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March 15, 2005

Tivo Gets Boost From Comcast

Courtesy of TechWeb News

Tivo Inc. and Comcast Corp. on Tuesday said the cable operator has agreed to carry Tivo's TV and advertising services in a non-exclusive deal that gave an immediate boost to Tivo stock and brand image.

Under the agreement, the nation's largest cable company will offer Tivo software in Comcast digital video recorders. The Tivo-based DVRs are expected to be available in a majority of Comcast markets by mid-to-late 2006.

Financial details were not disclosed.

Wall Street appeared enthusiastic over the announcement, as Tivo shares on Tuesday jumped more than 54 percent, or $2.09, to $5.92. Before the announcement, concerns over increasing competition from consumer electronics manufacturers and PC makers entering the DVR market had driven Tivo stock over the last year from near $13 to less than $4.

For Comcast, the deal lets it offer subscribers' the Tivo user interface, which is a key intellectual property item for the Alviso, Calif., company, Gerry Kaufhold, analysts for market researcher In-Stat, said. The Tivo software is known for its ease of use in helping people find content, whether it's live TV programming or movies stored in a DVR or a PC attached to a home network.

"Comcast has been the most innovative cable company in trying technology in markets where it makes sense," Kaufhold said. "They are certainly the technology leaders in the cable industry."

Comcast, for example, uses Microsoft Corp.'s TV Foundation Edition software platform in DVRs distributed in the Seattle area, where Microsoft is based.

In addition, Comcast gets to use Tivo's interactive-advertising platform, which would let the cable operator insert advertising in the Tivo user interface or before, after or during programming. Interactive advertising tries to get the viewer involved by requiring them to click on the ad in order to view a short video, enter a contest, or access some other promotion.

"Interactive advertising is the holy grail of the advertising world," Kaufhold said.

For Tivo, the deal gives it access to millions of Comcast subscribers. The Philadelphia-based cable operator has 21.5 million cable subscribers and 7 million high-speed Internet customers.

"For the last four years, Tivo has been under a cloud because they have been unable to get a major cable operator interested in what they have," Kaufhold said. "This announcement with Comcast breathes fresh life in Tivo's brand image."

Long term, however, Tivo's future with Comcast is cloudy. The cable company in February 2004 paid $250 million in cash to license the intellectual property and technology of Gemstar-TV Guide International Inc. The deal also included use of the TV Guide brand and content on Comcast's interactive program guides.

In addition, the two companies formed a joint development group to develop an interactive program guide that would eventually be used by Comcast and offered to other cable companies.

"Comcast is looking for solutions that fit each of its markets today, but within the next 10 years, it will have a completely updated system using its own technology," Kaufhold said. "Over the long term, Comcast doesn't need Tivo."

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