Huge, huge news! While not unexpected given DTV’s slow start in transitioning customers off to TiVo and the associated expenses, this is very good news for both TiVo as a company and for DirecTV TiVo customers. The original agreement was set to expire in about a year, at which point TiVo would have stopped providing service to DirecTV. Of particular interest, and surely no coincidence during the Echostar case, is the mention of a patent rights truce.

Apr 12, 2006 08:00 ET

TiVo and DIRECTV Agree to Extend Relationship for Three Years

Agreement Guarantees Quality Service for Existing DIRECTV TiVo Subscribers; Also Addresses Intellectual Property

ALVISO, Calif., April 12 — TiVo Inc. (NASDAQ:TIVO) , the creator of and a leader in television services for digital video recorders (DVR), and DIRECTV, Inc. (NYSE:DTV) , the nation’s leading digital television service provider, today announced a three-year extension to the TiVo-DIRECTV commercial agreement.

Existing DIRECTV TiVo subscribers will be able to continue to receive the award-winning TiVo(R) service, with TiVo providing ongoing maintenance and support. In addition, TiVo and DIRECTV agree not to assert patent rights against the other. The agreement also extends the advertising relationship between the two companies. DIRECTV will continue to service existing DIRECTV receivers with TiVo service. While specific financial terms of the agreement were not disclosed, the recurring monthly economics of the agreement are similar to the economics for DIRECTV receivers with TiVo service activated since 2003.

“We are pleased to have reached an agreement with DIRECTV that will allow us to continue to provide our service to the more than 2 million DIRECTV TiVo households,” said TiVo CEO Tom Rogers. “As the pioneer in the DVR market, we have created a service that is highly valued by consumers because of our technology, the wide range of our unique features and the unparalleled ease of our user experience. This agreement reflects TiVo’s popularity among DIRECTV subscribers and importantly respects the value of our intellectual property as well.”

“By extending our agreement with TiVo, we are ensuring quality support for DIRECTV customers who already own a DIRECTV TiVo unit,” said Romulo Pontual, DIRECTV’s chief technology officer. “We are pleased to cooperate with TiVo in a way that will best serve DIRECTV and our DIRECTV TiVo customers.”

To recap: TiVo has sued Echostar for infringing on their “time warping” patent. After a delay last fall, the trial finally began about two weeks ago.

Echostar has focused their defense on Dish DVR’s technical variations (”media switch“) while TiVo has been playing the role of David (versus Goliath) and is seeking $87 million in damages — a number calculated from theoretical licensing fees and potential customers.

Arguments are complete and the jury will receive instructions from the judge tomorrow to begin their deliberations. Regardless of the outcome, you can bet there will be appeals… not to mention Echostar has pending litigation against TiVo.

Marshall News Messenger says: After nine days of mind-boggling technical testimony, both sides rested Tuesday in TiVo Inc.’s patent infringement lawsuit against EchoStar Communications Corp., owner of Dish Network. U. S. District Judge David Folsom dismissed the five-man, five-woman jury shortly before 3 p.m., instructing them to return 9 a.m. Thursday and “bring a sack lunch.”

Claiming its co-founder Jim Barton was the inventor of an affordable, easy-to-use digital video recorder (DVR), TiVo is seeking $87 million in lost sales and royalties from EchoStar. According to Barton’s testimony, he and TiVo co-founder Mike Ramsay contacted EchoStar executives early on in the hopes of working out a distribution deal similar to one which TiVo negotiated with DirecTV. Barton said he explained his product in detail to EchoStar engineers and, at their request, left a prototype DVR with them. And while they promised to return the television set-top box within a couple of days, Barton said he has not seen it since.

As many of you know, the next two weeks are critical in determining TiVo Inc’s future. If they are able to prevail in defending their “time warp” patent versus Dish Network, with court proceedings beginning today, TiVo should be able to work out royalty arrangements with other DVR providers… in or out of the courtroom.

Reuters says: TiVo Chief Executive Tom Rogers last month said a Tivo victory in the case could open the door to either a bounty of payments, since TiVo could then file similar suits against other DVR distributors, or more licensing agreements. “It will certainly cause people to think long and hard not only about Tivo’s brand … and the best of our engineering, but on a whole different level of what we mean in the mix if our intellectual property is upheld in the courts,” Rogers said at the Reuters Global Technology, Media and Telecoms Summit.

Satellite providers have used DVRs, which allow viewers to pause live television and record dozens of hours of programing, to woo customers away from cable companies. In turn, more and more cable providers are placing cable boxes with DVRs in their subscribers’ homes. A court win might empower TiVo to challenge the technology in other DVRs. However, EchoStar, a far larger company than Tivo whose 2005 revenue of over $8 billion is more than 40 times that of its rival, could perhaps outlast TiVo during an extended appeals process, even if it doesn’t defeat TiVo in court.

Let’s face it… if you’re a journalist, bashing TiVo is good for business. Very few companies inspire the cult-like loyalty and name recognition (a small player like) TiVo enjoys. There’s nothing like a negatory article to energize the masses. That could explain why every few months both the Motley Fool and Phillip Swann of TV Predictions claim TiVo is dying and/or will be acquired.

