Combined Rovi-TiVo Entity To Tout 'Expanded Reach,' 'Deeper' IP Portfolios

Rovi and TiVo “are collectively responsible for the innovation that millions of consumers use every day, including the interactive program guide and the DVR,” Carson said. “This strong history of innovation has put us at the forefront of today’s evolving media landscape with industry-leading technology solutions, not only for traditional and hybrid set-top boxes, but also for over-the-top and cloud-based services.”

The combined company, which will adopt the TiVo corporate name, “will have tremendous reach with products serving nearly 500 service providers in more than 75 countries and 28 million households,” Carson said. Rovi and TiVo collectively have invested more than $1.5 billion in R&D the past 10 years, “creating an innovation engine that has resulted in more than 6,000 patents and pending applications,” he said.

Rovi and TiVo believe “our two companies’ expanded reach and deeper product and IP portfolios will allow us to grow faster and generate even greater value for all Rovi stockholders,” Carson said. By coming together, “we can drive significant synergies, while extending our reach and strengthening our offering to more effectively execute our shared vision,” he said. The companies are confident they can achieve $100 million or more in annual cost synergies, “while building a stronger, more robust and profitable combined company,” he said. “We will do this while maintaining key product deliverables and customer relationships.”

The companies also expect to “drive top-line revenue by leveraging our complementary capabilities,” Carson said. Opportunities abound for the combined company in the media and entertainment landscape that’s “undergoing significant transformation,” he said. “Consumers are more engaged with content than ever before, but the increasingly fragmented nature of the market presents challenges for both end users and service providers. Turning on our strong legacy of innovation, the combination of Rovi and TiVo will redefine the media experience and enhance viewer engagement for our customers, for our employees and for our stockholders.”

Combining Rovi and TiVo “will create the market’s largest entertainment software provider with hundreds of operator, consumer electronics and content owner relationships,” Naveen Chopra, TiVo interim CEO, said on the call. Rovi and TiVo see “clear opportunities to combine product offerings and create end-to-end solutions for service provider partners,” Chopra said. “We can integrate and bundle software, cloud services, metadata, advertising and analytics.”

The combined company also “will allow us to apply significant R&D capability and leverage our consumer DNA across an even broader group of products and customers,” Chopra said. Doing so will create the “opportunity to pair TiVo’s unique viewing data with Rovi’s analytics tools and create a valuable data analytics platform with enhanced targeting capabilities,” he said.

Rovi and TiVo have several overlapping businesses, but also business interests that complement one another, Carson said in Q&A. “If you look at what TiVo does and you look at what Rovi does, frankly we are in many similar types of areas,” he said. Both companies have electronic program guides for the “traditional set-top box use case,” but also have invested “pretty heavily” for Internet-connected guides for “mobile experiences,” he said. Rovi and TiVo also both have advertising, analytics and “search-and-recommendation” businesses, he said. So “I think when you look, this is really an incredible opportunity to come out the back end of this with really best-of-breed technologies in all discovery areas,” he said. In complementary areas, “TiVo is a big user of metadata,” and “obviously we provide metadata, so we think our metadata solutions will fit very nicely in the TiVo experience,” he said. Combining TiVo’s 10 million subscribers and Rovi’s 18 million also “makes for a pretty compelling experience,” he said.

Carson doesn’t worry that acquiring TiVo runs the danger “of putting us in competition with our existing customer base,” he said. Since Rovi lacks a “complete end-to-end guide solution with some of the big operators, there is certainly an opportunity to take all of these technologies discretely and offer them to some of the bigger operators,” he said. “So I think from that perspective I think it kind of enhances what we’ve been trying to do. So I don’t really see that as being problematic.”

Combining the two companies “really gives us more strength,” Carson said. Acquiring TiVo “I think puts us in a great position to be able to deal not only with kind of the Tier 2, Tier 3 providers, but with the big providers,” he said. TiVo also has “a great geographic footprint,” he said. “This really puts us in a significant number of countries around the globe.”

Rovi and TiVo have faced "headwinds" independently in signing on new customers because many operators are reluctant “to stitch together pieces from a number of different partners,” Chopra said. What he finds “really exciting” about the deal “is the ability to take the experience that we put in front of the consumer,” and “tie it, integrate it with a lot of the capabilities” that Rovi brings to the table, he said. Those capabilities include “very robust, high-quality metadata” that TiVo lacked because “we really lowered the bar for a lot of these operators to deploy our solution,” he said.

Rovi is “really excited” about the retail consumer business “that TiVo brings to the equation here,” Rovi Chief Operating Officer John Burke said. TiVo’s “vast experience” in “working directly with consumers has been quite valuable for their business” because it has “really brought back a lot of good information” about consumer usage patterns, and that has “really enhanced the TiVo experience,” Burke said. “So we're very keen to continue that effort.”

Though Rovi and TiVo were barred “for a lot of obvious reasons” from discussing the deal with TiVo’s big customers, “we are very sensitive to the combination of the two companies and the concerns customers have and there is a plan to very proactively go out and talk to them,” Carson said. How TiVo’s customers would react is “a question that we have thought very carefully about,” Chopra said. But he’s “really confident” the deal will be well received, he said. As of Jan. 31, DirecTV was TiVo’s largest pay-TV customer in terms of service revenue, TiVo said in a 10-K report filed March 23 at the SEC. DirecTV representatives didn’t comment Friday on the Rovi-TiVo deal.