Archive for category TiVo

TiVo Awarded Patent For Closed Captions On A DVR

Feb 11

Posted by Davis in Disclosure - I own stock in co. mentioned, SA, Slingbox, TiVo, TV | 9 Comments

TiVo doesn’t know whether or not their injunction against Dish’s DVR will hold up yet, but that hasn’t stopped them from adding to their patent portfolio in the meantime. In a remarkable filing with the USPTO, TiVo appears to have now won an important patent for displaying closed caption information to DVR customers.

In addition to covering this important feature, TiVo’s latest addition to their portfolio, also appears to encompass enhanced TV services, including a “clip and sling” type technology, that could eventually allow TiVo users to automatically remove commercials from time shifted programs.

According to patent 7,661,121, TiVo now owns the right to use existing closed caption and Enhanced Television (ETV) signaling data to create an interactive experience for their customers. ETV data is metadata that content owners have started to embed into their programming. It’s been used by Cablelabs and is part of the fundamental architecture behind big cable’s sinking “Canoe” DVR advertising venture. While I would suspect that the cable companies also have patents related to how ETV data can be used, it will undoubtedly be another series of rapids that the long delayed project will have to maneuver through.

While the abstract for TiVo’s latest patent is a little vague, if you delve into the details, you start to understand why TiVo would try to seize this particular piece of intellectual property. Essentially, the patent allows TiVo to sync closed caption information (and metadata) from broadcast programs recorded on a DVR and then display that data in an interactive format. This data can be as simple as a menu or closed captioned text or can be as advanced as digital video and sound effects.

From the patent,

“A multimedia device may use closed-caption data patterns to recognize and synchronize to multimedia content streams. The types of data patterns available in closed-caption data are numerous. For instance, distinct data patterns may exist within the actual closed-caption text, the closed-caption control data, as well as well as any other event defined by the closed-caption data. By recognizing distinct patterns within the closed-caption data, a DVR may identify events within the multimedia content stream. One way of recognizing patterns within closed-caption data is by computing hash values representing closed-caption text and identifying patterns of hash value sequences. Thus, according to one embodiment, at a multimedia device, such as a DVR or server, the closed-caption data is parsed and hash values are generated corresponding to the closed-caption data. The hash values are then compiled into hash value sequences associated with particular video programs or segments, and further combined with metadata defining command and control information for processing at multimedia devices. These hash sequences and metadata are provided to multimedia devices such as DVRs in the form of hash value sequence data. The multimedia devices use the hash value sequence data for recognizing and synchronizing to closed-caption data. A matching algorithm is used by the multimedia device to sequentially compare generated hash values from the closed caption data with multiple hash sequences that the multimedia device has stored locally. According to one embodiment, the matching algorithm is implemented through a state machine that processes the generated hash values and reports whether or not a match has occurred with a hash sequence identified by the hash value sequence data. ”

While the patent was only awarded on February 9th, TiVo actually implemented part of this technology years ago. Not only do they already offer a number of different ways to view closed caption data, but if you’ve ever watched a commercial on TiVo from one of their corporate partners, you’ve probably noticed a thumbs up icon that lets you easily subscribe to a show or order more product information.

While TiVo’s current implementation of this technology is admittedly pretty limited, the patent hints that there may be more powerful features going forward.

“”A user can mark off sections of a multimedia program or place points of interest relating to content within the multimedia program. For example, a user may want to mark the best plays of a recording of a football game. Once the user marks the plays, he can send the resulting hash sequences to a friend’s DVR.” [Bold added by me]

One of the reasons why Dish was never able to launch their clip and sling technology was because the content owners threw a hissy fit and threatened to sue the bejesus out them, if they made it easy for consumers to share content. While I don’t know the technical details behind what Sling was trying to accomplish, my sense of the project was that they wanted to let users edit other people’s content and then redistribute digital copies of those clips. The genius behind TiVo’s method is that their method wouldn’t allow anyone to “share content” that wasn’t entirely owned by the customer or TiVo.

“DVR users can distribute their own sets of points of interest for programs to other users. Users can further attach metadata to each point of interest that may cause the DVR to display text to the viewer, e.g., “Isn’t this a great action scene?” The user may also attach metadata to a point of interest that tells the DVR to skip x seconds into the program from that point of interest or display x seconds of the program before skipping to the next point of interest. This allows users to create their own condensed versions of a program that they can distribute to their friends, family, classmates, students, interest group, etc.”

While TiVo uses the example of a clipping highlights from a football game in their patent filing, I’m much more interested in how TiVo customers could potentially use this technology to remove commercials from YOUR programs. If both you and I have already recorded a particular show, there is no copyright violation because we’re both recording content that we already own. By allowing their users to create hash tag data, TiVo would technically own that data and would have the right to distributed that hash tag data to other DVRs without having to worry about content owners accusing them of stealing.

This would make it easy for me (or more likely someone else since I time shift everything ) to easily tag all the commercials in a program and TiVo would then know to auto-skip past the content (commercials) when it saw the tags. TiVo could also use this as a way for live subscribers to tag the end of football and basketball games, so that they wouldn’t get cut off if the game went to overtime.

Another interesting embodiment of this patent would be the combination of live information with time shifted programming. Whenever I watch something a few months old, I always see commercials for upcoming TV shows or movies that are way past their expiration date. Instead of advertisers wasting their money on DVR subscribers, they could use sponsored hash tags to replace an old ad with something more current. Alternatively, if you were time shifting the news, TiVo could use your internet connection to create a live scrolling ticker that could update you on any new developments in the story.

Other potential uses that appear to be covered by the patent would include shows that have choose your own adventure type storylines. Upset about Chuck and Sarah not hooking up? the producers could give fans an alternate storyline to explore and allow viewers to vote on how they want to see the story move forward or TiVo could use this patent to create Blind Date type pop-ups around recorded television. While I tend to prefer my TV clutter free, for events like the state of the union, I can see why people would be interested in having fun facts pop up, addressing the issues that are being discussed.

While we haven’t seen any of these implementations take place today, the mere fact that TiVo was thinking about these options when they filed the patent would seem to suggest that they’ve been quietly innovating behind the scenes. This new patent award won’t necessarily help them in their case against Verizon or AT&T, but it could offer the telcos yet another reason to settle their dispute with TiVo, instead of being forced to place limits on the future of TV.

Forget Net Neutrality, What About Media Neutrality?

Feb 10

Posted by Davis in Disclosure - I own stock in co. mentioned, DivX, DRM, Media, Technology, TiVo, VOD | Comments off

Over the past five years, there’s been a lot of debate around the topic of net neutrality and while there have been a few examples where internet providers have tried to favor their own services over the competition, by and large this has turned out to be little more than a boogey man. Don’t get me wrong, I think that it’s important to keep the playing field level, but I also believe that there are bigger issues where consumers are being harmed.

While many media companies would like to see the first sale doctrine done away with, ever since the supreme court established the doctrine in 1908, consumers have enjoyed tremendous benefits from it. The concept, which was later codified into law in 1976, allows businesses and individuals to resell goods that they’ve legally purchased. Without it, companies like Ebay, Craigslist and Blockbuster Video wouldn’t even be possible.

Having the right to resell goods benefits consumers in two major ways. First, it reduces the risks that consumers have to take when making purchases. This ultimately makes things cheaper for all of us, because companies are forced to compete with their own products and consumers have a way of recouping part of their initial expense.

When I first purchased my TiVo series 3 for example, I spent over $800 on the product. While this may seem like an insane amount to spend for television, I was able to justify the cost in part, because I sold my original TiVo on eBay for $200 and knew that one day I would be able to resell my Series 3 (currently worth approximately $400 on Ebay) to recover part of my expense. As a result, I’ve been able to enjoy a premium DVR experience for about 1/3rd what it would have cost me to rent an inferior DVR from my cable company.

The second benefit to the consumer is that by having a robust resell market, it allows more businesses/middlemen to participate. This ultimately increases demand, stimulates innovation, and drives down prices. Redbox for example is able to rent you a DVDs at 1/20th of the cost or what it would cost you to buy the actual DVD thanks in large part to the first sale doctrine. Because Redbox knows that they can get more than 20 people to share the same product, it enables consumers to save money, the media companies to sell more DVDs and for Redbox to still earn a tidy profit in the process.

