TiVo slashes price of digital-video recorders

TiVo Inc., seeking to prevent consumers from choosing rival digital-video recorders, slashed the price of its machines by as much as half.

Customers who sign up for a one-year subscription will get a $150 mail-in rebate, bringing the price of TiVo's most basic box to $49.99 from a previously discounted $99, the Alviso, Calif., company said Tuesday in a statement. The promotion will end Nov. 27.

The discount cuts the set-top box's price to its lowest level ever. It's part of TiVo Chief Executive Officer Thomas Rogers' plan to attract subscribers as a marketing agreement with satellite-television provider DirecTV Group Inc. ends in October. TiVo in August forecast a loss of as much as $25 million this quarter as it spends more on marketing.

"They've pulled out the price card," Adams Harkness analyst Steven Frankel said. He said that TiVo will lose money on boxes sold at $50 and that it isn't clear how long it will take for the company to recoup the loss.

TiVo shares rose 5 cents to $5.09 at 4 p.m. New York time in Nasdaq Stock Market composite trading. They have fallen 13 percent this year.

TiVo, with 3.6 million customers, wants "mass distribution" and needs to be "more aggressive" with marketing, Rogers said last month. DirecTV and cable company Comcast Corp. are introducing their own recorders that match many of TiVo's functions.

The rebate applies to TiVo's recorders that can store 40 or 80 hours of live television. The promotion cut the price for a 40-hour box from $99, and the 80-hour box dropped to $149.99 from $199.

"The company is trapped," said Frankel, who rates the shares "market perform" and doesn't own them. "The cable companies have vastly improved their offerings" over the past year.

TiVo's recorders allow consumers to pause and rewind live television, prompting concern from advertising executives because they allow viewers to skip commercials.

After the purchase of the set-top box, TiVo's service costs $12.95 per month, or $299 for a lifetime subscription. The service provides program-schedule information for recording TV shows.

TiVo sells its recorders either through retail stores and the Internet or through marketing agreements with companies including DirecTV. Retail sales account for one-third of the company's subscribers, yet they generate about 80 percent of revenue because they pay more for the service, Fred Moran, an analyst with Stanford Group in Boca Raton, Fla., said in an interview.

Retail subscribers on average pay about $9 per month for the service, while DirecTV pays TiVo about $1.13 per month for each subscriber, said Moran, who rates TiVo shares "sell" and doesn't own them.