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TiVo To Acquire Digitalsmiths

San Jose, Calif. – TiVo said Wednesday that it will acquire Cloud-based content discovery and recommendation service Digitalsmiths.

Digitalsmiths offers personalized video search, recommendations and browsing, social trending and mood-based discovery. This can be used to connect consumers to the most relevant movies, TV shows and live events available on multiple devices, including set-top boxes, tablets, smartphones, computers and gaming consoles.

Digitalsmiths currently works with 46 blue‐chip U.S. and international service providers, including seven of the top 10 pay-TV operators in the United States, and content providers and CE manufacturers.

“The Digitalsmiths acquisition opens new opportunities to commercialize and deploy TiVo’s Cloud-based services and technologies to operators, in an extremely cost effective way that can be offered either independently or in conjunction with TiVo’s renowned user interface,” said Tom Rogers, TiVo president and CEO, in a statement.  “Additionally, Digitalsmiths contributes expertise, data opportunities, and approaches that complement and extend TiVo’s extensive work in advanced television to customers seeking search, recommendations and portability.”

Rogers said the acquisition will expand TiVo’s role with tier-one U.S. service providers through its significant relationships with the seven of the top 10 U.S. Pay-TV providers, which serve 64 percent of the country’s Pay-TV households.

He added that Digitalsmiths’ “revenue growth trajectory and attractive margin structure can help accelerate TiVo’s long-term adjusted EBITDA growth.”

“Both Digitalsmiths and TiVo share an acute focus to improve the consumers’ viewing experience, and we understand the importance of the ‘service’ or ‘Cloud’ to achieve this goal through next-generation personalized video-discovery solutions,” said Ben Weinberger, Digitalsmiths CEO and co-founder.

Digitalsmiths delivers unified personalized experiences that instantly connect consumers with the most relevant video content available, at any time, on any screen.

The company’s core product delivers personalized discovery experiences that drive higher consumer engagement and satisfaction, helping video service providers increase average revenue per customer and decrease customer churn, the company said. Additionally, seamless discovery adapts to each user’s constantly changing viewing preferences in real time, ensuring a personalized experience that is relevant and effective in any discovery context at any particular time.

Digitalsmiths powers 46 domestic and international customers and partners, including Foxtel, Sharp, Univision, Zeebox and i.TV.

Currently Digitalsmiths’ Seamless Discovery platform is licensed to Service Providers and other providers covering more than 100 million households worldwide.

Digitalsmiths TV Everywhere video discovery solutions are deployed on such platforms as iOS, Android, Roku, Xbox, PlayStation, Kindle and multiple set-top boxes.

Digitalsmiths is experiencing rapid growth in transaction volume.  The company’s Cloud service handled 90 million transactions in July 2013, growing to almost 150 million in December.

During 2013, Digitalsmiths experienced rapid growth in both its user base and revenue. TiVo anticipates continued rapid growth from increased penetration within Digitalsmiths’ current customer base and through new customer wins.  Digitalsmiths’ current user base represents about 10 percent of the total potential user base licensed under its current contracts.

TiVo said it expects the active user base to grow to more than 50 percent penetration in the next few years.  These factors should drive significant double-digit revenue growth rates for Digitalsmiths for the next several years.

TiVo plans to provide additional details on the transaction when it reports its fourth-quarter fiscal year 2014 results.

Under the terms of the deal, TiVo will pay $135 million in cash, subject to a working capital adjustment. The transaction, which is subject to customary closing conditions, is expected to close in the first quarter of fiscal 2015.

Separately, TiVo said it has increased its current stock repurchase authorization by $100 million, giving the company approximately $186 million of unused repurchase capacity. In conjunction with this increased authorization, TiVo intends to repurchase $100 million during the first quarter of fiscal 2015.