While the first sale doctrine has been a huge benefit for consumers over the last 100 years, these benefits are rapidly being eroded as media moves digital. Because the first sale doctrine was based on physical goods, it hasn’t aged very well in the digital realm. As a result, consumers have been forced to endure awkward DRM implementations, limited availability of digital content and higher prices for media services.

As the top media conglomerates have sought to seize more and more control over the distribution of their products, they’ve shifted from a world where you have the ability to “own” your media, to one where you only have the option to “license” your content.

For a lot of consumers, this distinction may not seem important, but it has profound implications on the future of digital entertainment. Since firms aren’t allowed to buy products at a wholesale price and rent them to multiple consumers, they’ve been forced to negotiate agreements one by one. This is a costly and time intensive process that has limited how quickly media can migrate online. It has also given the media conglomerates monopolistic control over prices. Instead of being forced to compete in an open environment, they are able to take their ball and go home, when they haven’t liked the terms and conditions that innovators offer them.

The result of this transition from ownership to licensing has increased costs for consumers even beyond the price of media. Take for example, the various hardware devices that we’ve seen released over the last five years. If you want to watch digital copies of old movies and TV shows, you can do it through Netflix, but only if it’s on a device that has a business relationship with them. When Sony decided to release a digital copy of Cloudy with a chance of meatballs at the same time the movie was in the theaters, consumers could only participate on select Sony TVs.

If you prefer to watch new releases from Apple’s iTunes store, you’ll need to buy an AppleTV to easily watch that content on your TV. If you want to watch a DivX file that you purchased from CinemaNow, you’ll need to illegally hack your AppleTV or purchase a DivX certified device instead. It’s fantastic that consumers have the ability to record HD cable TV through TiVo, but if you subscribe to AT&T or Dish Networks, you’ll need additional (proprietary) hardware to decode their signals.

While many of these businesses have come a long way towards opening up their systems and fulfilling the digital dream, they’ve all been limited by what content holders allow. As a result, consumers must face a digital minefield where DRM and file formats are used to limit what you can do with the content that you’ve paid for.

As we continue to move forward into the digital world, I think it’s important that consumers shouldn’t have to abandon the first sale protections that have served us so well over the last century. What I propose is a new set of rules that would allow media companies to control their prices, but would also give consumers (and businesses) a way to move past some of these restrictions.

While the DMCA has been a mixed blessing for tech companies and consumers, it is in desperate need of an update (and one that isn’t written by the lobbyists.) For example, currently, it’s illegal for consumers (or businesses) to circumvent DRM, even if consumers are being harmed by the DRM. This has led to situations where people who have purchased media, later lost access to those rights because a provider went out of business. Situations, where companies are unable to offer lifetime licenses in the cloud, because of exclusivity clauses in contracts with pay TV channels.

What I purpose is that if media companies want DMCA protection for their content, it should come with strings attached. In crafting new rules for a modern first sale doctrine, I would require content owners to set a wholesale price that all businesses would be allowed to buy content at. They could still require minimum purchases sizes and would have complete control over what they wanted to charge for that content, but they shouldn’t be allowed to sell a license at one price to one company and then exploit another company for political reasons.

What this would do is create a level playing field for all of the digital retailers. If UMG wants to charge $50 for a download, they would have the right to do this, but they couldn’t favor one vendor over another and they couldn’t punish innovators for being successful or passing on value to the consumer. This would also bring welcome competition to the pay TV market because media companies wouldn’t be able to play MSO’s off of each other.

For example, I’d love to be able to see every NFL game each season, but I can’t unless I’m willing to subscribe to DirecTV for service. Instead of making consumers fight and choose over exclusive content, everyone should be given fair access to that content. If cable companies don’t want to pay the price of admission, they would be less competitive with consumers. The end result would be more demand for NFL content by consumers and more competition for their dollars. If we allow media companies to continue with exclusive content in the digital realm, it will only makes it more expensive for everyone.

I also think that if the media wants to continue to have DMCA restrictions on their DRM, that they shouldn’t be allowed to use that DRM to discriminate between hardware partners. It’s great that I’ve got the ability to record HDTV on my TiVo, but since cablecards don’t work with satellite or U-verse, it essentially gives Comcast a monopoly on pay television for TiVo households.

As a result, Comcast is able to provide abusive cablecard support without having to worry about competition. If they knew that they had to actually compete for the $50 – $200 a month that they charge, it would encourage them to provide better service and to continue to innovate, (even if consumers decide not to use Comcast’s equipment.) Instead we’ve seen cable companies limit the ability for consumers to take their programs on the go and prevent consumers from accessing VOD services on DVRs that aren’t rented from them, all without having to worry about repercussions.

The same is true for digital downloads. If Apple wants to use DRM to help protect their content partners, they should be allowed to, but not at the expense of consumers. If other hardware manufacturers want to build support for iTunes’ product they should be allowed to license the DRM (at cost) from Apple. This would prevent Apple from offering exclusive downloads that lock consumers into their own hardware ecosystem. The end result would be more devices that could play Apple content and more competition among set top box manufacturers. This competition would cause prices to drop and would encourage Apple and others to be innovative with the features and services that they offer to their customers.

While some may be content to let the media industry continue to grow inside of these walled gardens, I’d like to see a world where someone can legally purchase media and play it on any device that they want to. By creating new laws to help better regulate the abuses of our current licensing system, consumers, businesses and the online video industry as a whole, would be allowed to flourish across many different platforms. Instead of being forced to buy the same content over and over and over again, consumers would be allowed to license their media under fair and reasonable conditions.

Cut The Cable and Free Your TV

Jan 19

Posted by Davis in Disclosure - I own stock in co. mentioned, Media, Netflix, Technology, TiVo, TV | 1 Comment

A couple of months back, I received my monthly bill from Comcast and almost had a heart attack. Over the course of one month, my bill went up over 50% and while I’ll admit to loving TV more than your average bear, after years of fee increases, it became hard to justify paying over $50 a month for the small handful of channels that I actually watch.

When I called Comcast to inquire about the increase, they told me that instead of extending their “promo” deals like they have in the past, they would rather lose my business than extend my discounted rate. After much hand wringing, I finally decided to cut the cord and figured I could always go back.

Sure enough, less than one week after discontinuing my cable TV service, Comcast had a change of heart and sent out a 12 month promo offer bundled with internet. While the deal looked tempting, I didn’t want to keep trying to play musical chairs when it came to how much I paid for television and I didn’t particularly appreciate Comcast’s policy of screwing existing customers until you actually quit. At first, I tried going cold turkey and figured I’d have withdrawals, but much to my surprise, I found that I didn’t really miss cable TV all that much.

Thanks to sites like Netflix, Megavideo, Amazon and Hulu, it was easy to stay up to date via the laptop and with less distractions, I found that I was actually accomplishing a lot more in my life.

Over the holidays, it became clear that cable TV simply wasn’t offering a very good value for what they were providing. In the past, there’s been talk of allowing consumers to subscribe to channels a la carte, but Comcast has consistently resisted offering this to consumers. As much as my laptop provided a reasonable solution for finding content though, I still felt like I was missing out on the high definition experience that I had grown to love, so after the holidays were over, I purchased an Audiovox HDTVo antenna to see what kind of free OTA signals I could get.

In the past, I’ve seen plenty of negative reviews on HD antenna’s, so I half expected that I’d be taking the product back, but despite a few difficulties in getting it set up, I couldn’t be more pleased with the reception that I’m getting.

When I was a kid, we had a giant antenna mounted on top of our house. Not only was it ugly, but every time a storm blew in, we’d lose all reception. On the good days, we were lucky to get three channels and even then it was intermittent with static. While the price for OTA signals hasn’t changed any, technology sure has.

Not only did my Audiovox antenna allow me to pick up signals that were over 50 miles away from my house, but they provided the signals with incredible clarity. No static, no glitches, just pure high definition goodness. When you throw in the ability to time shift my programs with my TiVo, it creates a remarkable user experience.

In comparing my season passes from cable to post-cable, I found out that there are approximately 15 programs that I’m missing out on. Of those programs, 10 of them are available through Hulu or Netflix. While I do miss some of the Laker games that are broadcast on ESPN and some of the original programing on USA and TBS, with over 45 programs being recording each week, there is more than enough high quality content to keep me busy. If you throw in Netflix’s watch instantly integration via the TiVo, there are another 250 movies or shows that I’ve got waiting in my queue.

While my overall impression of the AudioVox HDTVo antenna was positive, there were a few drawbacks. While the antenna is fairly small, it does look a little obnoxious sitting on my roof. Because of the location of the broadcast towers, in order to capture the signals I could only install it on one side of my house. This makes it hard to camouflage from the neighbors and could present problems to those who live next to tall trees or buildings.

Another difficulty that I had was that the installation instructions were very poorly written. They referred you to web addresses that didn’t exist, didn’t provide the names of each part, but referenced the parts like you were supposed to already know what they were and when I first hooked it up to my TV, I couldn’t get any signals because by five year old HDTV did not include an HD receiver inside of it. Luckily, My HDTiVo did and was able to translate the signals perfectly. I also thought that the name HDTVo was a little bit deceptive and made it seem like this was a product designed specifically for TiVo. While I’m not sure that it would amount to a trademark violation, I do think that the way they’ve chosen to market the antenna could lead to a bit of confusion on the part of consumers.

Despite my frustration setting it up though, the final experience exceeded my expectations and I wouldn’t hesitate to recommend the product to anyone who are looking for a way to save money on their television. At $65, it takes about 5 weeks before it becomes cheaper than paying Comcast for lackluster service and when you consider that you can save over $600 in the first year that you use it, the savings can add up pretty quick.

That $600 could be spent on two movies a night from Redbox or a Blockbuster rental every other day and I’d still end up ahead. While antennas in the past may have been a disappointment, the new generation of digital antennas make it easy to cut the cord and make it awfully hard to justify the expense of pay television. I don’t expect that we’ll see everybody cancel their cable bill, but if enough people begin to take advantage of this type of equipment, hopefully we’ll see some of the cable companies begin to rethink their fee increases.

New Media Bounty Hunters

Oct 28

Posted by Davis in Disclosure - I own stock in co. mentioned, TiVo | 2 Comments

tivobounty There’s been quite a bit written on how consumers are interacting with TiVo, but there hasn’t been a lot said about how businesses are beginning to use TiVo. Over the past few years, it’s been no secret that TiVo has been beefing up their audience research capabilities and while having access to second by second information is a pretty cool party trick, it’s useless if a business can’t figure out a way to extract profits out of that information. That was why I was pleased to see a blog post by Secret Enemy Hideout discussing a company named Simulmedia whose using TiVo’s data to create an arbitrage opportunity.

“With a set of millions of users, they identify viewing patterns and can predict with certainty how receptive you might be to one television program given that you voluntarily watch some other one. What’s interesting is their business model. Instead of selling the clean data back to the networks like we’d expect, they go back and ask, for example, “How many viewers would you like us to deliver to Mad Men?” Then they take the network’s own marketing assets, like a 15-second trailer, buy commercial slots on other networks, and target the viewers of specific shows who they know will be receptive to Mad Men. In turn, they get paid for the uptick they promised.”

Secret Enemy Hideout calls Simulmedia a new media bounty hunter and as DVR data matures, I expect that the media bounty hunter industry will be a burgeoning one. By having a more intimate understanding of an audience, many different types of advertisers will become increasingly more efficient at extracting value from their ad spend. With billions of dollars a year being spent on television ads, the stakes are huge and while TiVo may not end up being a pariah to the advertisers that can feast off this info, these sorts of bounty hunters certainly won’t endear them to studios. From the studio’s perspective, it’s bad enough that their technology is having a huge disruptive impact on the 30 second commercial, but now TiVo is teaching the studio’s best customers how to get the same exposure by spending less money. As TiVo makes it more and more efficient for marketers, it will take money that is being wasted on the studios and transfer it into the pockets of the companies advertising. Ultimately, this means that ads end up being a lot more relevant to the consumer, but it will also represent a new challenge for the studios to wrestle with, amidst the broader changes brought on by digitization.

TiVo’s Billions: How TiVo Could Spend Their Legal Jackpot In A Single Day

Jul 21

Posted by Davis in Disclosure - I own stock in co. mentioned, DivX, Microsoft, Netflix, Slingbox, Technology, TiVo, TV, Video Games, VOD | 8 Comments

During their ten year history, TiVo’s obituary has been written more times than I’ve sat through an entire commercial, yet no matter how tough the climb has been, TiVo has continued to defy critics and skeptics alike by chugging along (as if by sheer will at times.)

Even though the financial wiz kids over at Engadget, still have TiVo on their “death watch”, I’m beginning to see a much different picture. With 6 quarters of EBITA profitability now under their belt, $200 million in cash (minus the zero in debt on their balance sheet), and partnerships with a significant portion of the DVR market waiting to be implemented and rolled out, it’s no surprise that TiVo has gone from being a small cap child with plenty of dissenters, to an emerging mid cap teenager looking to establish a legacy.

The last ten years may have been characterized by one rumor after another of who TiVo was going to be acquired by next, but the next ten years will be a much different chapter for the little DVR that could.

At the risk of counting my chickens before they hatch, I wanted to kick off the next ten years of innovation by highlighting a few companies that TiVo could use to transition themselves from a niche DVR provider to a diversified corporate conglomerate. Of course there’s no guarantee that TiVo will even get the billion dollars that they are asking for, but it’s still fun to spend imaginary money.

SecuriTiVo – For years TiVo has been dragged into a bare knuckle brawl with cable and satellite companies, just for the right to offer their DVR to their customers. Meanwhile, they are ignoring an important untapped stand alone market that their invention created. The home security business might not be as sexy as HBO, but the DVR has had just as big of an impact on the security industry as it’s had on Hollywood’s outdated business model.

Instead of fooling around with a couple hundred of gigabytes, TiVo should be building multi-terrabyte DVRs that can record several weeks worth of high quality footage. TiVo could also sell a consumer version of the system that connects to the DVR in your living room and allows you to see live security video from your couch.

Not only would a security DVR give TiVo a commercial product to sell, but it would also add important reoccurable monthly revenue from on going security contracts. It would also create an opportunity to add an additional revenue stream from high quality video cameras.

Potential Target = The Brink’s Company (Ticker: BCO) – With a current market cap of $1.36 billion, this top notch security outfit may be a little out of TiVo’s reach, but they could certainly consider a joint venture or pounce on them, if the market starts to get cheap. Either way, a free TiVo with your home security system sounds like a great promotion just waiting to happen.

TiVo Charge Card – In 1939, the US was reeling from an economic depression so Fred Lazarus Jr., the CEO of Federated Dept. stores did two important things for his business. First, he convinced President Roosevelt to change Thanksgiving to the last Thursday of November so that it would extend the Christmas shopping season and then he started offering store credit to anyone who would purchase through him. By giving cash starved consumers access to credit during a tough economic climate, Federated Department stores was seen as a friend and patriot during a dark economic period. The impact from these two decisions helped take the company from a struggling retailer to the Goliath that it is today.

When it comes to couch commerce, TiVo faces a similar opportunity. Currently, when you purchase something through your DVR, TiVo stays out of the transaction. Even if you want to order a pizza with a credit card, you’re not able to, TiVo makes you pay cash This is probably a good thing for home shopping addicts, but works against’s TiVo’s goal of revolutionizing the advertising business. If they want couch commerce to actually succeed, they must make it easier for consumers to make an actual purchase.

The beauty of a TiVo charge card is that it could be linked directly to your TiVo account once and then capture every purchase after that. If you wanted to rent a movie from Jaman or buy a pair of flip flops from Amazon, it would be the same process and simply require password authorization.

