Gemstar-TV Guide International Inc. signed Comcast Corp. to a 20-year deal to license its interactive program guide, the companies announced Friday morning.
The agreement is a big boost for Gemstar, considering that Comcast is one of the four MSOs that formed the TVGateway consortium with WorldGate Communications Inc. last summer in order to compete with Gemstar in the guide market.
Comcast agreed to deploy TV Guide Interactive to the "substantial majority" of its systems, including its six major-market clusters, Gemstar co-president Peter Boylan said during a conference call. The deal includes advertising and television-commerce revenue splits, as well as video-on-demand and personal video recorder integration, he added.
Gemstar and Comcast cut a separate deal that will see Comcast launch Gemstar's Television Games Network "in two of their top states" within the next several quarters, Boylan said. The network allows cable subscribers to gamble on horse races from their living rooms.
Comcast spokeswoman Jenni Moyer said she couldn't confirm the Television Games carriage deal.
Gemstar will retain an 85- percent minimum of advertising revenue and 50 percent of television-commerce revenue generated through TV Guide Interactive, with Comcast keeping the remainder, Boylan said. The MSO will earn additional local avails as it moves "closer to 100 percent penetration" of TV Guide Interactive, he added.
Comcast also agreed to dump the "Sara" IPG supplied by Scientific-Atlanta Inc. and replace it with TV Guide Interactive, Boylan said. Gemstar currently has patent-infringement suits and an International Trade Commission complaint pending against S-A, EchoStar Communications Corp. and Pioneer Electronics Corp.
Moyer said Comcast agreed to replace the S-A guide with TV Guide once the integration work is complete. S-A officials didn't return calls before deadline.
Gemstar's IPG is now deployed to two-thirds of Comcast's 1.4 million digital-cable subscribers, UBS Warburg estimated.
WorldGate spokesman Jim Boyle refuted Boylan's claim that TV Guide will be distributed to the "substantial majority" of Comcast systems, insisting Gemstar will only get a majority of Comcast subscribers.
Even though Charter Communications Inc., another TVGateway partner, recently signed a 10-year licensing deal with Gemstar, Boyle insisted that the consortium remains committed to rolling out TVGateway. "There was never an expectation that there would not be deals done with TV Guide," he added.
WorldGate has claimed that TVGateway is deployed on 24 cable systems, but won't disclose the specific systems owned by consortium members that have the guide.
Boylan devoted a big chunk of Friday's conference call with analysts to lambasting EchoStar CEO Charlie Ergen. He complained that Ergen told some "pretty tall tales" about the merits of Gemstar's patent-infringement suit against EchoStar at a March 14 Janco Partners conference.
"It's what you would expect from any poker player that has been dealt a bad hand," Boylan said of Ergen, a gambling fan who has been known to play poker with Wall Street analysts.
Boylan said that Ergen told investors and analysts that even if EchoStar lost the case, it wouldn't be a significant loss, because the company could just use the flash memory capability of its set-tops to download a new guide to its set-tops.
"I believe this is not only misleading, but it ignores that if they were to be found guilty of infringement, the damages would go back to 1994 on every box," Boylan said. "And if we prove willful infringement, that number would be tripled."
EchoStar spokeswoman Judianne Atencio confirmed that Ergen spoke at the Janco conference, but said the company would not comment on Boylan's remarks on Friday.
Shares in both EchoStar and S-A had dropped about 4 percent by 1 p.m. on Friday.
Gemstar stock had jumped about 17 percent by that time, after falling to a 52-week low of $25.50 last Thursday.