PVRblog has repeatedly pointed out the increasing possibility that DirecTV will stop offering its customers settop boxes with TiVo capabilities. The latest development occurred on Monday, when DirecTV announced that it would offer an alternative settop box with PVR capabilities in early 2005.
Some analysts believe that the direct satellite broadcaster will shift its marketing to emphasize the alternative settop box/PVR combo, from a British firm called NDS. Some people take it one step further, suggesting that DirecTV will drop TiVo entirely when the agreement between DirecTV and TiVo expires in 2007.
There are a couple of flaws in this reasoning from my perspective, and they have to do with the fact that these companies really need each other. DirecTV has to overcome some issues associated with the fact that it does not own a physical broadband connection to each subscriber's home. For instance, it cannot reasonably expect non-rural customers to use it for high speed Internet access at this point in the technology cycle. This means that in order to generate additional profits, it needs to offer the best possible PVR experience and hope that as many customers as possible subscribe to such a service.
Although I am a committed TiVo user, I see no reason why DirecTV should deal exclusively with TiVo for PVR technology. An NDS settop box may be a good alternative that provides some but not all of the TiVo experience at a lower price point. That may be attractive to more price-sensitive TiVo customers. I doubt that NDS will be able to provide all of the features that TiVo can. But, more power to them if they can.
TiVo needs DirecTV somewhat more than the other way around. DirecTV customers make up the fastest growing segment of TiVo users. TiVo should and probably will jump through hoops to continue to be a value added service choice for DirecTV customers.
On the other hand, DirecTV already has over 1 million TiVo-enabled customers. Even if they offered a free trade-out to get their PVR customers to adopt NDS instead, dropping TiVo would create a customer churn event that would rival the first days of mobile phone number portability. This is why I think DirecTV will think very carefully before severing its remaining ties with TiVo.