MOUNTAIN VIEW - ReplayTV, a pioneering maker of personal video recorders, is cutting its staff almost in half and will move away from selling its own set-top boxes to consumers, company officials said Tuesday. Amid tight competition from rival TiVo Inc. - and with more to come from industry giant Microsoft Corp. - ReplayTV said it will focus instead on licensing its technology to cable providers and other companies.
It will stop making its own digital video recorders but will continue, for instance, to work with Panasonic, which makes a set-top box using ReplayTV's technology - a technology that the company still firmly believes will revolutionize the way people watch TV.
Personal video recorders digitally store hours of television programming on a computer hard-drive, allowing users to watch the shows they choose, when they want, all without the hassle of video tapes.
"This new business model completely accelerates our path to profitability," said Steve Shannon, ReplayTV's vice president for marketing.
ReplayTV, which postponed its public stock offering in August, said it was losing money on retail sales of its devices and was still several years away from profitability. In addition, it had come under pressure from cable operators, satellite television providers and others who wanted to control their own recorder services and gain the revenue generated by ReplayTV's premium services and advertising sales.
"We were putting up all this money up front and now we're flipping it around," Shannon said. "Now we'll get positive cash flow with every box that ships, and the licensee will own the revenue from the service."
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As part of its strategic shift, the company will eliminate 260 jobs, mostly from the manufacturing, marketing and advertising divisions. The company also has replaced chairman and chief executive officer Kim LeMasters. Anthony Wood, the company's founder, will assume those roles.
ReplayTV faced fierce competition from San Jose-based TiVo, which last year became the first to introduce the new breed of personal video recorders.
ReplayTV's service was free and charged only for premium services, TiVo charges monthly fees. ReplayTV would not disclose its subscriber level, but analysts have estimated it had about 30,000 subscribers. TiVo said in September it had an installed customer base of 73,000.
New competition also looms from Microsoft Corp. And the competition in the nascent market will only grow, Shannon said.
"We expect to get a lot more licensees, so we'll see a lot more products and offerings to customers," he said.
Research firm Gartner Group predicts the interactive TV market will grow to $4 billion in advertising and access fees by 2004, and that 17 million U.S. households will subscribe.
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