TiVo and ReplayTV may see satellite and cable services overtake them

05/22/2003

By DOUG BEDELL / The Dallas Morning News

Gary Arlen loves his ReplayTV personal video recorder. "But I bet I haven't plugged it in for more than a year now," says the Maryland-based president of Arlen Communications.

It's not broken. The stand-alone ReplayTV box, which uses a hard drive instead of tape, can still record and store hours of television programming. And, like machines from competitor TiVo, it can pause live television and zip through commercials.

No, it was Mr. Arlen's satellite TV service that rendered his ReplayTV unit obsolete. Last year, EchoStar Dish Network produced its own PVR machinery, added it to its receiver box, then offered it virtually free to entice subscribers.

"It's really a no-brainer," says Mr. Arlen.

The displacement of Mr. Arlen's stand-alone PVR is more than happenstance.

With its line of PVR satellite receivers, EchoStar surpassed TiVo to become the market leader with 45 percent of the 1.5 million in use at the end of 2002. And, analysts say, satellite and cable companies will join the makers of DVD players, media center computers and other electronics in adding PVR functions to their equipment.

It's not a pretty picture for stand-alone box makers such as TiVo and ReplayTV.

When they debuted in the tech boom days of 1998, the two companies seemed destined to slug it out with products from America Online and Microsoft. Instead, Microsoft has shuttered its UltimateTV, AOL-TV has left the market, and ReplayTV has been sold in a bankruptcy auction of parent SonicBlue.

"I'm afraid they're becoming obsolete," says Adi Kishore, an analyst with the Yankee Group. "I think if you're a consumer right now, you probably don't want to get a stand-alone box."

Chances are, he says, your cable company will offer one to you soon at a cost more attractive than today's cheapest PVRs (about $250 or more, plus at least $250 for a lifetime subscription to electronic programming guide updates). Even now, EchoStar customers can upgrade to a PVR for a one-time fee of $150; new customers can get one for $50.

Those who already own a PVR can still use their units, spokesmen for the makers say. ReplayTV, for example, is selling three models ranging from $250 to $450. The company says it is committed to continuing service indefinitely but will increase its one-time subscription fee to $300 on June 1.

TiVo, which has about 625,000 subscribers, says it expects to approach 1 million customers by year-end. Still, that is a long way from the mass-adoption "TiVolution" anticipated by its ardent fans. And, say analysts, the low sales figures reflect the difficulty that stand-alone PVR makers have had in generating interest.

In some ways, the state of the stand-alone PVR market is puzzling. PVR owners often enthuse about their capabilities. In January, no less than Federal Communications Commission Chairman Michael Powell gushed over his TiVo, calling it "God's machine."

Tonight host Jay Leno talks about "TiVo-ing" his favorite series. And an In-Stat/MDR survey of PVR users recently showed more than 83 percent of respondents were "extremely satisfied" or "very satisfied" with their units.

Yet Mr. Arlen, a longtime television analyst, says retailers had problems selling PVRs.

"If you go into Best Buy or Circuit City to take a look at one of these things, the retailer often can't explain it very well," he says. "It's so intuitive once you have it, but a lot of people are concerned about buying another entertainment center box – and especially one that has a subscription."

As a result of poor sales, TiVo and ReplayTV have turned to licensing their technologies to other consumer electronics makers.

TiVo recently added home networking components to its software, allowing the entertainment center to share digital photos and play digital music. It also began offering TiVo Basic, a service that can be included in DVD players and other components. The service's PVR functions can be upgraded to extend program guides beyond three days, add search capabilities and activate home networking for audio and video.

But competition is building.

Comcast cable recently said it will try out an all-in-one Samsung PVR cable box that uses existing cable lines to distribute video to other cable-connected televisions around the house. Other cable box makers – Motorola, Scientific-Atlanta, Pioneer and Pace – are producing PVR units.

Panasonic is selling a line of DVD recorders starting at $250 that let viewers watch one show off a disc while recording a second. It will also market a large-screen television with built-in ReplayTV.

And DirecTV satellite television has been taken over by News Corp. CEO Rupert Murdoch has said he'll use PVRs to vie with cable's video-on-demand services.

Mr. Arlen says recordable DVD PVRs may prove quite attractive.

"They'll act more like a VCR in concept, and you'll get transportable recordings, which is what people really want," Mr. Arlen says. "The thing people don't like about the PVR is that you have to watch it where you record it."

Not to be left out, Microsoft and computer makers are incorporating PVR capabilities in software and hardware systems designed to work as a household's central media server.

Add it all up, and stand-alone PVRs face a fuzzy future.

Mr. Arlen says the upcoming flood of PVR-equipped electronics could even wash away the brand identity that has made TiVo a well-known name.

"There's going to be confusion here," he says.