ReplayTV Trims Workers, Changes Chief Executives in Bid to Cut Losses

ReplayTV Inc., a pioneering manufacturer of so-called personal TV recorders, changed chief executives Monday and laid off dozens of workers in a bid to cut its sizable losses.

The Mountain View, Calif.-based company also announced that it will no longer build recorders and sell them directly to the public. Instead, officials said, they will sell their technology to cable operators, TV manufacturers and other companies eager to launch their own personal TV services.

The change means the two leading personal TV companies, Microsoft’s WebTV unit and TiVo Inc. of San Jose, face one fewer competitor going into the busy holiday season.

ReplayTV was the first to sell the new digital recorders, but WebTV and TiVo lined up more powerful partners, charged less up front for their products and raised more revenue from subscription fees.

Using a high-capacity computer disc instead of videotape, personal TV recorders enable viewers to pause, rewind and replay shows as they are being televised. They also make it easy to record shows automatically based on a viewer’s favorite actors or subjects.

Steve Shannon, vice president of marketing for ReplayTV, said the company would continue to support customers who had bought ReplayTV boxes. And Panasonic will continue to manufacture its ShowStopper recorders with ReplayTV technology, he said.

Analyst Josh Bernoff of Forrester Research Inc. estimated that about 30,000 boxes had been sold by ReplayTV and Panasonic, its main distribution partner. By contrast, TiVo had 73,000 subscribers for its service at the end of September, and satellite TV operator EchoStar had sold more than 100,000 WebTV-powered DISHPlayers.

ReplayTV’s main problems were slow sales and dwindling cash resources, which were being drained by marketing and subsidies for the recorders. Needing more money but facing a tight capital market, company officials didn’t want to launch a new round of fund-raising without a faster path to profitability, Shannon said.

Under ReplayTV’s original business model, the company sold the recorder at a loss but made money over time by selling new forms of advertising and programming. A major problem, Shannon said, was that cable operators and other potential partners for ReplayTV didn’t like the idea of sharing future revenues.

So the company decided to give up the race with TiVo and WebTV to be the dominant personal TV brand. Instead, it wants to help cable operators and other service providers establish their own personal TV brands by integrating the ReplayTV technology into their set-top boxes.

It also laid off last week an undisclosed number of employees--Shannon said it was dozens of people but “less than half the company”--involved in manufacturing and marketing. Kim LeMasters, chairman and chief executive, resigned Monday in favor of founder and original Chief Executive Anthony Wood, whom LeMasters replaced last year.

Michael Ramsay, president and chief executive of TiVo, contended that ReplayTV was taking a big risk by relying on cable operators and other service providers for deployment. “I think the real strategy is to clean themselves up to get bought,” Ramsay said.

Unlike ReplayTV, TiVo is a publicly traded company. TiVo also received a $200-million cash infusion recently from America Online, which owns 13% of the company.

Bernoff disagreed with Ramsay’s assessment, arguing that ReplayTV had to change course. “In a lot of ways, the company proved it was not quite as professionally put together as the TiVo box and the TiVo system,” he said.

The new strategy, Bernoff argued, gives ReplayTV a high probability of succeeding. The cable operators need to react quickly to the satellite TV operators’ TiVo- and WebTV-powered personal TV recorders, and ReplayTV is now well positioned to supply that technology, he said.

ReplayTV’s investors include the two leading manufacturers of cable set-top boxes--Motorola and Scientific Atlanta--as well as two of the largest U.S. cable operators: Time Warner and Comcast.