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Netflix and TiVo Shares Climb

Newsweek says a deal on movie downloads is near, but the companies downplay the prospects.

September 08, 2004|Lorenza Munoz | Times Staff Writer

Shares of mail-order DVD rental firm Netflix Inc. and digital recorder maker TiVo Inc. jumped Tuesday in the wake of a Newsweek report that said the companies were near an agreement to allow customers to download movies.

Both companies downplayed the prospects.

Netflix spokeswoman Lynn Brinton said there was no formal relationship between her company and TiVo, nor was there a timeline to form one. TiVo spokeswoman Kathryn Kelly told Bloomberg News that the company would not offer a movie download service for at least a year.

Newsweek said the companies planned to offer the service to subscribers of Netflix and TiVo. Netflix allows customers to rent DVDs through the mail. TiVo's recorders allow users to pause, replay and store live television shows.

Shares of Los Gatos, Calif.-based Netflix rose $1.05, or 7.3%, to $15.41. Alviso, Calif.-based TiVo rose 66 cents, or nearly 15%, to $5.08. Both stocks trade on Nasdaq.

Netflix and TiVo must overcome obstacles before viewers will be able to download movies from their TV sets.

Hollywood studios have to determine what kinds of digital rights they will grant to the service providers and negotiate financial terms.

The studios are leery of granting download rights until better copyright protections are in place. In addition, they have to carefully guard their home video business, their biggest source of revenue.

"They have to go and obtain rights to movies from the studio, and the studios basically can say, 'This is how much we want' of each transaction," said Larry Gerbrandt, head of the entertainment and media practice of Century City-based consulting firm AlixPartners.

The report nonetheless bumped the stocks of two companies that have been hammered by investors in the last six months as competition for each firm has increased sharply. Shares of both companies are fetching less than half of what they did early this year.

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