While it’s possible TiVo may die or be bought, their reasoning is illogical. Both point to TiVo’s Valentine’s Day mixer as a red flag. Do critics chime in that McDonalds is doomed whenever they release a bizarre television commercial? TiVo’s ultimate success or failure cannot (and should not) be gauged by a small marketing experiment designed to excite fans.

It’s true TiVo will lose a ton of subscribers when their deal with DirecTV expires. However, Comcast has roughly twice as many potential customers (~32 million) as DTV. It’s true TiVo’s release of the Series 3 HD model is taking too long. However, many of us will wait patiently for a HD stand-alone box while TiVo continues to add Series 2 subscribers. It’s true TiVo has not been profitable with the exception of one quarter. However, TiVo is investing in themselves by acquiring customers. Not to mention, it’s that critical mass of subscribers which has allowed them to sell more advertising at presumably higher rates.

In all likelihood, TiVo will never die. This kind of branding and buzz would be snapped up in a heartbeat if the current management team failed and TiVo were in trouble. More importantly, DVR technology is here to stay. I’m fine with competition in the marketplace — it forces companies to innovate and keep prices reasonable.

I know you visit my site for the hard-hitting journalism ;), so I asked the question many of us have been wondering… and during a brief email exchange Phillip Swann informed me he owns “zero stock.”

Swanni says: Unlike TiVo, tech companies such as Apple and Google have enjoyed remarkable success in the last year. So they are now getting the overwhelming (and sometimes gushing) coverage that TiVo once enjoyed. Tech reporters — like everyone else in the media — loves a winner, or at least the appearance of a winner. Apple and Google now look like winners while TiVo looks like a loser.

Fool says: If there’s anything the Olympics bring to mind, it’s the thrill of victory … and the agony of defeat. Not that TiVo’s a full-on defeat, but for the past couple of years, “disappointment” seems to be a reasonable word to describe the company. I was once a TiVo bull — I even owned shares long ago — but lately it seems as if TiVo has stalled out in the innovation department.

Echostar’s DISH satellite launch has been rescheduled for tomorrow. As I posted earlier, the ocean launch will be webcast live. Supposedly this new satellite will provide DISH with additional bandwidth to expand their HD offerings… but I’m just interested in seeing the rocket take off.

Sea Launch says: After a halt in the countdown for launch on February 8, Sea Launch is now preparing for a second launch attempt on Sunday, February 12, with liftoff planned for 3:35pm PST (23:35 GMT).

The Zenit-3SL rocket is now being erected on the launch pad, and preparations are underway at the launch site. On launch day, the rocket will lift the 4,333 kg (9,553 lb.) EchoStar X satellite to geosynchronous transfer orbit (GTO), on the way to its final orbital position of 110 degrees West Longitude.

“We understand the ground support system issue we observed during countdown last Wednesday and we are confident that our corrective action will support a successful liftoff on Sunday,” said Jim Maser, president and general manager of Sea Launch.

Echostar plans to expand DISH Network bandwidth with Wednesday’s launch of satellite X. Adding an extra satellite doesn’t really impress me, but I am intrigued by the launch details. As with DirecTV and XM, Echostar has enlisted Sea Launch’s Odyssey platform — a vessel that motors out to sea for launch.

Sea Launch will be providing about two hours of live Echostar X coverage via webcast beginning at 3:15pm PST on 2/8.

Sea Launch says: Sea Launch receives satellites at the Home Port facility in Long Beach, California. Following the completion of fueling and encapsulation in the payload processing facility, the integrated payload unit is transferred to the assembly and command ship for integration with the launch vehicle. The horizontally integrated rocket is then transferred to the launch platform, where it is stored in an environmentally controlled hangar during transit to the equator.

Upon arrival at the launch site, the launch platform is positioned at 154 degrees West Longitude, ballasted to its launch depth and oriented to minimize wind and wave effects. At L-27 hours prior to liftoff, the rocket is rolled out of its environmentally protected hangar and automatically erected on the launch pad.

Propellant chilldown begins at L-4 hours and 20 minutes, with loading commencing L-2 hours and 30 minutes before liftoff. Launch support personnel transfers to the assembly and command ship prior to propellant loading. The large transporter/erector arm is lowered 17 minutes prior to flight, signaling all parameters are “go” for launch.

On Malik reports EchoStar (aka DISH Network) has participated in the current round of Sling Media funding. Combined with Echostar’s investment in Archos, there’s a high potential for synergistic devices. I give them credit for aggressively investing in these unproven, peripheral technologies… then again, maybe that’s what a #2 needs to do in order to remain competitive. I also congratulate the Sling folks for executing their game plan well — these additional investments (to the tune of $46.6 million) wouldn’t have come without the good sales and positive press they’ve received.

DirecTV’s press conference isn’t until Thursday evening, but two manufacturers have already outted DirecTV 2Go. First was Humax with a generic looking PMC. Next up is RCA, with this sexy Lyra X3000. In addition to the DTV interface and content, these devices also handle a variety of multimedia. The Lyra is expected to hit stores this month at a competitive $399.

Details of the DTV 2Go service itself are still sketchy at this point, though it’s clear it will not be immediately available upon the Lyra’s release — a free software upgrade will be available later this year. It’s not clear what XM (XM2Go) and TiVo (TiVoToGo) have to say about their naming strategy.
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