DirecTV To Offer TiVo HD Service

DBS Operator Also Extends Intellectual Property Licensing Deal

By Todd Spangler -- Multichannel News, 9/3/2008 7:36:00 AM

Three years after DirecTV stopped offering TiVo digital video recorders, the satellite operator has struck a new deal with TiVo to develop a new HD DVR as a high-end option for subscribers.

Financial terms of the deal, announced Wednesday, were not disclosed. The companies said the agreement, effective until at least February 2015, included the extension of mutual intellectual property arrangements.

Under the nonexclusive pact, DirecTV and TiVo will work together to develop a broadband-enabled HD DVR service, slated to launch in the second half of 2009. The product will support the latest TiVo and DirecTV features and services, including TiVo's Universal Swivel Search and TiVo KidZone.

DirecTV said it will continue to develop and offer its own set-top boxes as primary offerings to both new and existing customers, and that the new TiVo box will be offered as "an alternative choice" to customers. 

DirecTV president and CEO Chase Carey said in a statement that the new deal will extend the satellite operator's "long-standing reputation for developing innovative, advanced products and services."

"We will continue to work with TiVo and make this new product available to all new and existing DirecTV customers who may want to add TiVo on top of our industry-leading experience," Carey said. 

DirecTV launched a TiVo-based DVR in 2000, but five years later said it would market its own DVR developed by NDS Group instead.

As a result, the number of DirecTV customers that still have a TiVo DVR has steadily dropped. TiVo, for the quarter ended July 31, reported a net decline in MSOs/broadcaster subscriptions during the period, dropping to 1.9 million from 2.5 million a year ago.

In April 2006, the companies announced an extension of their commercial and advertising relationship. DirecTV and TiVo also recently deployed a software update to existing DirecTV with TiVo boxes, which enables new features like remote DVR scheduling. 

Separately, TiVo is engaged in patent litigation with DirecTV rival EchoStar, which a federal court found had infringed on a key DVR patent owned by TiVo. EchoStar is appealing the decision; a hearing is set for Sept. 4 to determine whether EchoStar was in violation of an injunction in the case.

For TiVo, selling DVR boxes and service through cable and satellite operators is a key survival strategy. The DVR pioneer has deals with Comcast and Cox Communications, which are rolling out TiVo-based services to their customers.

On the DirecTV deal, TiVo president and CEO Tom Rogers said in a statement, "Together we brought the TiVo experience to millions of DirecTV customers and now we look forward to launching a next generation product that uses TiVo's latest features to truly showcase DirecTV's broad selection of high-definition programming -- all stitched together with the elegance of TiVo's renowned user experience."

The new HD DVR will be marketed and sold by DirecTV nationally to its entire customer base. Consumer pricing and packaging has yet to be announced.

The updated agreement between DirecTV and TiVo extends the expiration date from Feb. 15, 2010, to Feb. 15, 2015, with DirecTV having the right to extend further until Feb. 15, 2018, according to a TiVo 8-K filing Wednesday with the Securities and Exchange Commission.

TiVo said in the filing that DirecTV will pay "a substantially higher monthly fee" for households using the new HD DVRs with TiVo than the fees for the satellite operator's previously deployed TiVo-based DVRs. The fees paid by DirecTV are subject to monthly minimum payments that escalate during the term of the agreement starting in 2010, according to TiVo.

In addition, TiVo said, under the new agreement, each company has agreed to not assert its patents against the other party with respect to products and services deployed prior to the expiration of the agreement.

DirecTV also is entitled to "most favored customer" terms compared with other multichannel video distributors in the United States to whom TiVo grants a license to distribute certain TiVo technology in the future, according to TiVo's 8-K filing.