TiVo could also offer discounts on DVR service for balance transfers or for customers who carry larger balances. Extending credit during tough economic times might seem risky, but TiVo needs a better payment solution sooner than later. By putting themselves in a position to become the paypal of television, TiVo could lower the barriers of entry for advertisers, in exchange for a cut of every transaction.

Potential Target = Bank of the Internet (Ticker: BOFI) With a current market cap of $50 million, TiVo could easily acquire this sleepy little bank from San Diego, CA and immediately serve a national audience. Not only would they have the infrastructure in place to start offering credit card services, but TiVo would be picking up a high quality loan portfolio in the process. BOFI’s conservative approach to lending may have hurt investors during the boom years, but when the credit bust hit, it proved that there was wisdom in their prudence.

SlingTiVo – When Sling first introduced place shifting to the DVR community, TiVo choose not to implement the functionality directly into their software. My guess is that they were concerned that a feature enjoyed by the fringe, could spark a lawsuit with the media giants, who’ve had their business model disrupted by TiVo’s fast fowarding powers.

Holding off on introducing place shifting may have been the right choice when the technology was still young, but internet video has changed a lot since Sling was founded. While the legality of placeshifting still hasn’t been affirmed by the courts, even Sony is selling a placeshifting device to their customers. With placeshifting starting to reach a more mainstream audience, now is the time for TiVo to introduce this capability to their customers.

Potential Target = Echostar (Ticker: SATS) – Without the ability to manufactuer DVRs for Dish customers, Echostar may find that their business isn’t worth all that much. With a market cap of $1.31 billion, TiVo could offer an olive branch to Dish, in exchange for the Echostar/DVR side of the business. Frankly, I’d rather see them bankrupt Dish and buyout the satellite business in a vulture sale, but the poetic justice alone makes this one worth consideration.

TiVoPages – One of the problems with TiVo’s current advertising setup is that they are kind of taking a walled garden approach to selling the ads. There are strict requirements on the content allowed on the service and only certain agencies are really given access to the inventory. This may be necessary to butter the toast of their Stop Watch customers, but it also limits what TiVo can become.

Why not make it so that anyone can upload a video ad to TiVo and inexpensively reach the TiVo audience based on screening criteria similar to Google’s Adsense program? I may be a small business, but if the costs are low and I can target local viewers or people who fit a certain demographic profile, I’d advertise through TiVo in a heartbeat. TiVo should play to their strengths and become a video Craigslist for the time shifted generation.

Potential Target = Razorfish – Two years ago, Microsoft paid $6 billion for the company. Today they are rumored to be looking for $600 – $700 million to spin off the ad agency. Owning an agency might ruffle some feathers with some StopWatch customers, but Razorfish would give TiVo the infrastructure they need to their take their advertising program, beyond major, one time, national partnerships. By better implementing their advertising programs, TiVo could create a platform where local businesses could reach local viewers in their markets.

DigiTiVo – TiVo may be one of a handful of solutions for letting consumers watch digital video on their televisions, but they could go a long way towards improving their current implementation. One of the problems with trying to watch various internet video types on your TiVo is that TiVo needs to transcode the video before it will play on your screen.

Currently, customers can either hack their machines for free access or they can pay $25 for a copy of TiVo Desktop plus. While I don’t expect TiVo to support every flavor of codec out there, it would be nice if they threw their support behind a standard and tried to come up with a more seemless experience for their customers. It may be too late for them to get a piece of Adobe or to crack their way into Quicktime or Silverlight, but there are still smaller codec companies that could help.

Potential Target = DivX – (Ticker: DIVX) with a market cap of $175 million, TiVo could easily afford to buy the digital video company and use their contacts to adopt more of a licensing approach to the DVR business. By taking advantage of the profits from the codec business, TiVo could help to subsidize more robust codec support for their subscribers.

HuluTiVo – One of TiVo’s advantages is that they’ve managed to remain neutral despite competing in some pretty tough battlegrounds. In the past, TiVo has taken on the media giants, but now may be the time for them to lay down their arms and secure a stake in the next generation of television.

Love it or hate it, the Hulu cartel has been able to establish themselves as a major broadcaster in the narrowcast world. To date, other media companies have been reluctant to share Hulu on the television, but with TiVo’s relatively small subscriber base, they could be seen as a safe testing ground for experimentation. By implementing direct response ads into the actual programming, TiVo and the major media companies could finally benefit from working together instead of against each other.

A Hulu ownership position might make it harder for TiVo to sign more deals like UnBox and WatchNow, but I think if they stayed focused on advertising supported programming, they could still attract plenty of premium and subscription based partners.

Potential Target = Hulu – The company has raised $130 million to date at a billion dollar valuation, but with the market being down its hard to know what it would be valued at now. Given the “digital dimes” that Hulu is producing, one could argue that the weak market should offer new investors a discount, but one could also argue that given Hulu’s growth, a billion may be cheap. It’d be hard to convince Hulu’s current owners to sell or even innovate to the television, but I know more than a few TiVo customers who would love to see Hulu show up on their Now Playing lists.

NinTiVo – Even with TiVo’s new found purchasing power, buying out one of the three video game companies simply isn’t going to happen, so TiVo would either need to invest in building out their own billion dollar console or license one from Nintendo, Sony or Microsoft to create a killer DVR/PC/Console compatible platform. With three major companies fighting for a highly competitive industry, a partnership with TiVo would be highly sought after and could at least give them a seat at the negotiation table.

Potential Target = Take Two Interactive (Ticker: TTWO) – Take Two’s bad boy Grand Theft image wouldn’t compliment TiVo’s KidZone initiatives, but it would give them access to an instant powerhouse in the video game industry. With a market cap at $690 million, TiVo could easily acquire the company for a billion and tone down the bad boy image. With an exclusive on several of the hottest games out there, a partnership with a major console manufactuerer and a beefed up TiVo that acts more like a high end gaming PC/DVR combo then a VCR, TiVo could create a big splash with the gaming crowd.

Hotel TiVofornia – One of the biggest reasons why TiVo isn’t more popular with consumers is because it’s hard to know how much you’re missing until you’re actually a customer. Getting someone to buy a DVR in the first place is tough, but getting them to give it up is even tougher. What TiVo needs is an easy and cost effective way to introduce their DVR to the masses.

Whenever I stay at a hotel, the television is awful. If a national hotel chain were to partner with TiVo to let me schedule programing while I’m there, I know that they would become my default choice when I traveled. To date, TiVo has dabbled with these types of programs, but with the extra money they could kick this program into hyperdrive. By building out more support for hotel rooms, TiVo could secretly expose millions of travelers to a commercial for their DVR without travelers ever realizing that it could be the last ad that they’d ever have to tune into.

Potential Target = Boyd’s (Ticker: BYD) – With the Vegas economy still dealing with the after shocks of the credit crisis, Boyd’s market cap has fallen to $760 million. With a little bit of elbow grease and some slick marketing, TiVo could buy the hotel and pick up a casino as a bonus. With a Vegas style monument to the DVR, TiVo could let you gamble from your hotel DVR. You can check out anytime you like, but you can never leave.

TiVoTube – Over the last few years, a lot of people have mocked Google for their $1.6 billion acquisition of YouTube, but in retrospect, it’s starting to look like a brilliant acquisition by the search giant. Not only did Google continue to expand their dominance on the web, but they picked up a major future broadcaster in the process.

It’s too late for TiVo to get their slice of YouTube, but it doens’t mean that other video sites wouldn’t be a good fit for them.

Potential Target = Dailymotion.com – With TiVo looking to expand DVR service into Europe and Asia, Dailymotion could very well be the beachhead they need with international audiences. This one would probably have the biggest risk associated with it because of the hosting costs and potential copyright headaches, but with Dailymotion having only raised $43 million so far, TiVo could probably offer $300 million and set aside the other $700 million to figure out the business model.

1-800-TiVo-Fon – I wish that I could take credit for this idea, but I originally found out about TiVo-Fon two years when a research report surfaced online by two teams of University students studying the idea. Unfortunately, I lost track of the link so it will have to remain internet legend for the time being, but the system they described worked similar to the Movie-Fon hotline that you can buy theater tickets with.

