We always knew “time travel” was profitable: TiVo and their “Time Warping System”
As announced in their settlement press release, TiVo, Dish Network, and EchoStar have settled their patent disputes, with $500 million going the way of TiVo (initial payment of $300 million and $200 million in 6 installments between 2012 and 2017). Also, as part of the agreement, patent licenses were granted multi-laterally. A previous payment of just over $100 million to TiVo for the time warp patent brings the total paid (or to be paid) to TiVo to over $600 million.
While these sums could be viewed as an outcome of a costly and acrimonious (and protracted) legal battle, the announcement was littered with positivity:
“We have tremendous respect for TiVo’s management, and we have always said that regardless of the outcome of the case, there were many ways that we could work together with TiVo,” said Charlie Ergren, Chairman and CEO of DISH Network.
“We are extremely pleased to reach an agreement with DISH Network and EchoStar which recognizes the value of our intellectual property,” said Tom Rogers, president and CEO of TiVo.
As a prelude to things to come he added “those efforts (to diligently enforce TiVo’s intellectual property rights) will aggressively continue with other parties.” It seems the statement in the 2010 TiVo annual report that “the emerging enhanced-television industry is highly litigious” is no exaggeration. TiVo has complaints against Verizon and AT&T, which are pending resolution.
The following diagram depicts the overall patent litigation timescape for TiVo:
One of the central patents in question to all of this is patent 6,233,389 “Multimedia time warping system,” the TiVo innovation that allows you to record one program while simultaneously watching another on a different channel. This patent now accounts for over $600 million in revenues (past and future) for a company that recorded $237.6 million in revenues for 2010 and a market cap of just about twice the litigation figure (approximately $1.2 billion). Clearly this patent and associated productization and litigation has paid huge dividends for TiVo – time travel DOES pay.
In looking further into the future of TiVo, it is noteworthy that their primary business model is driven by OTHER manufacturers and cable operators (i.e., they rely on others for distribution). Their brand is strong and they obviously have some very valuable IP, but they may be vulnerable to the vagaries of the shifting media markets and their convergence (video and media delivery overall has massively changed in the last 5 years). For these reasons, they would seem an ideal candidate to be acquired to a more substantial player in media (Google and Apple included).
They also hold some IP risk of their own, but the EchoStar finding does give some confidence that their own portfolio can be asserted successfully against others. From Tivo’s annual report:
“A successful claim of infringement against us, our inability to obtain an acceptable license from the holder of the patent or other right, or our inability to design around an asserted patent or other right could cause our manufacturers to cease manufacturing DVRs that enable the TiVo service, our retailers to stop selling the product or us to cease providing our service, or all of the above, which would eliminate our ability to generate revenues.”
In assessing who has been active in acquiring such technologies as the “time warp” patent, we looked at reassignments of patents in similar classes:
For class 386:
For main-line class 386/200:
And finally, for class/subclass 386/232:
If TiVo’s brand or technologies and IP can be leveraged successfully by one of these players (Google, Apple, or someone else), it certainly doesn’t seem far-fetched to suggest that their market-cap of $1.2 billion (or some multiple) would be a very justifiable acquisition, particularly on the back of the $500 million “time warp” judgment.
TiVo, DISH Network and EchoStar Press Release: