Guest blogger Kevin Groppe is a digital media enthusiast, located in the DC metro area, who covers media centers and home theater computers at Floppyhead.com.

Two things I hate about exercising with my current MP3 player are how the cable from the player to earbuds constantly bounces around and how covered in sweat my MP3 player gets when I hold it. With this in mind, OTTO has developed a Wireless MP3 Player Headset.

The unique concept behind the OTTO Wireless MP3 Player Headset is that it combines an mp3 player and headphones into one compact device, eliminating the wire from earpiece to MP3 player. For most people, carrying around your entire music collection in your MP3 player is overkill. 10,000 songs in the palm of your hand is great for long vacations or business trips, but not necessary for your commute or trip to the gym. OTTO embraces this fact and has developed an MP3 player that has a useful form factor with the following specs:

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Infinite free respawns never felt so good? Kevin Tofel, of jkOnTheRun, shares his Dragon’s Lair thoughts and pics.

Ah, 1983. A time when I was waiting for my growth spurt, had no gray hair and could often be found in an arcade or pounding away on my Commodore 64. I enjoyed all different game genres in the arcade: I didn’t discriminate on which machine was worthy of a quarter. However, I was always drawn to Dragon’s Lair which was one of the first laserdisc-based games. Maybe it was the movie-like cartoon graphics that captured my attention. (Actually, it was more likely glimpses of the spunky li’l Princess Daphne, but I digress so let’s get to current day.)

Fast forward to 2007. I’m still waiting for that growth spurt, I bleach the grays and have no time for arcades these days. And what’s with these “tokens� everyone keeps trading real money for: is this Second Life in the real world? No, these days, I stay home and play games in high definition on an Xbox 360 and 60-inch Sony SXRD set. It’s all exactly as I would have predicted back in 1983, of course.

That’s why I was excited to get a copy of Dragon’s Lair in HD-DVD to review. With the remastered disc from Digital Leisure and my Xbox 360 HD-DVD drive, I figured I’d be giddy with Daphne sightings, er, I mean, ready to once again quest away as Dirk the Daring.

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One TiVo stockholder’s take…

The USPTO action finalizes the first phase of the Patent Office reconsideration of TiVo’s patent. The enforceable part of a patent is a series of “claims” (basically descriptions of part of a thing or process). Some of the claims of TiVo’s patent were validated, some were rejected. The claims that were validated are done — they’re now rock solid. The claims that were rejected will now be the focus of further action.

A couple of things can now happen: 1) TiVo can appeal the decision through the appeals process of the Patent Office, then the federal court of appeals, and finally the Supreme Court; and/or 2) TiVo can work with the Patent Office examiner to modify the claims to make them acceptable to the Office. This second option is particularly valuable because two of TiVo’s claims (#1 and #32) form the basis of all the rejected claims. If they can be “fixed,” all of the rejected claims will likely be validated. Since, in an earlier meeting, the patent examiner agreed that TiVo’s interpretation of the claims distinguished them from prior art, but asked them to show how that was represented in the wording of the claims, it seems that this second route would likely be successful. TiVo has 60 days to respond to this latest action, and will likely do nothing until very close to the end of that period.

In any event, the process will go on for many months or several years, and will therefore likely have no impact on TiVo’s lawsuit against EchoStar. Anyone who doubts this should review NTP v. RIMM. NTP received a huge settlement based on a patent that had been gutted by the USPTO.

One TiVo stockholder’s take… 

EchoStar responded to Judge Duffey’s order to show cause with a lengthy set of documents outlining their reasons for believing the various documents in question are immune from discovery. Generally they take the position that the documents are simply internal work product that was never communicated to EchoStar. Without access to the documents in question, we cannot comment on the strength of EchoStar’s position on these documents, however we do find their response regarding Document 88 to be quite curious. Document 88 is a set of handwritten notes taken during a telephonic conference call, about which EchoStar says:

When Merchant & Gould attorneys were retained to provide an opinion
regarding a patent over which litigation was pending, they had a
conference call with litigation counsel from Morrison & Foerster. The only participants in the call were Merchant & Gould attorneys retained to provide advice on legal matters related to the pending litigation, and Morrison & Foerster counsel representing EchoStar in the litigation. [ ... ] Document 88 was never communicated to EchoStar (in this form or orally), and it does not reference, describe, or disclose any communication with EchoStar.

EchoStar, then, appears to be taking the position that direct communication with the law firm they retained to represent them in the litigation is legally distinct from communication with EchoStar itself with respect to the that litigation. We doubt TiVo’s attorneys will see it the same way. We wonder if the judge will.

One stockholder’s take…

In the ongoing legal maneuvering over the disclosure of documents relating to the Merchant & Gould “Opinion Letter” (of non-infringement), Judge William Duffey of the U.S. Circuit Court in northern Georgia issued the following order on 3/22:

ORDER DIRECTING that Echostar and Homer Knearl SHOW CAUSE by 3/30/07, why the following documents should not be produced: MG PRIV 16, 27, 32-35, 37, 55, 68, 69, 72, 73, 75, 85, 88, 95, 105, 177, 179, 180, 271, 274, 276, 287, 291, and 305. Echostar or Knearl must state in detail for each document the privilege asserted, and the grounds for that privilege, including a description of the identity and role of each author, recipient, cc recipient, or bcc recipient of the document. IT IS FURTHER ORDERED that if any portion of the above documents was submitted to the Court in redacted form, unredacted copies be provided for in camera review by 3/30/07. These documents shall be marked in such a way as to allow the Court to discern easily which portions were previously redacted. Signed by Judge William S. Duffey Jr. on 3/22/07. (kt) (Entered: 03/22/2007)

The clarified rules of discovery issued by a U.S. Court of Appeals last year for this situation require documents to be produced to TiVo only if they were communicated by the law firm to the client (i.e., Echostar), or if they reference a communication with the client.

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One stockholder’s take…

In its Q4 earnings release last week, TiVo stated that its churn had increased to 1.2%/month, up from about 0.9%. We took a closer look at this number and found some interesting results. When we did our financial analysis for ZNF in December, we devoted Appendix A to deriving real churn numbers from the data TiVo has provided. Recall that we found the churn for recurring subscribers to be about 1.38%/month. Also recall that “Lifetime” subscribers do not churn until 1) the end of the four-year period TiVo uses to amortize their revenue, and 2) the box has not contacted the TiVo service for six months. We discovered that Lifetime subscribers exhibited a “bulk churn” (i.e., an immediate churn at the end of the four-year period) of about 19%, and an ongoing churn of the fully-amortized subs of about 1.2% per month. (Both the recurring and Lifetime churn can be bigger than the total churn number TiVo provides because TiVo includes the entire body of lifetime subscribers, including those not fully amortized.)

At the end of Q3, TiVo had 138,000 fully-amortized Lifetime subscribers. At the end of Q4, that number was 166,000. But in the four-year-ago period, TiVo added approximately 50,000 Lifetime subscribers, meaning that without churn, the fully amortized number would have been 188,000. Thus, there were about 22,000 lifetime subscriptions cancelled in Q4. This result requires a significant bump in both bulk and ongoing churn of the Lifetime subscribers (we’re using 27% and 2.2%, but the numbers are interdependent and could therefore be any combination that results in the same total churn).

That leaves 40,000 cancellations of recurring subscribers which, when divided by about 955,000 (average) recurring subs during the quarter, gives us a churn of recurring subscribers of about 1.4%/month – nearly unchanged from the average over the trailing twelve month period.

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One stockholder’s take…

Our initial impression after reading TiVo’s fiscal fourth quarter earnings release and listening to yesterday’s conference call is that the company may finally have its financial feet under it. While it will take some time to fully digest the financials and commentary, we think it will be increasingly hard for any lingering doomsayers to argue that TiVo is a failing enterprise. Continued growth, improving financials, and the impending MSO rollouts tell us that TiVo will be around for many years to come, and may even begin to thrive.

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On January 26th, in response to a TiVo motion to enforce his earlier order to deliver certain documents, a frustrated-sounding U.S. District Court Judge Duffey slapped the wrists of Echostar and “non-party witness” Homer Knearl, requiring them to sign pre-prepared affidavits that they had, in fact, complied with his order. Duffey accused Knearl and Echostar of playing “a legal shell game” and called their earlier responses “vague, equivocal, and qualified.”

TiVo has been seeking documents produced by Knearl and his former associates at the Merchant and Gould law firm that relate to a legal opinion of non-infringement that M&G gave Echostar in their patent dispute with TiVo. That opinion was not allowed into evidence at trial (primarily because of Echostar’s failure to deliver related documents under an earlier court order), and has now become a significant factor in Echostar’s appeal and TiVo’s counter-appeal.

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