To use the service, you would link your DVR to your cell phone number so that you could call 1-800-TiVo-Fon and immediately go into the main menu choices. Currently, TiVo does have a cell phone app, but it costs money to use and doesn’t allow you to schedule things at the last minute. With TiVo-Fon any cell phone could call and a voice recognition system could be set up to take you to the program you want to schedule. This way if you’re at dinner and someone mentions that there is something good on at home, you could order your recording and have it pushed into your box, so that you can watch it when you get home.

Potential Target = Fandango – Fandango is a fellow .com mania survivor who managed to scrape together an impressive business by being early and disruptive. Early on, TiVo and Fandango partnered to offer movie ticket reservations through the DVR and may even represent their first couch commerce transaction. Two years ago Comcast paid close to $200 million for the ticket company, but I think TiVo could buy them for less than $150 million. With the right budget and some slick marketing, TiVo could use Fandango to take on TicketMaster and StubHub.

TiVo Video Conferencing – It’s 2009 already, but where are all of the video phones. Making it easy to attach a camera and Microphone to your TiVo would really change what it means to reach out and touch somebody. By adding VOIP and business support, TiVo could expand their services into the commercial marketplace.

Potential Target = Skype – When you consider that Ebay paid $2.6 billion for Skype in 2005, this one may seem like a longshot, but telecommunications has only gotten more competitive since then and Ebay’s already signaled their intention to exit the business. By picking up the popular program and making a subsequent acquisition for a small relationship management company like Zoho, TiVo could build a multimedia telecommunications solution that would rival Salesforce.com

TiVo Networking – One of the biggest challenges that TiVo faced early on was trying to convince consumers of the benefit to plugging your DVR into the internet. Owning a networking company wouldn’t necessarily make this any easier, but it would help to further wedge TiVo into the center of the digital media experience. If there were enough synergies for it to make sense for Cisco to buy Scientific Atlantic, then it makes just as much sense for TiVo to acquire a networking company.

Potential Target = Netgear (symbol: NTGR) – A few years ago Netgear had a market cap that was almost four times larger then TiVo’s but today they weigh in at $540 million. With a profitable business model and revenue that is nearly three times what TiVo is currently bringing in, a $700 million bid wouldn’t be ridiculous.

TiVo Extender – Over the years, TiVo customers have loved the service so much that many of them have purchased multiple units. TiVo charges an extra fee to add an additional DVR, but doesn’t really make much of a profit because they are forced to subsidize the hardware purchase with smaller multi-room viewing fees.

Instead of trying to get their customers to buy multiple DVRs, TiVo should instead allow the first DVR to act like a server and then have extender devices inexpensively tap into the main DVR signal. This would allow TiVo to sell hardware at a profit and give away multi-room viewing to their customers. With companies like AT&T making a big deal about their muti-room capabilities, TiVo could use an extender strategy to undercut them in pricing.

Potential Target = Roku – Netflix may have put Roku on the map, but the company is headed for greatness on their own. We don’t know a lot about their valuation, but if you consider that they’ve only raised $6 million in VC backing, I think that it’d be easy for TiVo to pick them up for less than $50 million. Not only would the other TiVo video services compliment Roku subscribers, but it would be an easy and cost effective way to solve the multi-room limitations.

Some of these ideas are admittedly a bit far fetched, but you have to admit that they would make interesting mergers. While I don’t expect that we’ll see TiVo go on any big shopping sprees soon, as their cash bulks up and their legal victory pulls through, expect to see more people asking what they plan to do with the money.

What do you think, if FakeTomRogers stepped aside and you were hired you as the new CEO of TiVo, what would you do with a billion dollar jackpot?

Does Dish Have The Antidote?

Jun 15

Posted by Davis in Disclosure - I own stock in co. mentioned, TiVo, TV | 7 Comments

I hate to admit it, but I’m feeling a little foolish right now. Last week, I raised the question of whether or not Dish was researching a hostile takeover of TiVo? In my article, I concluded that they might try, but that they’d never be able to afford the $7.5 billion poison pill that came with it.

Since then, I’ve spent more time researching the pill and realize that I made a terrible mistake. Not only is there an antidote, but Dish may already have it.

Over the years, I’ve spent a lot of time thinking about this pill, but could never figure a way around it. It wasn’t until I asked myself a simple question, that the solution became so obvious. What would Charlie do?

Love him or hate him Dish CEO Charlie Ergen has a special kind of brilliance. His reputation as a fearsome litigator is legendary and more than once he has demonstrated his mastery for the fine art of negotiation. Over the years, his decisions have created huge growth for Dish (albeit at great risks.) Unfortunately, his penchant for the legal system may have finally caught up with him and now he finds himself struggling in quicksand with the prospect of having to buy rope from TiVo.

To get a better picture of his frame of mind, I turned to his own testimony from last February. (Via Mainer’s Law Library)

Q: Is the following an accurate statement, that Echostar would lose $90 million per month if it had to comply full with the terms of the injunction, assuming it’s properlty interpreted as requiring you to disable DVR functionality in the specified product lines?
Ergen: There would have been a time fame that, that would have been an accurate statement. Today that,
Q: Ninety –-
Ergen: Today it would be more than that. Today would be more than $90 million dollars
Q: And how much would it be a month today?
Ergen: Would be probably several hundred — It would be over several hundred million dollars, I don’t know exactly, I don’t have the figures in front of me, but it would be more today.
Q: Several hundred million dollars a month?
Ergen: It may be as much as several hundred million dollars a month.

I don’t know about you, but if I spent the last 30 years of my life building a business and all of a sudden was faced with the prospect of losing several hundred million dollars a month, it’s a good bet that I’d be willing to do whatever it takes to make sure that this doesn’t happen. I don’t care how big you are, after a few months, hundreds of millions turns into billions and after billions in losses vultures have a tendency to sweep in and pick off your carcass.

Even before we see how this plays out, S&P is already circling. From their June 10th assessment of Dish’s credit rating.

“With nearly $1.2 billion in cash and marketable securities and very moderate leverage for the current ‘BB-’ rating, Dish could easily fund the $103 million of new judgments and penalties without a ratings impact, it said. However, the longer term effect on the company’s credit profile would depend on the strategic path Dish takes to resolve the DVR issues, S&P said. If Dish were to enter into a licensing arrangement with TiVo, which S&P said was the most likely scenario, there would be no effect on Dish’s BB- corporate credit rating” [Note: Bold added by me]

If Mr. Ergen believes his own testimony, then his only frame of mind has to be one of desperation. He is left with only two solutions.

He can try and negotiate a settlement with an empty gun or he can go for an all-in bluff and try to buy TiVo in a dangerous gamble.

Now I don’t know whether or not TiVo has actually refused to settle with Dish, but if they really are serious about enforcing their right to NOT license their technology, then Charlie really only has one option. In my opinion, I see TiVo digging further into the trenches. Take a look at Tom Roger’s comments from the Q3 2009 conference call as a good example,

“We will pursue with great aggressiveness the resolution of these issues in a way that hopefully will lead to the imposition of the injunction but I just wanted to make clear that the right to appeal is not one without the ability of the court to handle this situation and bring it to ultimate resolution.”

Or if you want to get a closer glimpse into how TiVo feels about the injunction, take a look at TiVo’s most recent argument for why Dish doesn’t deserve a stay of execution,

“The right to exclude conferred by TiVo’s patent is empty if it can never be enforced. Since this Court entered its previous stay, TiVo has lost 25% of its DVR subscribers, while EchoStar’s have nearly doubled. Ex. 1 (Brunelle Decl. Ex. A). That harm can never be fully redressed through damages. Entry of yet another stay will undermine respect for district court process and severely prejudice TiVo.”

further in their response,

“EchoStar is a large, aggressive competitor, more than willing to pay damages (and face contempt charges) so long as it can continue to do as it likes Granting a stay here will distort the patent system by encouraging other infringers to make minor changes to their adjudicated products and then seek further stays in order to keep operating even after they are held in contempt. With deep-pocketed infringers, endless cycles of purported change and ensuing litigation will reduce the right to exclude to little more than a compulsory license—and one enforceable only through rounds of litigation that not only drain a patentee’s resources but allow rapidly-evolving modern markets to be shaped by infringing competition in ways that go far beyond monetary harm.” [Note: Bold added by me]

The more that I look at things from Charlie’s perspective, the more it becomes clear that he doesn’t have a choice in this scenario. He must buy TiVo. The future of his business would depend upon it.

