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TiVo to charter Internet course with Liberate

TiVo moves closer to deals with Liberate Technologies and Blockbuster that will likely lead to a proliferation of its "video-on-demand" technology.

LAS VEGAS--TiVo moved closer to the epicenter of the digital entertainment revolution today through deals with Liberate Technologies and Blockbuster that will likely lead to a proliferation of its "video-on-demand" technology.

Liberate Technologies, a developer of software for TV set-top boxes, which has seen its stock skyrocket recently, is expected to announce that it has signed an agreement whereby its software will be combined with TiVo's digital video recording services and hardware. The news comes amid many announcements in the set-top realm at the Consumer Electronics Show here.

TiVo's stock shot up 31.06 percent in trading today to close at 50.38.

Meanwhile, video rental chain Blockbuster has inked a deal with the company to deliver content through TiVo boxes.

The deals will likely give TiVo a leg up on its main competitor, Replay Networks. Until recently, TiVo was mostly known for its "digital VCR" (DVR), a set-top box that recorded video and live TV onto a hard drive. With Liberate, TiVo boxes will be able to deliver Internet content along with video-on-demand, an entertainment package similar to strategies currently being fleshed out by Microsoft and AOL.

The Blockbuster deal, by contrast, will expand the scope of video and entertainment available to TiVo customers.

Although the convergence of the PC and TV has been promised for years, companies are making tangible steps this year at the Consumer Electronics Show. There is mushrooming interest in providing services such as portals for programs, email and e-commerce via the TV, resulting in a growing array of devices designed to accomplish those tasks.

The latest twist involves combining the functions of a digital video recorder with software that allows access to non-video content such as Web pages and audio from the Net. Liberate has been providing software for advanced set-top boxes to cable and telco companies worldwide, while TiVo has been busy linking up with consumer electronics companies to incorporate its DVR technologies in both stand-alone devices and satellite set-tops from DirecTV. The new interactive TV platform is expected to be ready by the second half of 2000.

Where TiVo mainly faced Replay Networks and video-on-demand firms like Seachange and Concurrent, TiVo now moves in a different direction strategically, where there is competition from the likes of Microsoft, General Instrument, Wink, OpenTV, Canal Plus, Scientific-Atlanta and even a division of Sony that is providing set-tops to cable operators.

Ironically, Microsoft's WebTV, one of the first commercially available consumer devices to offer the Internet via the TV, has becoming more TiVo-like of late. WebTV has already started offering improved versions of its co-branded Echostar satellite receivers that will allow users to record and playback up to 12 hours of video. Microsoft is also working to provide interactive services through cable set-tops through its deal with AT&T's cable arm.

Don't count PC makers out of the mix of competitors, either, what with the amount of activity already happening around downloading MP3 files from the Internet to the PC.

In TiVo's favor: America Online, which is already moving to offer "AOL TV" with Liberate's software, is a partner of TiVo's as well. AOL TV service will eventually be combined with DVR capabilities as well, the companies said.

"AOL looks forward to a partnership with TiVo where AOL will enhance AOLTV by incorporating TiVo's best-of-breed digital video recording features with future versions of AOLTV," AOL president of Interactive Services Barry Schuler said in a statement. "TiVo's decision to partner with Liberate to integrate Liberate's TV Navigator software to the TiVo open Linux platform is fundamental to our efforts to enable these features."

All these companies are offering technologies for interactive TV because they are betting that they all can participate in new revenue streams, as consumers start purchasing goods and services from the comfort of the living room. Research firm Jupiter projects that interactive television will reach 30 million U.S. households and generate $10 billion in revenue by 2004.

Despite the predictions, TiVo appears unwilling to bet everything on just one part of the TV market when it can expand into new arenas.

In fact, TiVo may take interactive TV services in another direction altogether. Currently, DVRs are designed to allow viewers to pause and rewind live television by recording video streams to the device's hard drive. For instance, a viewer could "pause" a football game, get a snack, come back, and resume viewing where the viewer left off, even though in reality the game has continued on. These devices can also be programmed to record shows much like a standard VCR but allow a user to automatically record an entire season's worth of shows with the click of a button.

Now, instead of focusing simply on the TV, industry veterans say the company's platform could act as a home multimedia server that organizes and distributes audio and video content to other devices in the home such as handheld digital music players. Or perhaps the device could store content from digital camcorders and parse clips out to the Internet when a family member wants to see it.

One of TiVo's partners, Sony, which just came out with its first TiVo-based DVR, suggested as much. Michael Fidler, Sony's senior vice president of home audio and video, agrees that DVRs could become home multimedia servers about three or four years down the road as more and more digital content enters U.S. homes. Sony's upcoming PlayStation 2, produced by a separate division of the company, also hopes to serve much the same purpose.

DVR interest, of course, also is good news for set-top makers and developers. Liberate is the renamed former NCI subsidiary of Oracle. The company's original vision was to create a market for "information appliances" aimed at corporate users that didn't have hard disc drives, relying instead on network storage.

After being hotly debated in computer industry circles in 1996 and 1997, the network computing concept failed to gain a market foothold, in part because PC prices suddenly fell to historic lows-forcing Liberate to change its strategy and focus on the market for consumer devices such as set-top boxes. Since then, Liberate has secured investments from a number of cable operators such as Comcast, Cox Communications, MediaOne, Rogers Communications and Shaw Communications.