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TiVo, Sony Reach Digital Recording Deal

10/18/2001 11:48:00 AM Eastern

San Jose, Calif. - TiVo said it has reached an agreement to license its personal digital recording technology to Sony for implementation in future devices using hard disc drives and other digital recording media including recordable DVD discs.

TiVo said the agreement gives Sony, which holds a major equity staked in TiVo, access to its TiVo personal digital recording technology, including recently patented hardware and software designs, for the development of new devices. Language in the agreement calls for TiVo technology in Digital Network Recorders (DNRs), although the company explained this is a term for a range of future digital recording devices and does not indicate a specific new category of products.

Sony had no statement of its own on its plans for use of the TiVo technology.

On the horizon, TiVo said the Sony deal and other to follow will result in not only next generation set-top TiVo boxes and recorders integrated into television sets, but devices such as DVD recorders and networked systems that deliver music and games in addition to video. TiVo expects the first Sony products to emerge from the deal should arrive within the next 12 months.

TiVo said the deal 'reaffirms' a long-term relationship between the two companies and 'further validates TiVo's intellectual property.' Sony has manufactured and marketed TiVo Personal Video Recorders for the past two years. Financial terms of the deal were not disclosed.

TiVo sees the deal yielding two revenue streams. One comes from technology licensing involving upfront fees, per-box royalties, professional services and maintenance. The second stream comes after equipment deployment from value-added services including subscription fees for the personal television service. The company said it expects to see between $10-$15 million in revenue in the startup year, from the licensing and royalties portion of the business.

TiVo said the new agreement expands on the old - which encompassed standalone and combo satellite receiver/TiVo recorders only -- giving Sony access to TiVo source code for other capabilities.

'This agreement forms the corner stone of our strategy to license technology to consumer electronics companies and service providers for the purpose of creating an open standards platform for digital video recorders (DVR),' stated Mike Ramsey, TiVo CEO. 'The agreement will enable TiVo to place its service on Sony digital recording devices thereby creating a broader market for the TiVo service and the growth of the TiVo subscriber base.'

Morgan Guenther, TiVo business development senior VP, said the Sony deal was the starting point for future licensing agreements with other strategic partners, adding: 'we started with what we thought was the best of the breed.'

TiVo has 'a pipeline of discussions with key strategic partners that will help us deploy the technology and proliferate the platform,' Guenther said

He said the company has a patent portfolio on digital recording technology that gives it a strong position against new intellectual property claims.

Asked if the deal with Sony was a precursor to forthcoming legal actions against rival companies, Guenther said, 'at this stage of the game our focus is on building the portfolio and proliferating the platform with deals like these. We'd rather not use the hammer - we like the carrot approach.'

The deal comes at time when TiVo was reportedly headed for a depletion of funding by the end of the year. Guenther said, ' in a fast growth company you are always looking at your cash balances, but we very recently raised about $50 million in a bond offering. We feel good about our cash position. We manage it closely, and we are comfortable with our direction and strategy to have the staying power to see this thing through.'