U.K.'s Virgin Media Taps TiVo For Next-Gen Set-Tops

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TiVo is adopting a British accent: The company announced Tuesday that Virgin Media, the U.K.'s largest cable operator, has entered into an exclusive partnership under which TiVo will develop the operator's next-generation TV platform.

The deal comes at a critical juncture for TiVo, which is attempting to ramp up distribution through pay-TV providers -- including Comcast and DirecTV -- as its base of subscribers continues to shrink.

During the quarter ended Oct. 31, TiVo shed 314,000 net subscribers to stand at 2.7 million total. That's compared with 3.5 million in the year-ago period. On the financial front, TiVo's quarterly net revenue fell 11.8% from a year prior, to $56.9 million, and posted a net loss of $6.7 million.

TiVo is hoping deals such as the one it signed with Virgin Media will turn the tide. The cable company will become the exclusive distributor of TiVo services and technology in the United Kingdom, and anticipates its first TiVo co-branded product in 2010. The terms of the deal were not disclosed.

In a statement, TiVo president and CEO Tom Rogers said the Virgin Media deal "affords us a significant subscriber-growth opportunity." TiVo also has distribution deals with DirecTV -- which Rogers said is on track to launch a TiVo-based HD DVR next year -- as well as Comcast, RCN and Cox Communications.

Another major development that will affect TiVo's future is decision pending from the U.S. Court of Appeals for the Federal Circuit about whether to overturn a lower court's finding of contempt and infringement against EchoStar and Dish Network. The total damages and sanctions EchoStar and Dish have been ordered to pay TiVo -- which accused the satellite operator of infringing its "Time Warp" patent on time-shifting video -- is $400 million through July 1, 2009, excluding potential further damages and sanctions.

With Comcast, TiVo is continuing to work to port the its software to Comcast boxes and a tru2way platform, "which we expect will facilitate TiVo's move into additional markets," Rogers said. Comcast has reinitiated its marketing efforts across the New England market, "now that the vast majority of technical hurdles have been cleared," he added.

Cox, meanwhile, has moved out of the testing phase with its TiVo-based boxes and is in the very early stage of deployment in its New England region. "We expect the [Cox] rollout to pick up speed and increase in scope throughout 2010," Rogers said.

Under the deal with Virgin Media, TiVo will become the exclusive provider of middleware and user interface software for Virgin Media's next generation of set-top boxes. The new platform will let customers to search and discover content across linear TV, video-on-demand and broadband video, "creating the ultimate one-stop-shop for in-home entertainment," the companies said.

"TiVo's proven track record of innovation, strength of its patented technology and experience in developing best in class user environments, make it an ideal strategic partner for Virgin Media as we move aggressively to bring our next-generation TV service to market," Virgin Media CEO Neil Berkett said in a statement.

As it pursues deals with MSOs and other TV operators, TiVo also is attempting to resuscitate direct-to-consumer sales. The company recently signed a deal with retailer Best Buy to commence in early 2010, under which TiVo will create "unique user interface elements" for Best Buy's line of consumer electronics that will be integrated with Best Buy's digital content offerings.

In addition, Rogers called out a new keyboard remote control that TiVo is developing aimed at improving the usability of the boxes' Internet-delivered services.

Meanwhile, earlier Tuesday, TiVo announced a deal to sell set-top box data from its direct subscribers to Google. Financial terms of that deal weren't disclosed either.

For the fourth quarter of fiscal 2010, TiVo anticipates service and technology revenues in the range of $43 million to $45 million a net loss in the range of $13 million to $15 million. TiVo said higher research and development and litigation expenses "will impact" fourth quarter 2010 results.

TiVo reduced revenue and net income for the Oct. 31 quarter by $1.8 million because of "a one time catch-up reduction in service revenues" associated with a subscription over-reporting error for the past 18 months by DirecTV.