Personal video recorder firm ReplayTV will switch its focus from own-brand products to licensing.
ReplayTV yesterday announced it would stop the development of its retail personal video recorder (PVR) as well as firing its CEO and over 100 staff. Instead of selling its technology at retail, from now on it will license it to others.
The move is no surprise. ReplayTV’s business model was always flawed. One problem is that the primary market for PVRs will not be as a replacement for VHS, but to provide non-linear TV. Viewers will have the chance to record all kinds of broadcasts, providing a more economical alternative to video-on-demand services (since for the foreseeable future, broadcasting will be cheaper than individual broadband Internet access).
But offering premium services of this type will require the cooperation of broadcasters, who will be keen to tap this new revenue stream. Content will need to be integrated with the device; for example, the broadcasters will want encryption to preserve their copyright. At the moment, the only company offering such solutions is NDS, with its XTV device. This is much more sophisticated than ReplayTV’s existing offering, so it will continue to attract more operator interest.
Another problem for ReplayTV’s former business model is branding. Moving towards licensing has two major advantages in this area. It will allow large firms such as Sony to produce and distribute their own devices, which should be much cheaper. Consumers may also be willing to pay a premium for these. But more importantly, operators such as Sky Global may well be prepared to subsidize PVRs, which would substantially increase consumer take-up. They will be highly reluctant to supply customers with a ReplayTV branded device, since this will diminish awareness of their own brand.
ReplayTV is making the only sensible move available. But it is still a long way behind NDS, technologically and in terms of licensees. The company’s chances of long-term survival are greater than if it had stayed in the retail arena, but it’s not likely to become market leader anytime soon.
