TIVO Deathwatch: DirecTV Wins Again

This heart of mine could never see
What everybody knew but me
Just trusting you was my great sin
What can I do, you win again

- Hank Williams

DirecTV and TIVO made an announcement today that at first blush sounds like great news. At first blush.

In the wake of DirecTV abandoning TIVO in favor of some as yet unreleased DirecTV branded recorder, the parties agreed to extend their “commercial agreement” for 3 years.

So what does this mean for DirecTV customers who use TIVOs? In my house we have 4 of the HDTV DirecTIVOs. I call them our $1000 doorstops in waiting.

First of all, it won’t keep our TIVOs from being obsolete in the face of the move to MPEG-4 by DirecTV as a part of the roll out of local networks in HDTV. In fact, the Houston stations are supposedly available now in HDTV. The only problem is that there is no MPEG-4 compatible DirecTIVO or equivalent. So while today’s news likely means that my DirecTIVOs will continue to receive the channels that are currently available, they will not get the Houston HDTV locals or presumably any new DirecTV HDTV content, which will likely be pushed in MPEG-4 format.

It also seems unlikely that TIVO will produce a new MPEG-4 compatible DirecTIVO. And if it did, the fool me one rule dictates that consumers not buy it in light of the 3 year term of the new agreement. I suppose if the unit came out shortly, I’d consider buying it, as 3 years is a long time in tech-years. But every day that passes makes that a less desirable option.

While this deal sends a little oxygen into TIVO’s breathing tube, the real win is on the DirecTV side of the ledger, as part of the deal is an agreement that TIVO will not sue DirecTV for patent infringement, like it is currently suing EchoStar, operator of the Dish Network.

Meanwhile, DirecTV continues to develop and market their own branded digital recorders.

TIVO does get an extension of the $1 per month per TIVO box payment from DirecTV. This is worth about $36M a year- which is real money.

Commenting on the new deal, Nyquist Capital cuts to the bottom line and says:

In short, we’’re a little stumped why the market thinks this is such a great deal beyond protecting a recurring revenue stream. If DirecTV had agreed to use Tivo exclusively and stop in house development, that would be big news. All that has really happened is a further extension of the status quo.

My conclusion is that someone at DirecTV got smart and proactive and cut a deal with TIVO that DirecTV views more as a settlement of the potential patent infringement claim than a business deal, in exchange for continuing the $1 per month per TIVO box payments for 3 more years. The fact that this will delay enraging all of the DirecTV TIVO users is just icing on the cake.

Let me say it again- this is about lawsuit avoidance. Think of it as a pre-settlement of a potential lawsuit.

TIVO gets some much needed cash to keep the lights on while it tries in vain to reinvent itself. DirecTV gets out of a potentially messy lawsuit and can claim to be taking care of its TIVO-loving customers.

Thomas Hawk (like me a TIVO user), while agreeing that there is less than meets the eye here, calls it a win/win. From the stands it sure looks like it.

But I bet if you pulled up the photo finish tape and had the contract in your hand, one horse’s nose clearly hit the finish line first.

DirecTV wins again.

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