TiVo Sees Its EchoStar Settlement As Strengthening Its Legal Position

The pact with EchoStar underscores the “strength and enforceability of our intellectual property … while also proving the significant monetary value that can flow from aggressive enforcement of our IP assets,” Rogers said. TiVo spent about $11 million in Q1 on the EchoStar suit, Brunelle said. But this year’s legal costs are expected to drop to $36.8 million from an earlier $46 million projection because of the settlement, Brunelle said.

TiVo is scheduled to begin claim construction hearings in June as a precursor to an October trial in patent infringement lawsuits against AT&T and Verizon filed in 2009, company officials said. TiVo alleged that DVR products used in U-verse and FiOS systems infringe the time-warp patent. Microsoft, which supplies its Mediaroom software for AT&T’s U-verse set-top boxes, and Motorola, which is a set-top supplier to Verizon, have also sued TiVo for patent infringement. Microsoft also filed a complaint with the International Trade Commission, which is expected to decide the case by July. A separate lawsuit Microsoft filed in U.S. District Court, San Jose, was stayed pending a review of the software giant’s patents by the U.S. Patent and Trademark Office, Rogers said.

In the case of Verizon and AT&T, “we believe we have a strong position” because the companies have focused on “building their respective television services off of the DVR and our critical time warp technology,” Rogers said. Verizon and AT&T officials weren’t available for comment.

TiVo expects the much-delayed DirecTV DVR/satellite receiver to launch “relatively soon, I hope,” Rogers said. In March, Rogers said the product would be delivered in the “relatively near time frame” (CED March 15 p3). The combo device, which stems from an agreement the companies signed in 2008, was originally scheduled to ship the first half 2009 and most recently was due early this year (CED Dec 7 p1). The many delays were tied to changes in top DirecTV management, DirecTV’s internal development that resulted in changes having to be made to the TiVo platform and the DVR developer “not being the only solution,” Rogers said Wednesday at the Barclays Capital global communications, media and technology conference in New York. As the exclusive or primary DVR “solution” at cable operators like RCN and Virgin Media, TiVo’s platform gets more attention, Rogers said. DirecTV was an early supporter of TiVo, but dropped the technology from its boxes in 2005, switching to a platform by then-affiliate NDS. DirecTV “has nothing definitive” as to when the TiVo product will be available, a DirecTV spokesman said. “TiVo’s delays are not due to any issues on the DirecTV side,” he said.

TiVo also is continuing development with Best Buy on a broadband-capable LCD TV that would be designed around TiVo’s DVR platform but lack a hard drive, TiVo officials said. Rogers didn’t comment on when the product would be released. But some delay is tied to “this being the first time through” for Best Buy in terms of introducing such a product and being extra careful before it ships, Rogers told us. Best Buy officials weren’t available for comment. Best Buy and TiVo signed an agreement in 2009 and the first of the sets were expected to ship late last year (CED Dec 7 p1).

Meanwhile, Comcast will deploy its Xfinity on Demand service in TiVo’s Premiere DVRs starting with the San Francisco market in the second half (CED May 10 p1) as part of a business model that TiVo believes other cable operators “will find attractive,” Rogers said. The on-demand service is included free with Premiere DVRs sold at retail, relieving Comcast of some hardware cost, Rogers said. Comcast will heavily promote the service in direct mail and TV commercials in markets where Xfinity on Demand is available on TiVo Premiere DVRs, Rogers said. TiVo also has distribution agreements with RCN, Cox Communications and Charter, the latter expected to start sales late this year, Rogers said. While TiVo’s cable agreements cover more than 10 million U.S. subscribers, another 30-40 million homes aren’t addressed by existing distribution, Rogers said.

Still missing from TiVo’s customer roster are Cablevision and Time Warner Cable. Time Warner has been a strong supporter of the TV Everywhere concept, which Rogers derided at the Barclays conference as being “smoke and mirrors.” The user interface isn’t consistent across platforms, including TV as well as cellphones and tablets, Rogers said. Time Warner Cable officials weren’t available for comment.

In international markets, Spain’s Ono is expected to start introducing TiVo service to its cable customers in early 2012, while Virgin Media is fully rolling out a Cisco STB stocked with TiVo DVR software. Virgin Media had 65,000 pre-orders for the device that launched in April. TiVo’s Q1 service and technology was $38 million, exceeding the high end of its forecast, as it surpassed milestones for Virgin “a little bit earlier,” Brunelle said. TiVo also is seeking new distributors for its service in Australia and New Zealand, after having ended an exclusive pact with Seven Networks and Hybrid Television Services. “We're still selling the service” in Australia and New Zealand, said Rogers, conceding that signing an exclusive in 2007 with a broadcaster may have been a mistake.

TiVo swung to a $139 million Q1 profit from a $14.2 million loss a year earlier as it recorded $175.7 million in proceeds from the EchoStar settlement, the company said. TiVo’s Q1 net revenue fell to $45.7 million from $61.3 million as receipts from services slipped to $33.3 million from $36.2 million. Technology revenue dropped to $5.5 million and hardware to $6.9 million, from $6.9 million and $18.1 million a year ago. TiVo’s total subscribers declined to 1.96 million from 2.5 million a year earlier as those from broadcasters/cable operators fell to 753,000 from one million. TiVo standalone subscribers dropped to 1.2 million from 1.41 million. TiVo’s monthly churn increased to 2.3 percent from two percent a year earlier, while per subscriber acquisition costs declined to $153 from $167.