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Comcast to Develop TiVo Code for SA Boxes

Comcast will fund additional development work to make TiVo’s digital video recorder software run on other platforms, including Scientific Atlanta set-top boxes, TiVo said in announcing its second-quarter earnings.

But TiVo also Wednesday disclosed that Comcast has not yet begun rolling out TiVo service commercially. The companies will “commence the TiVo rollout process shortly” in Comcast's New England division, which includes the metro Boston area, Southeast Massachusetts and New Hampshire, TiVo said.

Comcast and TiVo have kept pushing back the date of their initial launch. In June, Comcast was supposed to begin offering the TiVo-branded service in New England by the end of this month. Prior to that, the MSO expected to have TiVo-based DVRs deployed in a majority of its markets by the end of 2006.

Meanwhile, TiVo last week began the retail push for its $299 high-definition DVR, designed “exclusively for cable,” which the company said became available through major retailers.

But according to TiVo, growing demand for products like the new HD DVR also inhibited sales of the company’s existing Series2 standard-definition DVRs – leading TiVo to post a net loss of $17.7 million for the quarter ended July 31, compared with a previously projected loss of $5 million to $8 million. TiVo reported revenues of $62.7 million for the period, compared with $59.3 million in the second quarter of 2006.

TiVo’s net loss for the second quarter included a combined inventory write-down and inventory purchase commitment charge of $11.2 million.

“Increased consumer demand for high-definition products, which accelerated retailers' movement toward high-definition sales, resulted in a continuation of the tepid trend in standard-definition sales,” TiVo CEO Tom Rogers said, in a statement. “Consequently, we ended the quarter with higher-than-anticipated inventory levels of long-lead time components and parts related to our standard-definition product.”

For the same reason, the company ended the quarter with a net decline of 19,000 “TiVo-owned” subscribers. Overall, TiVo-owned subscriptions were 1.7 million, up 136,000 compared with a year ago. Subscribers through DirecTV, which no longer offers TiVo boxes, declined by 126,000 to stand at 4.2 million as of July 31.

With the loss of DirecTV as a channel, TiVo’s deals with Comcast and Cox Communications to jointly develop DVR service are a key part of its growth strategy. In another attempt to win cable’s support, the DVR company kicked off an initiative to provide front-line support for cable subscribers experiencing issues with CableCard installations.

Comcast and TiVo, which originally struck their agreement in March 2005, first developed the DVR software for Motorola boxes. Through Jan. 31 of this year, Comcast had invested $16.2 million to back the development of TiVo DVR software on Motorola’s set-top box platform, according to TiVo’s 10-K annual report filing.

The operator’s agreement to further develop the DVR maker’s software for SA set-tops and other platforms, according to TiVo, will “increase the distribution opportunities that TiVo will have available.”

Regarding the TiVo HD DVR launch this month, Rogers said in the earnings announcement that the company saw a strong initial response to the product, which the company launched with “virtually no hardware subsidy” through its direct channel and with a lower subsidy compared with the standard-definition TiVo products in retail channels.

Retailers like Best Buy and Circuit City, according to Rogers, are “enthusiastic about our new HD product and are embracing TiVo in new and unique ways, including better merchandising, improved floor placement, demos, and more aggressive positioning of TiVo as a centerpiece to an HD media center.”