India: Breaking Up Of Products And IP Licensing: Tivo

Last Updated: 26 June 2019
Article by Amit Ranjan

Introduction:

TiVo is one of the prominent leaders in the field of broadcast services. It is a digital video recorder capable of recording live TV programs. It was incorporated on August 4, 1997, as "Teleworld, Inc." by Jim Barton and Mike Ramsay, veterans of Silicon Graphics and Time Warner's Full Service Network digital video system. It works in a form of set-top connected to the TV. TiVo allows viewers of TV to pause the content they are watching and record the same & watch it later and also transfer the same content via USB ports into one's laptop or cell-phones. The main highlight is that one can perform this function for live TV programs also. This provides viewers an altogether different experience of watching television. It also allows access to digital content providers like Amazon, Netflix, and YouTube on a subscription basis.

The company has also several Patents under their name in the field of broadcasting technology and it is involved in the IP licensing business. TiVo itself was acquired by Rovi Corp. for $1.1 billion in 2016, primarily for the many patents it holds related to online television viewing and the combined entity kept the name TiVo.[1]

Why the split is being done?

The Company has made an announcement that it is looking to split its Product and IP licensing business as part of its corporate restructuring. Both the business is expected to run independently, providing the co-corporation to catch up on the latest market opportunities. This decision is the result of growing competition where streaming service providers have made it all too easy for viewers to watch their favourite shows according to their own wish of how and when they want to watch. TiVo in this regard has found it difficult to sustain itself in the market. The company had made few decisions in the past which did not go well for their product business. Like for example, in the view of differentiating its product line with others, its newer Bolt DVR adopted an odd, angled shape that many users found it displeasing because of the fact that these new DVR models were required to be on display where the television set is located. Internet giant Amazon brought up its new product Fire TV recast which could be easily put behind the television set, and this was viewed as a more convenient product in relation to broadcasting services.

The following descion of splitting has also been prompted out of the fact that the company, over the past few years was facing a significant amount of financial losses, around $2.33 per share to end the fiscal year 2018.[2] TiVo initially looked for a scenario where it could manage one single company accruing its entire business but failed to do the same.

TiVo's business is categorized into two groups: Product and IP licensing through patent. The product business compromises of Platform Solution and Software and Service business. It provides applications for content creators to stream there content digitally which viewers can watch on their television sets. It also helps creators a trusted neutral platform to connect audiences to content and monetize transactions. The licensing business consists of Rovi and TiVo patent portfolios, which is in a total of 5,500 issued patents and pending applications worldwide. Millions of consumers get access to innovation of TiVo through license agreements with leading video providers around the world. The IP licensing business raked in $295 million in revenue in 2018, while its product unit had $401 million in sales.[3]

Effect of the separation

TiVo has intimated that the separation strategy has been followed for the purpose of focusing on innovation around the frontiers of new entertainment and communications that are developing beyond traditional footprints. The Company has been into a discussion with their investors regarding the outcome of the proposed decision and it is expected that the entire process of splitting the business should be completed by mid of 2020.

Several analysts have said that breaking the company into two entities will better position the IP licensing business to grow through a horizontal licensing strategy and take advantage of emerging growth opportunities, the company said. The IP licensing business will have better freedom to focus on innovation and address the "next phase of the consumer video experience".

References:

[1]https://techcrunch.com/2019/03/01/tivo-prepares-to-split-its-business-into-two-as-it-pursues-sale/

[2]https://www.multichannel.com/news/tivo-says-split-wont-affect-comcast-litigation

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