TiVo-DirecTV deal sticks it to Dish

Co-branded set-top box to launch in about a year

TiVo, scheduled to hash out in court Thursday a patent dispute with Dish Network, struck a deal with that company's primary competitor Wednesday.

The arrangement between TiVo and DirecTV is for a set-top box to launch in about a year that will be a co-branded, HD, broadband-connected DVR.

TiVo and DirecTV have a long-standing relationship and, in fact, the satellite TV operator used to offer TiVos exclusively to its subscribers who wanted DVR functionality.

The relationship soured significantly, though, when News Corp. took control of DirecTV, and analysts have been predicting that some sort of new arrangement would be worked out since Liberty took control of DirecTV more than six months ago.

Unlike TiVo's relationship with cablers Comcast and Cox, which only require a software upgrade to turn generic DVRs into TiVos, the new TiVo-DirecTV DVRs will require users to obtain new boxes that have yet to be developed.

TiVo CEO Tom Rogers, speaking at an investor conference Wednesday, promised "all kinds of new additional TiVo features" for the new boxes. He also said the deal includes "substantially improved economics" for TiVo, suggesting that TiVo's per-month payment for each subscriber will be significantly more than the roughly $1.25 it gets now from the 1.9 million subscribers of the legacy TiVo-DirecTV product.

Rogers also touched on today'scq court hearing where a judge will consider several things, including whether Dish should be forced to disable millions of DVRs that infringe TiVo's patents and whether Dish, or sister company EchoStar, owes TiVo more than $100 million or so in damages already awarded.

"We've won it," Rogers told analysts Wednesday. "The money will be forthcoming. The issue tomorrow is enforcement of the injunction."

Citi analyst Tony Wible reiterated his "buy" recommendation on TiVo shares and his $11.50 target. TiVo stock rose 2.8% on Wednesday to $8.75.

Wible said that TiVo's new deal with DirecTV indicates that TiVo might opt for open access rather than for cutting exclusive deals, "implying that tomorrow's Dish hearing could lead to commercial license rather than hostile tactics."

TiVo vp corporate development Naveen Chopra said analysts shouldn't draw any conclusions from the timing of the DirecTV deal, coming the day before an important court hearing with Dish.

He also said that no monthly subscription price has been set for the new DirecTV-TiVo upgraded HD DVR service coming sometime in the second half of next year.
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