Internet Video

Rovi Pushing For Patent Dollars From Netflix, Hulu, Amazon

8/06/2012 2:28 PM Eastern

Rovi has been unable to reach licensing deals for its interactive program guide patents with Internet video distributors including Netflix, Hulu and Amazon.com -- each of which Rovi is suing for infringement -- and overall the company expects licensing revenue will be approximately $50 million lower for 2012 than its previous estimates.

On the consumer-electronics front, Rovi is trying to negotiate new IPG patent deals with LG Electronics and Vizio.

Rovi president CEO Tom Carson said in an interview that the company's licensing business represented about half the $100 million reduction in full-year 2012 revenue from previous guidance. Last month Rovi lowered its annual revenue forecast to between $650 million and $680 million compared with earlier estimates of $755 million to $785 million.

"By and large, we've done a good job of getting traditional license deals done" in the CE and service provider segments, he said. "We're now looking to the TV Everywhere space, and we have a number of deals we're trying to get done."

In the second quarter Rovi entered into new license agreements covering the television and TV Everywhere field of use with Cogeco and with Google, which is gearing up to launch fiber-based Internet and TV service in Kansas City, and cut deals with CE manufacturers Funai and JVC. The company noted it has struck prior patent-licensing deals for TV Everywhere with Comcast, NDS (now owned by Cisco Systems), Apple and Sony.

With the lowered revenue forecast, Rovi expects to conduct layoffs as the company aims to cut $20 million in costs before the end of 2013, Carson said. "We are basically looking at all areas of the business [for layoffs] but particularly areas that are light" in terms of revenue contribution and growth, he said.

Rovi currently has 1,800 employees worldwide. The company is not disclosing how many jobs it expects to cut.

Last Friday, Rovi reported revenue of $158.3 million for the second quarter of 2012, down 13% year over year, with a net loss of $18.5 million versus a net loss of $10.7 million in the year-prior quarter. The revenue decline was primarily due to a drop in revenues in Rovi's CE business, which was down 24% from the second quarter of 2011.

In addition, Carson noted, the Rovi Entertainment Store movie streaming service which it operates on behalf of partners including Best Buy is "ramping up more slowly than we thought."

Rovi's service provider revenue was up 4% from the second quarter of 2011, to $77.6 million, driven primarily by subscriber growth among operators and from an increase in subscribers and rates for its guide products. The company said it had 16 agreements for existing service provider products up for renewal in Q2 and renewed all of them.

But according to Rovi, growth in revenue from cable operators did not meet expectations for the quarter because of delays in completing guidance patent licenses. Advertising growth in the service provider segment also was slower than anticipated; Rovi chief financial officer Peter Halt, speaking on the company's earnings call, blamed that on "the overall softness in interactive TV advertising, as well as a lower-than-expected contribution from our online properties."

Carson said Rovi is seeing a longer-than-expected deployment cycle for its next-generation TotalGuide solution for service providers. The company now expects deployment in the first half of 2013 at Mediacom Communications, Cogeco, BendBroadband, Buckeye CableSystem, Armstrong and Blue Ridge Communications.

Over the next 12 to 18 months, Carson said, Rovi will be focused on better integrating its operations.

"We've acquired a lot of companies over the last four years... and we still have a lot of work to integrate the businesses," he said, noting that one of the areas Rovi will look to streamline is R&D.

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