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TiVo, DirecTV Reach Accord

The digital recorder firm's shares rise on an extended deal with the satellite TV provider.

April 13, 2006|From the Associated Press

SAN JOSE — Shares of TiVo Inc. rose 8% on Wednesday after the digital video recording pioneer announced it had extended a partnership with satellite TV provider DirecTV Group Inc. for an additional three years.

Under the agreement, DirecTV will continue to provide TiVo service to its existing subscribers. Both companies also extended their advertising relationship and agreed not to assert patent rights against each other.

The extension is good news for TiVo: 2.8 million of TiVo's 4.4 million subscribers as of January were DirecTV subscribers who bought the satellite company's TiVo-based receivers.

With DirecTV having recently begun switching to a competing technology from its sister company, News Corp.'s NDS Group, industry analysts had questioned whether TiVo would be entirely cut off from DirecTV when the old contract expires in February 2007. TiVo could have lost its existing DirecTV subscribers, each of whom brings TiVo about $1 a month in revenue.

"People are able to look at the certainty of this deal -- that not only will DirecTV subscribers continue to get our service but we will continue to be paid for it," TiVo chief Tom Rogers said.

DirecTV spokesman Robert Mercer said the extended agreement did not change DirecTV's plans to continue using NDS' digital video recorder technology for its receivers.

The companies didn't disclose specific financial terms of the deal but said they were similar to the 2003 agreement.

TiVo's revolutionary technology lets people record television without the hassles of videotapes. Users can pause live TV, do instant replays and begin watching programs even before the recording has finished.

In recent years, Alviso, Calif.-based TiVo has faced stiffening competition from bigger companies making their own digital video recorders, including Motorola Inc. and Scientific-Atlanta Inc., which has been bought by Cisco Systems Inc.

"The extension won't save the company, but the absence of it would have been really bad," said Josh Bernoff, an analyst at Forrester Research.

TiVo has been touting features such as parental controls to differentiate itself from rivals and is pursuing more licensing deals with cable companies and electronics makers to use its technology. It has signed a deal with the nation's largest cable operator, Comcast Corp.

The company also is in the midst of a jury trial against DirecTV's rival, EchoStar Communications Corp., the parent of Dish Network, alleging that the satellite TV provider is infringing its digital video recorder patents. Closing arguments in that case in Marshall, Texas, were scheduled for today. A legal victory there for TiVo could empower it to enforce its patents and try to collect licensing fees from other recorder providers.

TiVo shares rose 61 cents, or 8.1%, to close at $8.12.

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