This leaves just two questions, how much can he spend and how does he do it? If Dish currently has $1.2 billion in cash and short term securities, it would give them enough firepower to easily get 50% at recent market prices, but it wouldn’t be enough to pay for the poison pill.

Dish could probably raise another $2.5 billion before their debt would start to get too expensive, so for the sake of argument, let’s say that their budget is around $3.5 billion. When you consider TiVo’s tax losses, their cash on hand, and what Dish actually owes them in licensing fees (plus punitive damages ), they’d probably really only end up paying $2.5 billion to make this acquisition happen.

So if Charlie came to me and said, Davis here’s a pile of money I want you to engineer a hostile takeover, here’s how I’d do it

Since making a tender offer would trigger the pill, my only option would be to try and acquire more than 50% of TiVo’s stock on the open market before anyone found out about it. One problem I would face with this strategy is that as soon as I purchased more than 5%, I’d have a mere ten days to complete my acquisition before I’d be forced to tell the world about it (11 or 12 days if the deadline falls on a weekend).

Since this would make this strategy very dangerous, I’d want to wait as long as I could before trying to pounce. Once the judgment was final though, I’d move as quickly as I could to mask the accumulation with publicity from the verdict.

On day 2, I’d continue to buy heavy shares to try and simulate the appearance of quick profit taking. By the time day 3 rolled around, I’d slow things down so the market wouldn’t catch on to the significance of what was happening. Days 4 – 9, I’d continue to add, but in a very controlled and deliberate manner. It wouldn’t be until day 10 that I’d go bonkers and buy anything on the market because at that point every share I purchased would be one that I didn’t have to pay an extra $60 for.

Where my math was flawed when I was originally calculated the cost of TiVo’s poison, was that I didn’t consider the shares Dish wouldn’t have to pay a $60 dividend on (their own.) If they could accumulate 50% of the company for $1 billion, then they’d owe $3.5 billion to the remaining TiVo shareholders. If they grabbed 60% for a billion, they’d only be on the hook for another $3 billion in poison. If they could actually buy 70% of TiVo’s shares, they’d get away with a $3.2 billion total acquisition (the equivalent of $28 per share even after paying $71 to the shareholders who hold out.)

A price that seems reasonable given the gravity of their situation.

The danger in using this strategy is that just like a snake, Echostar would be most vulnerable when it was feeding. If the market (or TiVo) somehow got wind of this it could very well threaten Charlie’s ownership stake in Dish.

You see, TiVo has a provision in their pill that says if someone triggers the pill, but then can’t pay for it, they have to pay in stock worth .50 cents on the dollar. Based on Dish Network and TiVo’s current market caps, this would mean that if TiVo managed to choke Dish on an acquisition, they’d end up owning roughly 65% of Dish’s stock.

While there is no way for me to know whether or not Echostar really is in the process of a hostile takeover, there is evidence to suggest that this scenario is possible.

I don’t want to read too much into technical indicators, but if you look at TiVo’s money flow index, you’ll see that it spiked from a score of 50 to 90 following TiVo’s latest win. In 2006, TiVo’s money index hit 80 following the initial verdict, but it was already at 80 going into it. The money flow index measures the eagerness of buyers for a particular security. It looks at the high mid and low points that a stock trades at and takes into account the volume that buyers and sellers are trading at. Anything over 80 is usually considered over bought, but it would be impossible for anyone to achieve a hostile takeover without tripping this index off the charts. To put the significance of this score in perspective, you have to go back to the wild days of 2001 to find a time where TiVo’s money index was at a higher level.

The day after TiVo’s most recent court victory, their stock traded a record 38 million shares. They very next day TiVo saw 12.5 million shares change hands. To the man on the street, this may not mean anything, but for a stock that normally sees 1.5 million shares of action, this is extremely significant. Two days alone represented nearly 50% of TiVo’s total shares outstanding. The mainstream media never picked up on this story, but Bloomberg’s reporters knew enough to be incredulous when they found out how much volume TiVo was seeing post judgement.

Some will dismiss this spike in volume as speculators and day trading following a well publicized judgment, but I’m concerned that something much more sinister is happening. While TiVo did see 30 million shares trade hands following their 2006 verdict, the situation leading up to that spike in volume was very different. In the week prior to their 2006 verdict, they averaged 6 million shares per day as speculators clearly bet on the result of the trial. After the victory, there was heavy volume, but there was also heavy volatility as people cashed in their winning tickets. Over the course of two days, TiVo shareholders watched their shares jump from $8.05 to $9.80 and back down to $8.20 a share. Over the course of 8 days, investors traded an average of 6.6 million shares a day.

This time around has been very different. TiVo’s stock has been steadily increasing and continues to set higher highs and higher lows in most of their trading sessions. In the five days prior to their latest court win, TiVo averaged 2 million shares per day, but in the 8 trading days that have followed, they’ve averaged almost 10 million shares a day. To get a sense of the difference in volume between now and 2006, see the following graph.

We don’t know whether or not it was Dish or market forces that caused 50% of TiVo’s stock to trade on June 3rd and 4th, but we do know that these transactions took place. If Dish was in fact the buyer, I would guess that over the last 8 trading days, Dish probably has picked up a 45% stake in TiVo for about a half a billion. If this is the case, it would mean that they are still on the hook for another $4 billion.

Even if they were to pay $20 per share for the remaining 25%, they could easily hit a 70% target, assuming that they were willing to spend the half a billion that would be left in their bank account.

How could TiVo defend against this? They would need to poison the snake with more venom. Currently, they are authorized to conduct a secondary offering for up to 170 million additional shares. I wouldn’t recommend trying to go to market with all of those, but for every dollar TiVo raises, it would cost Dish $7 to make an acquisition.

If TiVo was to do a 10 – 30 million share offering in a secondary, it would add $700 million to $2.1 billion more to the cost of an acquisition. If they actually managed to catch Charlie while he’s feeding, they’d seize control over Dish Networks.

While this conspiracy theory is based on speculation and is admitedly a long shot, it’s possible that this could be going on. If TiVo sees the type of crazy volume it would take for Dish to get to the final 70%, I would hope that TiVo management would be cunning enough to contact their bankers and get those extra shares out into the market.

Either way though, it won’t take long to find out whether I’m looking like a goat or a genius on this one. If Echostar really is in the midst of a hostile takeover, we’ll find out today (June 15th), after the market closes. If we don’t see a 13-D filing, you can chalk this one up to crazy Uncle Freeberg chasing aliens again, but if by some wild chance I’m actually right, then David will have figured out a way to slay Goliath with little more than their wits and a pebble aimed squarely at Dish’s forehead.

Update – A hostile takeover may have been possible when I published my post this morning, but as of today’s filing deadline, Dish hasn’t disclosed a position in TiVo. This would make a takeover at this point highly unlikely unless we see volume spike again. I’d still like to see TiVo issue a few more shares to beef up the pill, but for now they should be out of the woods. Sorry for getting everybody excited, but it looks like I’m going to end up looking like a goat on this one. At least it was fun to think about the what if’s of trying to break the pill. Since I was wrong about the filing, I probably should go back and reconsider the health benefits of the tin-foil suit . . .

Dish Researching Hostile TiVo Takeover?

Jun 9

Posted by Davis in Disclosure - I own stock in co. mentioned, Technology, TiVo, TV | 26 Comments

It’s been over 5 years since TiVo filed their patent lawsuit against Dish, but we’re finally reaching the endgame of what has been an epic chess match between the two companies. Between the he said/she said arguments that have played out in the press to the endless legal maneuvers by both camps, it has been a long and brutal battle for both. As a TiVo shareholder, I know that I’ve found the long delays especially frustrating.

