Arguably one of the biggest trends in consumer tech continues to be cord-cutting as consumers shift toward streaming video. In that trend, Roku (NASDAQ:ROKU) continues to dominate the competition. The reason for that continued success is Roku’s focus on platform rather than original programming and subscription revenues. It’s also the reason why ROKU stock has been on fire over the last few years — surging more than 225% over the last 12 months.
And in sight of the threats to its empire, Roku has been pretty insulated, thanks to that focus on platform.
However, some new competition may have Roku bulls starting to sweat. This new threat is starting to focus on platform over programming and because of brand recognition, it could have a real foothold in the streaming wars. We’re talking about forgotten and often-ignored TiVo (NASDAQ:TIVO).
In the end, TIVO could be a serious threat to Roku’s proposition. It looks like the company could be coming from nowhere to fight hard in the streaming wars.
A Bit of Tech Nostalgia
Honestly, I don’t even remember the last time I thought about TiVo — aside from maybe a joke. But the consumer tech provider really was a game changer in the world of digital video and streaming. Its famous DVR technology set the world on fire and is now pretty standard issue on devices everywhere.
The problem for TiVo is that it hasn’t done anything since then. After a few big legal wins, the firm has quietly lived off its huge portfolio of patents, done a few mergers and has basically floated along for nearly a decade.
But over that time, the company has started to revision itself. And the obvious use of its tech is in streaming. Originally, TiVo had planned to release apps for popular streaming devices like Apple’s (NASDAQ:AAPL) Apple TV or Amazon (NASDAQ:AMZN). This app would allow users to watch live or recorded video without needing a separate DVR box. After missing its launch dates for the end of 2019, TiVo shelved the idea. It turns out that was a good decision. That’s because its latest idea will mean bigger bucks down the road.
TiVo is now gunning right for Roku’s wheelhouse.
During this year’s Consumer Electronics Show, TiVo announced a new streaming video device dubbed TiVo Stream 4K. The device is an HDMI dongle or set-top box that will support high -definition 4K streaming and cost around $70. That puts it right in line with the average cost for a Roku box, Fire TV stick and Google’s (NASDAQ:GOOG, NASDAQ:GOOGL) Chromecast. Additionally, TiVo’s box will add live TV and allow users to record DVR content without additional fees.
The key is in how TiVo 4K will operate. Just like Roku, the idea is that the device will serve as a platform rather than just content provided. All the major streaming services will play nice on its device and users can watch all their subscriptions and free shows via the device. Already, we’ve seen this platform focus win for Roku. It doesn’t have to worry about who is spending big bucks attracting viewers, it just sits back and collects checks from the studios.
The real win for TiVo — and how it may just court customers — is in the app integration. One of the major issues for Roku is that it’s set up sort of like a smartphone. If you want to watch Netflix (NASDAQ:NFLX), you need to exit Philo and then head into the Netflix app. “Channel flipping” doesn’t really exist on a Roku device. And while the firm has added some new search features — such as its voice remote — you still need to exit and enter apps to switch.
TiVo’s new platform looks to offer a more channel-like integration of apps. It’s streaming, but with a more traditional TV experience. According to TiVo CEO Dave Shull, the firm found that most people are “frustrated with browsing through multiple apps” and that its new interface was a “dramatically better” experience for viewers.
TiVo’s Gain, Roku Stock’s Pain
Given the new interface, live TV and included DVR options, TiVo could give Roku a run for its money in the streaming wars. That’s because TiVo actually has some real numbers behind its users. The firm reported over the summer a whopping 22 million subscribers for its DVR services. Those are some serious numbers that are actually not that far behind Roku. It makes it easy for TiVo to up-sell and pivot consumers into its services. And because of its size, companies like Amazon and Netflix will begrudgingly pay for access to TiVo’s new platform, just like they do for Roku.
Even better is that TiVo is taking another play out of Roku’s book. This involves advertising. Over the summer, TIVO started rolling out short ads before DVR recorded content to some customers. Despite some complaints, the test was successful and the firm plans on adding ads as part of its business plan going forward.
All of this is just like Roku in its early stages. TiVo should be able to pivot its customers to the new device thanks to its better interface, live TV options and integrated DVR capabilities. Meanwhile, it should be able to clip some serious ad revenues from its users as well as “pay to access” fees from app providers. And if it’s able to seriously compete and gain traction, Roku could be looking at some serious fee compression from its smaller rival.
No wonder why ROKU stock dropped about 3% on the news.
Taking a Gamble on TIVO Stock
If there’s one lesson in the tech sector, it’s to never count out old dogs. While TiVo may be a forgotten relic, it’s clearly pivoting to the new world of streaming. And I have a feeling it could be successful. While it may not be as big as Roku, there is potential. Perhaps even more so considering the stock is a sub-$10 issue.
Now, the firm is planning on merging with another tech patent house and then splitting its consumer streaming operations into a separate company. But, given its potential to really make a splash as a prime platform for streaming, I think the gamble could be worth it for investors. That’s especially true if you are sitting on massive gains from ROKU stock. Selling a bit and taking a swing on TIVO may be well worth it.
At this point, TIVO stock could still be seen as a streaming gamble. Nonetheless, the odds are starting to be in investors’ favor.
At the time of this writing, Aaron Levitt was long AMZN and ROKU and is looking to start a small position in TIVO.