• by Paul Gough , May 24, 2004

When TiVo announces its first-quarter earnings Tuesday afternoon, it will be facing one of the challenges of its short corporate life.

The company has been on the cutting edge--praised for its role as a pioneer in digital video recording technology and reviled for the worries for what DVRs could do to the 30-second commercial. TiVo has grown by leaps and bounds, with 1.3 million subscribers by the end of January.

But as many as half of the subscribers have come to TiVo via its deal with DirecTV, the satellite television provider that was recently purchased by News Corp. And therein lies part of TiVo's challenge, one that could seriously damage the company. A news report recently cast doubt on whether TiVo could hold onto its deal with DirecTV.

According to an April 27 story written by the Reuters news service, NDS Group PLC said it would compete head on with TiVo for the DirecTV business. NDS is also owned by News Corp. This could leave TiVo the odd one out of the equation.

In its last conference call announcing its full-year earnings earlier this year, TiVo said it was planning to reach the 10 million subscriber mark in the next five years. But without DirecTV, it's going to be difficult. TiVo hasn't been able to gain a contract with a cable company--one of its stated goals over the past few years. The cable companies have been doing deals with other companies, including Motorola and Scientific Atlanta, for DVR technology.

TiVo will provide more clues to its strategy during a conference call Tuesday afternoon.