Shares in Gemstar-TV Guide International Inc. surged Tuesday morning after
the company announced a 10-year interactive-program-guide-licensing deal with
Charter Communications Inc.
The deal is significant considering the fact that Charter is one of four MSOs
that formed the TVGateway IPG consortium last summer to compete with Gemstar in
the guide business.
Charter -- which already offers TV Guide Interactive to 600,000 subscribers
on 200 systems -- plans to offer the guide on all digital platforms.
'The agreement has significant financial incentives for Charter to deploy TV
Guide in the substantial majority of their homes. And we believe, based on our
conversations, that's what they intend to do so,' Gemstar-TV Guide co-president
Peter Boylan said in a conference call Tuesday morning.
Gemstar will keep 85 percent of advertising revenue that it generates from
the IPG, while Charter will get 15 percent, Boylan noted. The companies will
split commerce revenues 50-50, he added.
The contract, announced Monday, marks the first agreement Gemstar has signed
with a top-five MSO since closing its merger with TV Guide last year. 'I believe
this will be the first of several additional deals with other major service
providers,' Boylan said.
In addition to set-tops from Motorola Broadband Communications Sector,
Charter plans to deploy TV Guide Interactive on Scientific-Atlanta Inc. set-tops
and drop S-A's native 'Sara' IPG, Boylan said. Gemstar expects to complete tests
of TV Guide Interactive on the S-A platform 'in the next two quarters, if not
sooner,' he added.
The deal is a blow to the TVGateway consortium, which is backed by Charter,
WorldGate Communications Inc., Adelphia Communications Corp. Comcast Corp. and
Cox Communications Inc. Charter had recently dropped TV Guide in several systems
and replaced it with TVGateway.
'We expected that TV Guide would do affiliation agreements with partners in
TVGateway. The key is that it's not an exclusive agreement, so the rollout of
TVGateway will continue,' WorldGate spokesman Jim Boyle said Tuesday.
Shares in Gemstar had jumped about 14 percent to $51.94 by noon Tuesday.
Shares in WorldGate, which manages the TVGateway consortium, were down about 12
percent to $6.44.
Gemstar will work closely with Digeo -- the interactive-TV company owned by
Charter CEO Paul Allen's Vulcan Ventures Inc. -- on the Charter deployment,