ReplayTV Changes Course With Revised Subcription Strategy

NEW YORK— Replay TV announced an expansion of its distribution base and adopted a new business model in which it will market its new 5500 series DVRs pre-activated with a three-year subscription.

The four 5500-series DVRs, unveiled in June, ship in September.

In expanding its retail base, Replay will sell the 5500 series through Bose's 110 stores and through Harvey Electronics' nine stores, including Harvey's Bang & Olufsen stores.

In addition, Replay said it will more aggressively target the custom-installation channel through a distribution agreement with AVAD, which targets custom installers through a nationwide network of distributors operating in 19 locations.

New and existing Replay dealers sell the new DVRs bundled with three-year subscriptions at prices ranging from $549 to $1,199 for models with 40- and 320-hour capacities, respectively. Once the three-year subscription expires, users will have the opportunity to extend the subscription for only 99 cents/month, prepaid in one-, two- or three-year periods.

Recurring monthly fees are becoming "a big barrier to a lot of consumers," said Replay president Jim Hollingsworth, "especially as the price of the hardware comes down."

Focus groups found that monthly subscriptions are holding the market back. "The vast majority of people are adverse to another subscription fee," he said.

Replay's new business model also lowers the total cost of ownership compared to Replay's previous business model, he said.

A current 40-hour 5000-series model retailing for $250, for example, actually costs $610 when three years of $9.95/month service is factored in, Hollingsworth explained.

With a new 40-hour 5500-series model, the total cost of three-year ownership drops to $550, and over five years, ownership costs drop even more.

"It's more economical for consumers and easier to understand, and it's better for retailers," he said.

The new business model will also simplify the purchase of DVRs as gifts, and it will reduce the incidence of returns by consumers who claim they didn't know a monthly fee was required, he added.

In 2002, he noted, 60 percent of all DVRs sold were sold in the last six weeks of the year, but there were "abnormally high returns afterwards."

Replay's new business model is actually a variation of a strategy that it dropped in 2002. Before then, it sold DVRs only with lifetime subscriptions in which 20-, 30- and 60-hour models retailed for $599 to $899.

In 2002, it began offering buyers of the new 5000 series the option of a lifetime subscription or a monthly subscription. The latter reduced the initial purchase price of an opening-price model to $250. A lifetime subscription, for the lifetime of the product, added another $250.