Weekly Update

Apple recordings

One of the enduring mysteries of Apple’s TV strategy has been why the Apple TV set-top box does not include a DVR. Apple’s music and mobile empires were each built in large measure by leveraging users’ own investment in a related product or service. The success of the iPod and the iTunes Music Store was built atop users’ prior investment in their own music collections, The iPhone and App Store rest in part on users’ existing need and investment in mobile phone service. Leveraging users’ existing investment in pay-TV service to build an over-the-top streaming service and device would seem like a natural extension of Apple’s approach.

Yet Apple made it clear from the start it wasn’t interested in adding DVR capability to Apple TV. Perhaps the company felt it wasn’t worth the risk of wading into the highly litigious world of DVR patents for what Steve Jobs always described as a “hobby.” Or perhaps Apple was worried that allowing cable and satellite services to interoperate with its device could compromise Apple’s control over the user experience. But whatever the reason, the lack of a DVR kept Apple TV isolated from the rest of the TV ecosystem.

There were signs last week, however, that Apple is growing more open to incorporating recorded TV content into its own video ecosystem. At the 2012 Cable Show in Boston Monday, DVR-pioneer TiVo unveiled a new service and device called TiVo Stream. The device connects to a TiVo DVR via WiFi, and then streams recorded content, or content in the process of being recorded to any iOS device connected to the same home WiFi network. Critically, the service will also let users download shows recorded from broadcast networks (but not from premium networks like HBO) to iOS devices for offline viewing.

While the partnership obviously falls short of Apple implementing its own DVR strategy, there’s a good case for why Apple would benefit from an even closer strategic relationship with TiVo.

The case for leveraging consumers’ existing investment in TV service through DVR technology remains as strong as ever for Apple. Its efforts to crack open cable operators’ monopoly on TV viewers by securing its own access to programming have largely been rebuffed by the networks concerned with alienating their primary distributors. Enabling viewers to do their own content space-shifting by means of a DVR and streaming could be Apple’s ticket to outflanking the operators. TiVo is also a paid service, and a close partnership with the DVR maker could be way for Apple to start establishing its own subscription relationship with heavily invested TV users without having to go through the cable operators.

TiVo also has its own, well-developed user interface and TV navigation software. Integrating iTunes and iCloud with TiVo’s interface could again help Apple establish direct relationships with pay-TV subscribers without going through pay-TV operators.

TiVo’s long legal campaign to enforce its DVR patents, morever, seems to have entered the end-game phase, with TiVo’s claims largely vindicated. Though it filed a fresh round of lawsuits last month against Motorola and Time Warner Cable for infringing its patents, the DVR maker has already racked up victories over Verizon, AT&T and Dish Network, while successfully fending off hostile action by Microsoft, making the Motorola and Time Warner actions feel more like a mopping up operation.

As a result, TiVo is a much-less risky potential partner for Apple.

As for TiVo, a strategic partnership with Apple could provide a major boost to its efforts to grow its business. Even with its victories in the patent wars, it still faces competition against commoditized DVRs leased by operators to their subscribers. Integration with Apple’s ecosystem would be a valuable selling point that other DVR providers could not match.

Nothing that either TiVo or Apple has said so far offers proof they plan to pursue their relationship beyond the current parameters of TiVo Stream. But it’s a relationship with a lot of potential.


Question of the week

Should Apple buy TiVo?