In the latest development in this high stakes game though, TiVo has managed to pin Dish into a dangerous checkmate situation. With appeals quickly running out, Dish’s options are becoming increasingly limited. While things look pretty dire for Dish, I believe that they may try to play one more dangerous gambit before this game is up.

I think they might try to buy TiVo.

While looking through my traffic logs, I came across a very interesting visitor In 2006, I wrote an article referencing a poison pill TiVo implemented in 2001. Since Google loves bloggers so much, my story somehow ended up near the top of the page for the search term TiVo poison pill. Given recent analyst chatter that TiVo could be an M&A target, I’m not surprised that people would be interested in taking a closer look at the nuts and bolts behind the agreement, but I was surprised at where my visitor was coming from.

While there is no way for me to know who it was, someone at Echostar’s corporate HQ’s spent 25 minutes researching an article that I wrote on the topic. Their outclick took them to the legal document that contains all of the nitty gritty details on how the pill actually works.

Now, there could be any number of explanations for why someone at Echostar would be interested in TiVo’s anti-takeover provisions, but the most likely one is that they’re interested in making some kind of play at TiVo.

On June 4th, the Eastern District of Texas District Court announced that they were holding Dish in contempt for continuing to infringe on TiVo’s timewarp patent. (via Mainers’ Law Library) Dish may have been able to get a temporary stay on the injunction, but the eventual impact of the ruling could end up being devastating.

The order against them contains two crucial components, the first is a requirement to disable all infringing DVRs. For Dish to comply with this portion of the injunction, it will probably cost somewhere in the neighborhood of $300 – $400 million. This type of expense would hurt, but it wouldn’t necessarily put them behind the 8-ball.

The far more damaging portion of Folsom’s order is the infringement provision. This prevents Echostar from replacing these DVRs with other DVR set top boxes.

“The DVR functionality, storage to and playback from a hard disk drive, shall not be enabled in any new placements of the Infringing Products.” (bold added by me)

The inability to offer a DVR to their customers would put Dish at a severe competitive disadvantage. Furthermore, because Dish has now been caught trying to sneak a “replacement” DVR in through a redesigned back door, they now must seek court approval prior to deploying any new DVR solutions.

Now I realize that there are still a lot of people who haven’t adopted DVR technology yet, but for those who have, you know that once you get a sweet taste for time shifted entertainment, there’s no going back.

Survey after survey after survey has confirmed that people LOVE their DVRs and while I can’t speak for others, I know that if my television provider disabled my ability to record television, it would take less than a week before I found a replacement.

Dish doesn’t breakdown their current number of DVR subscribers, but during their most recent earnings call, Dish CEO Charlie Ergen acknowledged that the “majority” of their customers buy advanced DVRs and/or HD services. This would suggest that that as many as 8 million Dish subscribers could potentially lose access to DVR technology.

While the cost of replacing the set top boxes could hurt Dish’s earnings, the loss of even 10% of their subscriber base would do terrible things to their stock price. Customer defections and the inability to remain competitive could easily cost Dish shareholders, $3 – 4 billion in lost market cap.

Given the strength of TiVo’s position, several analysts have suggested that Dish may finally be ready to enter into a settlement agreement with TiVo and while forfeiting the game at this late stage would help to prevent an unmitigated disaster for Dish, I don’t believe that TiVo is willing to accept such a forfeit.

Instead I think TiVo is planning a North Korea strategy. For years, they’ve been unable to command respect in their industry and as more and more generic DVRs have hit the market, TiVo has seen their market share eaten away by larger competitors. Now that TiVo possesses a nuclear DVR patent, it opens up new avenues for “conversations” between them and their competitors.

A fat royalty check from Dish would be good for TiVo shareholders, but having the ability to strike fear into the heart of the MSO industry is worth considerably more in increased pricing power. Some may believe that a settlement is inevitable, but I believe that TiVo would have already entered into an agreement long ago, if they weren’t crazy enough to actually push the red button.

Even before TiVo’s latest legal victory, this bargaining power has enabled them to forge agreements with Cox, Comcast and DirecTV. Once companies like Time Warner and AT&T realize that TiVo is both ready and willing to put this kind of hurt on a business, it makes it a lot more palpable to swallow the carrot that TiVo offers through DVR partnerships.

If you assume that TiVo will eventually win this case and that they have no intention of settling with Dish, the only logical move left for Dish to try and make is an expensive acquisition.

After five years of litigation, I would hate to see Dish win this by seizing control of a company that they’ve done everything to squash. Fortunately for TiVo they should have a lot of leverage to negotiate. Their pill wouldn’t prevent an outright acquisition, but it would make it extremely expensive for someone to buy TiVo without the board of Director’s approval.

Based on my understanding of the complex agreement, in the event that Dish (or another acquirer) were to accumulate more than 15% of TiVo’s shares (or even announce the intention to acquire more than 15% of the shares), it would trip a provision that would entitle the other TiVo shareholders to a special $60 per share dividend This means that if Dish were to forcibly acquire TiVo, it would cost them $71 per share or close to $7.5 billion (more than Dish’s entire market cap.) If Dish tried to pay for the transaction in stock, TiVo shareholders would be entitled to $13.5 billion ($131 per share) in the buyout.

With TiVo’s stock currently trading at $1.15 billion ($11 per share), this type of premium would be too bitter of a pill for Dish to swallow.

While it’s possible that we could see Dish challenge the poison pill legally (I hear that they have an attorney or two working for them), the only other option that I can see around this restriction would be for Dish to somehow convince TiVo shareholders to get rid of the pill at next month’s annual shareholder meeting.

This would be a long shot in and of itself (and one that I’m not even sure would be allowed per TiVo’s bylaws), but this feat is made even more difficult when you consider the fact that you would have had to have been a TiVo shareholder prior to the most recent judgment, in order to be eligible to vote on this kind of initiative.

While I’m doubtful that Echostar would succeed in an attempt to acquire TiVo, at the very least it’s interesting to see them thinking about it.

Revisiting Ghosts of TiVos’ Past

Apr 14

Posted by Davis in Disclosure - I own stock in co. mentioned, TiVo, TV | 4 Comments

Photo via the Tombstone Generator

Last night, I decided to do a little bit of spring cleaning with my TiVo and stumbled onto a treasure trove of memories. With the TV season starting to wind down, I needed to make some tough choices on what I wanted to continue to follow and what shows it was time to give up on. While I have a few core shows that I love, one of my favorite parts of the television experience is checking out new TV programs, so there were a lot of programs to go through. I’ll usually decide within 2 or 3 episodes whether or not to keep a season pass, but this season I’ve given a couple of shows way too much patience.

When I was browsing through my Season Pass manager, I realized that I must have terrible taste in programs because a healthy chunk of the shows listed had already been canceled. My TiVo was littered with tombstones of promising shows and pilots that had ended. Neil Young sang that “it’s better to burn out than to fade away” and when it comes to TV, I couldn’t agree more. While there have been some heavy publicized cancellations, most of the dead shows disappeared with nary a whimper. In fact, it wasn’t until I started to write this blog post that I found out that some of my more recent picks had ended

After flipping through the current batch of killed pilots, I decided go back even further and list every show that’s ended, while I’ve owned and subscribed to it on TiVo. The following is my TiVo graveyard (listed in order of priority of course.)

Surface
X-Files
Jericho
Wonderfalls
Alias
The 4400
The Jamie Kennedy Experiment
Dirty Sexy Money
New Amsterdam
My Own Worst Enemy
Welcome To The Captain
Survivorman
Greed
The Lone Gunman
Drawn Together
La Femme Nikita
Journeyman
Cane
Dark Angel
1 Vs. 100
Carpoolers
Two Guys, a Girl and a Pizza Place
Strangers With Candy
The XFL
Friends
Ally McBeal
Veronica Mars
Party of Five
The Ex-List
Prison Break
Malcom In The Middle
Just Shoot Me
Moonlight
Kid Nation
Dharma & Greg
Eli Stone
Stacked
Andy Barker P.I.
Kidnapped
Jeremiah
Spin City
Freaks & Geeks
Last Comic Standing
Blade
Cavemen
Titus
Becker
Buffy The Vampire Slayer
Andy Richter Controls The Universe
Pirate Master
Treasure Hunters
The Con
Joey
Shark
Angel
Dog Bites Man
Roswell
Dead Like Me
Las Vegas
Tripping The Rift
Pushing Daises
Aliens In America
Pasadena
Conspiracy Zone
Crank Yankers
The Weakest Link
Battlebots
Heist
The Bionic Woman
Celebrity Deathmatch
Ed
Conviction
The Mole
Crusoe
I’m With Busey

*As an added bonus, if you’re interested in checking out the new premiers that haven’t aired yet, I highly recommend an RSS subscription to GeekTonic’s coverage.

