TV GUIDE BUNDLING VCR PLUS WITH EPG LICENSES FOR DVD RECORDERS IN EUROPE

While the deployment of VCR Plus in the U.S. has declined in recent years as CE manufacturers opt for an EPG-only approach, the technology remains popular in other world markets. In Europe, Philips is fielding an EPG-equipped DVD+RW recorder with VCR Plus, and other licensees there, including JVC, Pioneer, Sharp, Thomson and others, are expected soon to follow suit, sources said.

In addition to DVD recorders, Gemstar is seeking also to have the technologies integrated in TVs, TV Guide Consumer Electronics Pres. Douglas Macrae told us. The VCR Plus technology is included in the EPG license fee at no additional cost, he said. “Basically any company making a [DVD] recorder is likely, at a minimum, have our VCR Plus in Europe,” Macrae said. “In Europe we are having success getting into many recorders with the EPG and those that don’t have it are already putting VCR Plus in there. There will be more VCR Plus out there than EPG in Europe.” In contrast, TV Guide EPGs deployed in the U.S., which once also carried VCR Plus, are being stripped of it for 2004- 2005 “because there is not the familiarity with product that there is in Europe,” Macrae said. “We've had it, but we're in process of removing it for simplicity.”

Gemstar-TV Guide provided some details of the VCR Plus strategy as it reported its first-quarter net loss narrowed to $39.7 million from $45.3 million, despite a $28.8 million loss on the sale of its Superstar/Netlink business to EchoStar and $19 million in legal expenses, including those involving litigation with former CEO Henry Yuen and CFO Elsie Leung. Gemstar’s earnings also benefited from a one-time $14 million payment from Pioneer as part of the settlement of a patent infringement suit. Samsung paid $4 million cash to Gemstar and agreed to transfer its 20% stake in subsidiary Norpak to Gemstar. The value of the Norpak stake was $1.4 million. In exchange, Gemstar agreed to drop a claim that arose from Samsung’s transfer of satellite set- top boxes to DirecTV in 2003.

Total sales rose to $195.1 million from $178.4 million on a sharp gain in CE licensing revenue to $54.6 million from $33.8 million. Gemstar’s ailing publishing business posted a decline in revenue to $98.3 million from $108.9 million a year ago despite the company spending $20 million to relaunch the flagship TV Guide magazine last fall. While TV Guide subscriptions rose 8% from the 4th quarter and were flat with a year ago at 9 million, newsstand sales plunged 20%, CFO Brian Urban told analysts in a conference call. The downturn in newsstand sales was partly offset by an increase in the cover price to $2.49 from $1.99, which generated an additional $2.8 million revenue. Magazine ad revenue also declined by $2.4 million, he said.

Gemstar’s cable and satellite business posted an increase in revenue to $42.1 million from $35.5 million as operating expense jumped to $27.1 million from $24.7 million. Shortly after the quarter’s close March 31, EchoStar agreed to pay $190 million cash to settle a patent infringement suit and license Gemstar’s EPG technology. EchoStar also purchased the assets of the Gemstar’s C-band Superstar/Netlink group and SpaceComm for $46 million and $2 million, respectively.

CEO Jeffrey Shell also said the company was developing “TV Guide Land,” a service that would complement its TV Guide Channel available in 80 million U.S. households. Gemstar has hired former Replay Networks Exec. Stacy Jolnick to head up development of TV Guide Land, which Shell described as a “simple TV guidance service that helps viewers quickly figure out what they want to watch.” The service is being designed to provide highlights of TV shows while “going much deeper than a short recap” with reviews and recommendations based on criteria set by the viewer. Recent carriage agreements with DirecTV, EchoStar, Comcast and Time Warner give Gemstar a “distribution platform against which to launch that service, and our TV Guide brand gives us the authority to capture consumer attention,” Shell said.

Meanwhile, Yuen -- ousted as CEO in 2002 when News Corp. purchased control of the company -- has cut his stake in it to less than 5%, according to a filing with the SEC. Yuen, who is the subject of an on-going SEC probe, sold 17 million shares Sept. 10-March 5, the filing said. As of March 5, Yuen owned 21.2 million shares, or 4.9% of the company’s stock. Former CFO Elsie Leung, also under SEC investigation, sold 1.4 million shares Oct. 13-March 5, cutting her stake to 6.2 million (1.5%), the filing said.