Personal digital video recording device TiVo has enjoyed having the nascent industry market largely to itself in recent months after rival ReplayTV bowed out of the consumer market, but that doesn't mean it's been easy going for the small company. Although subscriber numbers are growing, the company is feeling the pinch of the dot.com debacle and is looking for ways to control costs and promote growth.

TiVo, which was started in 1997 and is based in Alviso, California, manufactures and markets a $299 "personal video recorder" [PVR] which allows subscribers to its service to pause and resume television broadcasts, program favorite television viewing habits and more easily record shows. The company's revenues come from the subscriber fees and advertisers. A feature known as "Thumbs Up/Thumbs Down" allows users to rate programming so that the device can "learn" to find programs more closely corresponding with user tastes. In the future the company may also earn revenue from "t-commerce," or interactive television shopping, and also in audience measurement reporting, the company has announced.

Net4TV Voice reviewed the TiVo device in our Review: TiVo Wins Thumbs Up and found its initial offering easy to set up and it had a good user interface.

Generating only $4.7 million over the last year, the company claims a subscriber base of 154,000. TiVo announced this week that it was implementing layoffs and other cost-cutting measures in an attempt to reduce its cash burn rate and make it unnecessary to seek additional funding this year. The company will lay off 80 of its approximately 350 employees, about 23% of a workforce that also includes contract and temporary help.

Also in the works are leveraged marketing plans with partners such as AOL and DirecTV and a higher-margin platform design, based on what a spokesman called, "updated architecture taking into consideration some of the things we've learned thus far about our technology to lower cost." The company also plans to increase its cost of a subscriber lifetime membership from its current $199 to $249 on May 1, and offer current monthly subscribers the option to convert from a monthly subscription to a lifetime subscription for $199. The company plans to keep the monthly rate at $9.95.

The company has recently seen some sharp criticism about its privacy practices, though. The Privacy Foundation released the results of a four-month study recently that criticized the company for collecting consumer data without subscriber permission. TiVo collects information about what programs and commercials are watching, and the device "phones home" each evening to upload the aggregated data, which is shared with TV networks and advertisers. The Privacy Foundation study said that there were conflicting messages between the company's user manuals and the online privacy policy posted on its website. It further claims that although the company has pledged not to identify or use individually identified data, the capability does exist for the company to track individual household's viewing habits. The Privacy Foundation has called for TiVo to more fully inform their customers and revise their policies to what is known as an "opt-in" arrangement, in which a subscriber's consent must be obtained before data is collected.

TiVo responded to the charges with an explanation of the pains it takes to strip identifying information from the aggregated data. It admits that the original subscriber instructions and material included with the oldest devices claimed that viewers' information remained on the home device and denied that it was collected, but that new user manuals and the online privacy policy make it clear that the information is aggregated and stripped of personally identifying information before being shared. All TiVo users have been made aware of the privacy policies, said Matt Zinn, chief privacy officer at TiVo. Zinn says the collection of information on such things as what programs users watch and what commercials they skip help keep the service costs low by generating revenue from television networks and advertisers.

TiVo hopes to reassure potential subscribers that it protects their personal privacy in time to get them onboard before a big threat to their position in the fledgling PVR market grabs them away. Rival Microsoft, who debuted its UltimateTV last month, claims that it does not collect user information. UltimateTV combines PVR technology with existing WebTV Plus interactive television and Internet surfing capabilities. In the wake of the Privacy Foundation study, and UltimateTV spokesman said that if the company ever chooses to collect data, the device customers would be covered by a privacy policy similar to that of WebTV, who collects anonymous data on viewing habits.

TiVo's position in the infant industry has been largely positive up until now, with technology-watchers marking them as a potential success in filling a consumer-requested niche that has previously been empty. If the company can cut costs and increase its subscriber base with the current threats of bad publicity and competition from deep-pocketed rivals like Microsoft, perhaps it can be the "TiVo-lution" its advertisements boast of, but at the moment the picture remains fuzzy.