Xperi Pushes Stream OS as 'Independent' Platform Alternative to Big Tech

Consumers are engaging with close to nine streaming services per household, “and it’s expected that most content owners will follow Netflix and make more high-quality ad-supported programming available without a subscription,” Skaaden said. As more consumers shift their viewing habits from linear TV to AVOD, “there is no question advertisers will have to follow and shift more of their ad spend from traditional TV to streaming,” he maintained.

Despite a COVID-19 pandemic-led acceleration of streaming service adoption, a “significant gap” remains between viewership and ad spend, Skaaden said. In the first half, U.S. viewers spent more time engaged in streaming than viewing linear TV, but only 22% of advertisers’ TV budgets were allocated to streaming, he said. That sets up “a market dynamic that supports accelerated [connected TV] advertising growth,” he said.

Consumers have more content choices than ever “to the point that they need unbiased, personalized guidance in making these choices across live TV and streaming,” Skaaden said. He differentiated Xperi’s TiVo platform from tech companies, which he said view smart TVs and the CTV advertising opportunity “as their next frontier to extend their walled-garden ecosystems by turning consumer viewing habits into the next valuable data asset.” Content services are in a “hyper-competitive environment” battling for new viewers and audience retention, said the executive.

Skaaden said smart TV OEMs are at a crossroads, where they have a chance to “shape the future TV experience,” but many don’t have the scale or the capability to develop their own global video service infrastructure. That's the segment TiVo is targeting, positioning itself as an “independent streaming platform” vs. established big-tech companies in the streaming space.

In a prerecorded video, Strategy Analytics analyst Michael Goodman referenced a “major battle brewing for control of the OSes,” saying, “He who controls the OS gets to decide what apps are going to be on the smart TV and also where in the interface they’re going to be positioned.” He said a challenge for OEMs is that the big tech companies -- Apple, Google, Roku and Microsoft, for example -- are creating “walled gardens that are commoditizing the smart TV market.” Smart TV makers don’t want to “just be relegated to the margins they’re making on retail,” but about 40% of them lack the scale required to develop their own proprietary platform, he said.

Consumers, meanwhile, want to be able to easily find, watch and enjoy the content they’re interested in: “They don’t want to have to manage a whole bunch of services,” Goodman said. For smart TV OEMs, “I’m looking for an OS partner that will allow me to continue to own my own brand experience” and be able to retain a direct relationship with the customer “throughout the life cycle of my product,” he said. Xperi has an independent OS and longstanding relationships with CE companies based on “years of TiVo experience,” Goodman said. Instead of “strengthening Google with their Android product, this gives them an alternative” with a 4K experience, “complete tech stack” and global video service infrastructure, he said.

Xperi’s purchase of over-the-top and hybrid TV software company Vewd last month (see 2207290003) will help speed deployment of the TiVo Stream OS on connected TVs, Goodman said. Vewd already has presence in some 70% of smart TVs via browsers or app stores, he said.

Skaaden pegged annual global production of smart TVs at 185 million with a mid-single-digit growth rate; 100 million of those are being shipped into “high-value CTV ad markets,” such as Western Europe and North America. Some 40 million smart TVs a year are shipped into those markets by CE makers that lack the scale required to support the technology, content and monetization requirements of a streaming media platform, he said.

Positioning TiVo against competitors, Skaaden said big-tech ecosystems “take complete control of the user experience, turn the TV customer data into their product and influence retailers to commoditize smart TV display distribution to be based on size and price only.” He extended the potential reach of a TV partnership, saying a strong TV brand affinity can help drive sales of a CE company’s “high-margin" white goods business.

Xperi launched TiVo+ in 2020 as a curated ad-supported content network; it now has over 160 channels and over 100,000 ad-supported VOD assets, said Chief Revenue Officer Matt Milne. TiVo+ has relationships with Pluto TV, Freevee and Tubi for free and monetized content, he said.

Since introducing the TiVo Stream 4K dongle in 2020, Xperi built an “end-to-end advertising stack” for CTV called TiVo Xtend that's based on first-party viewership data from its hardware and pay-TV footprint, Milne said. TiVo creates target audience segments based on “deterministic behavior to meet custom campaign objectives.” It runs campaigns over 200 free ad-supported TV channels, including TiVo+, using proprietary data to measure a campaign’s reach and performance against the marketer’s goals, Milne said.

Milne cited a CTV campaign with CBS for a new reality TV show using its data to target reality TV viewers that were cable subscribers on CTV. The campaign delivered a 25% incremental reach beyond traditional broadcast and cable TV, he said. It also drove new viewers to the show more effectively than traditional cable TV ads, he said.

In Q&A, Xperi CEO Jon Kirchner noted Xperi’s first partner for TiVo Stream OS -- Vestel in Europe (see 2208310035) -- and said others are lined up. “It doesn’t take a massive installation base to drive very large increments of growth,” he said. The first Vestel TVs will reach the market next year with a full monetization cycle in 2024, he said. TiVo expects to have four or five OEM partners in three years, growing from 1 million to 7 million user accounts with average revenue per user of $20-$30 vs. $10 today. It projects revenue to grow from $5 million today to $140 million in three years.

For fiscal year 2022 ending Dec. 31, Xperi estimates revenue of $490 million-$510 million, with a preliminary FY ’23 revenue growth rate of mid-single digits, said Chief Financial Officer Robert Anderson.