Update: Tivo says it will continue to use third-party designers for hardware going forward. The article has been updated to reflect this fact.

Tivo has been bullish lately about releasing new software products beyond its core DVR boxes. Today, we found out why. The company laid off nearly all the industrial designers of those products.

According to sources within Tivo, most of the hardware team has been let go. So far, that's five employees. A skeleton crew of two engineers has been retained to handle support for current and upcoming third-party devices. The sources told WIRED that Tivo is getting out of the hardware business altogether and making a big direction change.

This jives with what the company has at least hinted at in the past. In May 2013, executive vice president and general manager of products and revenue, Jeff Klugman told WIRED, "Software is the future of Tivo."

To that end, the company known for its easy-to-use UI and quirky mascot has been partnering with pay-TV providers and sticking its DVR software in provider's set top boxes. The latest announcement, a prototype networked DVR called nDVR, won't be available in stores and instead will be offered through your cable subscription. The service stores recorded shows in the cloud. That recorded content will likely be available through the cable provider's DVR, mobile devices, and a Roku app.

The company's vice president of corporate communications told WIRED via email: "We continue to balance appropriate levels of staffing and expertise necessary to support our existing hardware business...and there is no doubt that we expect growth in the cloud-based delivery aspects of TiVo's business."

Like your music, your next TV experience from Tivo will be tightly integrated with the cloud.