TiVo, Comcast reach DVR deal
Long-term agreement eases investor concerns over the digital video recorder pioneer's future.
The companies announced the agreement on Tuesday, saying they're working to make TiVo's DVR service and interactive advertising capability available over Comcast's cable network. The first of their co-developed products will be available in mid- to late-2006 and will use the TiVo brand. Financial terms of the deal were not disclosed, but the alliance is nonexclusive.
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The deal arms Comcast with a successful and recognizable DVR service--something leading satellite companies, including EchoStar and DirecTV, have used to attract and keep subscribers. Cable and satellite TV service companies are battling for viewers, and new technologies, such as DVR, video on demand, high- speed Internet access and telephone service, are among the tools they will use against each other.
TiVo shares closed up nearly 75 percent, or $2.87 per share, to $6.70 in Tuesday trading on the Nasdaq. Investors were positive about the news, some upgrading TiVo's investment rating. Citing the Comcast deal, Smith Barney upgraded TiVo from a sell to a hold.
The two companies had flirted before without consummating a deal. The agreement opens up a much larger audience for TiVo.
TiVo receives an upfront payment from Comcast for creating a new DVR that works with Comcast's current service, according to a filing with the Securities and Exchange Commission. TiVo will also receive a recurring monthly fee for each Comcast subscriber who uses TiVo through Comcast. The deal will run for seven years following the completion of the software. Comcast can renew the deal on a year-by-year basis for up to eight additional years.
TiVo's agreement is with Comcast STB Software DVR, a wholly owned subsidiary of Comcast. The deal gives the cable giant access to TiVo's intellectual property--the value of which is currently being argued in a Texas district court in a case brought against EchoStar.
The court recently set a jury selection date in TiVo's long-running patent infringement dispute with the satellite TV provider.
Also part of the deal are advertising features that account for just a fraction of TiVo's overall revenue but could evolve into something more substantial. TiVo will sell certain types of advertising products related to the TiVo service offered through Comcast.
TiVo has been developing interactive advertising technology that's meant to give companies more information and access to couch potatoes.
Other parts of the Comcast deal include home media networking features and TiVoToGo transfers--allowing viewers to access shows recorded on their TiVo DVRs on PCs. Cable and satellite companies have been unwilling to enable capabilities beyond DVR because of concern over long customer support calls. TiVo will be providing Comcast with certain customer and maintenance support.
TiVo's digital video recorder service lets customers pause live broadcasts and program systems to record future shows. The company charges from $99 to $299 for its hardware, and $6.99 to $12.99 a month to access its service.
The majority of TiVo's 3 million or so subscribers come through satellite TV service provider DirecTV. However, DirecTV recently started using a second company, NDS, to provide DVR service, sparking investor concerns over TiVo's future. A deal with Comcast puts to rest some of those concerns by opening up a large new potential audience for TiVo's service.
TiVo spooked investors last week in its earnings call, predicting lower-than-expected growth in the next year.
The deal comes amid a management shakeup at the company. TiVo's president recently resigned, and a search for a successor to the current chief executive is under way.
TiVo continues to push forward with new initiatives, including building up a software developer program aimed at creating new applications. It also recently announced new patents.