Back TiVo Future

Apr 1

Posted by Davis in Disclosure - I own stock in co. mentioned, TiVo | Comments off

You’ve got to hand it to TiVo. 10 years and 1 day after celebrating the production of the first TiVo DVR, they’ve taken a big leap ahead by adding the ability to fast forward through live TV. TiVotees already know that you can wait 20 minutes after a show starts and then can fast forward through the commercials until you get caught up, but with this new technology, you can now start watching 20 minutes ahead of time and wait while the rest of the world catches up with you.

Steve Fox at PC World has the skinny on the new program.

“As we’ve come to expect from TiVo, basic recording and timeshifting functionality is effortless, and the interface remains unchanged from previous models. More important, the SuperAdvance feature is easy to find and activate: A red “SA mode” icon appears in the bottom righthand corner of the screen whenever the feature is available; you simply click the icon once, and presto–you jump 58 seconds forward.”

While Fox sounded impressed by the technology, it did have a few snafus. Because of limitations to the overclocking of the DVR, you’ll need multiple TiVo’s in order to get more then a 1 minute jump on live TV. In my own beta tests, I’ve also noticed that when overclocking the DVR unit, it has a tendency to catch fire while watching reality TV programming. I haven’t figured out why only reality TV seems impacted, but it especially doesn’t seem to care for Jerry Springer.

Another complaint Fox has is the cost of daisy chaining multiple DVRs together. While it’s true that it’s expensive to buy a dozen TiVo units just so that you can fast forward into the future, the power of the technology pays for itself. I like to use mine to watch CNBC and will short stocks before they recommend them. Given CNBC’s reputation for stellar financial reporting, this is essentially like printing money.

When I inquired with TiVo about the rumor that this feature would only be available on April 1st of each year, they had no comment.

One final restriction to the super fast forward functionality is that TiVo apparently needs copyright approval ahead of time before they can unlock a program. Some channels seem Ok with this, but other programs are much more secretive. When I contacted Hell’s Kitchen star Gordon Ramsey for a comment on why he choose to not include his show in the beta trials, he told me that it was because “no #$%&(* chef worth a lick of salt can bake a decent lasagna in less than an hour.”

Hard to tell whether or not this functionality will be a hit with consumers, but it’s good to see TiVo fast forwarding into the future. While in the past, I’ve been critical of people spoiling TV shows I was saving on my TiVo, it’s nice to finally be able to turn the tables on them by using TiVo super fast foward to spoil their live TV experience.

Mirror Mirror On The Wall Who Makes The Best Recommendations Of Them All?

Jan 6

Posted by Davis in Disclosure - I own stock in co. mentioned, Movies, Netflix, Technology, TiVo, TV, VOD | 2,381 Comments

When I was a kid, I grew up in middle of the sticks where my parents didn’t have access to cable TV. When satellite dishes first started to show up, my folks were early adopters and bought a ginormous pirate dish (that you’d actually have to crank by hand when you wanted to jump to different channels), but for the most part, my childhood television experience consisted of two fuzzy OTA choices, NBC and CBS.

Back then deciding what to watch was rarely a problem. If I didn’t like what was on one channel, I’d simply live with whatever was on the other. Of course since then, technology (and my life) have changed a lot.

In thinking about my home entertainment setup today, I’m amazed at how many choices I actually have. It’s as if I’ve overcompensated for my lack of choice growing up, by deluging myself with every media gadget or service that comes out today. Between Netflix, Comcast, Amazon, YouTube, a dual tuner HD TiVo (not to mention my dual tuner media PC) and a little friend I like to call Bit Torrent, there is no shortage of content to watch.

While having plenty of choices is fun, having too many can be just as paralyzing as having too few and as more and more technology companies continue to take their shot at crossing into the living room, managing all of this content is going to become an even more important task.

So far, there have been plenty of efforts to improve content discovery services, but the task is apparently, much tougher then I would have thought. Two years ago Netflix offered a million dollars to anyone who could improve their recommendations by 10% and they’ve yet to award the prize.

Over the years, I’ve signed up for a plethora of movie recommendation services, but last summer I realized that it was too difficult to sync my ratings between them all. Since I strongly believe that TV and movie suggestions is a crucial piece of the new media experience, I wanted to make sure that my metadata activity was giving me the most bang for my click. In order to test out the various movie sites, I decided to create a Netflix challenge and conducted a “blind” taste test to figure out what site actually makes the most relevant recommendations.

To set up my experiment, I randomly choose 5% of the 2,000 movies and TV shows that I’ve rated through the Netflix service. I then set up a new profile on Netflix, Blockbuster, Spout and Criticker and manually entered my ratings for these 100 films, into each service. According to Spout, these ratings represented 11.6 days and 181 minutes of time spent watching TV

After I had setup an identical profile on all four services, I then took a look at the first 50 suggestions from each site and compared it to what I had actually rated the film on my main Netflix account.

If the service suggested a movie that I hadn’t already seen, I disregarded it toward calculating the final scores. Essentially, what I wanted to figure out was which movie recommendation service provided the best recommendations based on my actual real life viewing data. After taking a look at all four sites, it was clear that Netflix easily won this challenge.

Of the 50 recommendations that Netflix made, 28 of them (56%) were for films that I had rated 5 stars on my main account. While they did include two 1 star recommendations (Fight Club & American Psycho), the average rating for their recommendations weighed in at 4.18. Critcker came in second place with an avg of 4 stars per recommendation, followed by Blockbuster at 3.96 and Spout at 3.87.

Perhaps even more interesting then the final scores though, were the services that helped me find movies that I had never seen before. Netflix’s results may have been higher then anyone else, but of the 50 recommendations that they made, there were only 11 films that I hadn’t already seen. This compares to 24 unknown content suggestions (48%) from Blockbuster and an astonishing 44 unknown recommendations (88%) from Criticker. In taking a look at the types of movies Blockbuster was recommending, I wasn’t all that impressed with the list of unknown films. Most of them were kids movies that I simply missed because I had no interest in them at all. Trying to decipher Criticker’s picks was a little more difficult because most of their picks were for indie or foreign based films. At first glance it would seem that while Netflix may make more accurate suggestions, Criticker may actually be the best place for finding films that go beyond mainstream audiences.

I’ve listed the breakdown of my results below, but I would encourage you to take these results with a grain of salt. With a sample size of 1, my survey isn’t very scientific and because the ratings of my Netflix sample profile were 100% identical to the ratings on my main profile, it could have influenced my results from Netflix. Nonetheless, at the end of the day, I was pleased to discover that Netflix appears to be the best place for me to be rating and interacting with movies. While I’m hopeful that their open API will eventually allow consumers to port their data between services, it feels good to know that my primary movie recommendation service is the most optimal one for me.

Netflix

Recommendations I’ve Never Seen – 11
5 star – 28
4 star – 4
3 star – 1
2 star – 1
1 star – 2

avg. 4.1794

Criticker
Recommendations I’ve Never Seen – 44
5 star – 2
4 star -2
3 star – 1
2 star – 1
1 star – 0

Avg Ranking 4.0

Blockbuster

Recommendations I’ve Never Seen – 24
5 star – 9
4 star – 11
3 star – 4
2 star – 1
1 star – 0

avg – 3.96

Spout

Recommendations I’ve Never Seen – 11
5 star – 18
4 star – 9
3 star – 4
2 star – 5
1 star – 3

avg. 3.87

Davis Freeberg’s Digital Connection