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TiVo Inc (TIVO - Analyst Report) recently announced that it has started delivering advanced television entertainment solutions to subscribers of Mediacom Communications. The deployment of TiVo Premiere, Mini IP set-top box client and mobile applications will enable Mediacom subscribers to access both IP and traditional video on demand and linear content at one go.

TiVo also announced the availability of its mobile application and second screen companion solution for cable operators. Atlantic Broadband will be the first major US cable operator to offer these bundled solutions (TiVo Mobile application and Set-Top Box solution) to its subscribers by this fall.

Lately, TiVo has been focusing on partnerships and strategic alliances to drive subscriber growth. Early this month, TiVo entered into a partnership with Vubiquity, a leading global provider of multiplatform video services. The partnership will integrate Vubiquity's AnyVU streaming service with TiVo’s user interface.  

TiVo has a number of partnerships with major companies including Comcast, Charter Communications, RCN, and Suddenlink. TiVo also expanded its services globally through partnerships with ONO, Virgin Media and Canal Digital (in Scandinavia).

These partnerships have been the key growth catalyst for TiVo’s subscriber base in recent times. In the recently concluded first quarter, total subscriber base jumped 36% from the year-ago quarter to 3.40 million. Net addition to total subscription was 255K while the churn rate per month was a negative 1.5% compared with a negative 1.6% in the year-ago quarter.

Beside partnerships, settlement of long pending lawsuits has also driven growth for TiVo over the past 12 months. Most recently, TiVo settled with Google’s erstwhile Motorola unit, Cisco (CSCO - Analyst Report), Arris Group (ARRS - Analyst Report) and Time Warner Cable for approximately $490.0 million. TiVo also announced patent licensing deals with Google, Cisco and Arris Group (which bought the Motorola Unit from Google in mid-Apr, 2013).

The end of these lawsuits follows the settlement of its disputes with Verizon (VZ - Analyst Report), DISH Network (DISH - Analyst Report), EchoStar (SATS - Snapshot Report), Microsoft (MSFT - Analyst Report) and AT&T (T - Analyst Report). Through these settlements, TiVo has not only ensured a recurring revenue stream till 2018 ($1.6 billion), but has also succeeded in lowering apprehensions about its patent rights. This will supposedly enable TiVo to freely use the technology going forward.

Although the legal settlements did away with a major overhang on the stock, we believe that TiVo needs to focus on increasing its subscriber base by expanding its product portfolio going forward. We believe that growth in subscriber base will be the most watched metric by investors to determine TiVo’s future growth prospects.

In this regard, we believe that rising product development costs and sales & marketing costs will continue to negatively impact TiVo’s profitability in the near term. Increasing competition from cable and satellite providers could also hurt profitability going forward.

In such a scenario, we believe that TiVo will continue to pursue opportunities for developing strategic partnerships with cable operators both in the domestic as well as international markets in order to boost its subscriber base going forward. We believe that these partnerships will also help in countering competition over the long term.

Currently, TiVo has a Zacks Rank #3 (Hold).

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