2007 to have separate navigation and security, though RCN has a waiver through this year. “This is basically a retail DVR,” Mitchell said. “It’s the same piece of hardware that you'd buy at Best Buy.” TiVo executives weren’t available to speak before our deadline.
The TiVo deal may reduce the number of video subscribers who switch from RCN, but large cable operators probably won’t change their DVR plans and sign similar deals, said analysts and RCN executives. “We've seen a lot of people kind of kicking the tires,” Mitchell said. “Maybe this opens up the floodgates and we see a lot of little deals as opposed to one big Time Warner” Cable deal. Many “smaller players” may take note of Tuesday’s agreement and “realize this is the way to do it, don’t try to just use the software, just use the box,” said RCN CEO Peter Aquino. “Why try to reinvent the wheel?”