Market Insight

TiVo has acquired Cubiware

June 17, 2015

Przemek Bozek Przemek Bozek Associate Director – Research and Analysis, Service Provider Technology
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Set-top box (STB) and TV software vendor TiVo has acquired Cubiware; a Polish STB middleware provider. TiVo develops and supplies STBs, middleware and applications for the pay TV market, mostly to cable operators. Cubiware specialises in DVB, IPTV and hybrid middleware, and other multiscreen / OTT video solutions, with about 40 customers across Eastern Europe, South America and Asia Pacific. Some of Cubiware’s key customers include: Cablemas (Mexico), Cablenet (Cyprus) and Toya (Poland). The financial terms of the deal were not disclosed.

Our Analysis

TiVo has been repositioning itself from a hardware plus software company to an application and features company for several years, taking efforts to move towards a more scalable, cloud-based service platform and focus towards running high-value features off a centralised or STB-based system. TiVo originally started supplying STBs and middleware in 2001; mainly to DirecTV, US cable operators and its domestic USA retail market. Its focus has shifted towards software over time.  In 2010 TiVo expanded to Western Europe through STB middleware deal with UK’s cable operator, Virgin Media; followed by subsequent software deals with Spanish Ono and Swedish ComHem. TiVo’s software positioning was further strengthened by its acquisition of recommendation engine specialist Digitalsmiths, in Q1 2014.

TiVo has built a reputation for enabling compelling pay TV experiences around the set-top box (STB), and coherently extending this to unmanaged CPE. Despite noticeable pay TV operator deals, the company has struggled to grow its market share. By 2014, TiVo’s TV platform supported 1.2% of pay TV subscribers in Western Europe and North America combined. Moreover, TiVo has not announced any other major operator deals outside of the USA since ComHem in 2013. Limited success, along with pay TV market saturation in developed markets; which prevents further growth, has led TiVo to seek opportunities in emerging markets.

Cubiware will enable TiVo to address emerging market opportunities outside its traditional, mature and saturated pay TV markets.  On the surface it provides TiVo with access to a customer base in emerging markets, but the rationale behind the acquisition may have much deeper strategic underpinnings. TiVo’ software typically runs on advanced and powerful DVR STB and attached thin client hardware; it has not been commercially deployed on Non-DVR or zapper STBs to date. This is critical to addressing developing and emerging markets because most operators in these markets depend on zapper STBs almost exclusively; in 2014 non-DVR STBs accounted for 95% or 535m of pay TV STBs in these markets.  Cubiware software is optimised for zapper STBs, and it can effectively serve as the bridge between TiVo’s software platform and non-DVR STBs. In fact, Cubiware has already demonstrated such integration at IBC in2013, when it integrated TiVo cloud services for IP-capable zapper boxes. This potentially enables IP-capable zappers to access  TiVo services and user experience (UX) such as cloud-rendered UI, search and recommendations, advanced DVR features and multiscreen video attributes; features that are currently available on TiVo advanced DVR STBs.

Offering such experiences on zapper STBs could be appealing to pay TV operators in developing countries. So far, pay TV operators in these relatively unsaturated markets have relied on primary pay TV growth, and have focused mainly on meeting basic needs of subscribers. However, pay TV growth is slowing in these regions; from 32% YoY during 2008 – 2013, to 7% CAGR 2014 – 2019. As these markets mature and saturate, pay TV operators will have to seek alternative means to grow their revenues. One of the ways to grow is by increasing ARPUs, which can be achieved by offering advanced services. Offering advanced services can also help to retain existing subscribers and poach subscribers from competitors, Far-sighted pay TV operators will prepare to enable these services to their subscribers in the future. TiVo essentially proposes the enablement of such advanced services; and without major operator investments (CAPEX) in deploying advanced DVR STBs. Operators deploying advanced services will gain early mover advantage in the market. Similarly, it could potentially help TiVo to secure a market position and early market share, putting pressure on rival pay TV software companies.

 

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