TiVo Institutes 1 Year Service Contracts

A recent change made to TiVo's customer agreement has opened up the door to allow the company to institute service contracts. Although it is unclear as to why the change has been made, TiVo has recently endeavored to market the DVR service to new customers and contracts would keep those users from canceling.

According to the new service agreement, any TiVo activated after September 6 will require a 12-month commitment. Those who cancel before the end of their contract, or have their contracts terminated by TiVo, will be forced to pay a $150 early termination fee.

The change has already angered some users, who began to voice their complaints across TiVo enthusiast sites late Thursday. "This is just not a good thing," a user who identified himself as "ZeoTiVo" posted to the Tivo Community site. Another said the tactic felt "sleazy."

Although not specified in the new agreement, some customers have reported that adding a new TiVo to their service makes contracts activated before that date also applicable to the new policy.

This is certainly not the first time that TiVo has angered customers by making changes to its service. In late March, the company began testing new popup ads, but they disappeared shortly after the story became public.

A similar, less intrusive type of advertising was launched by TiVo in July, possibly reworked in response to those criticisms.

There may be good business reasoning behind the change in policy, as TiVo has begun to aggressively pursue new customers. In July, the DVR maker offered a $100 instant rebate on its set-top box for the first time in the company's history, which lasted through mid-August.

In September, TiVo increased the mail-in rebate to $150, bringing the cost of a TiVo system down to under $50. At that rate, it would take TiVo a little over a year in subscription fees to recoup the retail price of the unit.

Most recently, an offer with iRiver was launched that would give new iRiver PMC-120 buyers a free TiVo with one year of service pre-paid. All these promotions cost money, however, and for a company attempting to stay profitable, every dollar counts.

But some TiVo customers don't think the end result is worth it. "The fee itself really isn't unreasonable in the scheme of new equipment purchases," a TiVo user wrote. "Although I really wonder if it's worthwhile in terms of bad publicity vs. what they'll actually recover from it."

"I just activated my TiVo a week ago. I was so happy to get it working and now I feel locked in, which is what I didn't want with the lifetime contract," one new TiVo customer told BetaNews. "Apparently you have to read the fine print, because there is no mention of a service contract during the setup phase on tivo.com."

TiVo had not responded to requests for comment on the service agreement changes by press time.

Nate Mook contributed to this report.