Some five weeks after reports first emerged that entertainment discovery specialist Rovi was planning to acquire advanced television technology specialist TiVo the pair have confirmed a cash and stock deal of approximately $1.1 billion (€0.96bn).
The new company combines two media and entertainment technology innovators with complementary products, services, and intellectual property assets and a common mission to write the next chapter of the consumer entertainment experience. The company will continue to be led by Tom Carson, current CEO of Rovi, and upon closing of the transaction will adopt the iconic TiVo brand as the new company name.
“Rovi’s acquisition of TiVo, with its innovative products, talented team, and substantial intellectual property portfolio, strengthens Rovi’s position as a global leader in media discovery, metadata, analytics, and IP licensing,” said Carson. “It’s an exciting time as the media and entertainment landscape undergoes a significant evolution. The combined capabilities of TiVo and Rovi place us in a tremendous position to extend services across platforms and to a customer base that includes traditional, over-the-top and emerging players across the globe. By working together, Rovi and TiVo will revolutionise how consumers experience media and entertainment and at the same time build value for our stockholders.”
“We’re proud of TiVo’s strong innovation history and of the ongoing efforts of our team to provide best-in-class products for our loyal consumer and service provider customers,” said Naveen Chopra, Interim CEO and CFO of TiVo. “This transaction is the culmination of those efforts and the logical next step for TiVo. In joining forces with Rovi, our customers, employees and stockholders will benefit from being part of a more diversified industry leader with significantly greater market opportunities. Our combination creates a more influential global player with a commitment to product innovation, which will be incredibly well positioned to redefine television.”
Natural Synergy, Strong Business
This transaction brings together the technology and products required to achieve the company’s strategic goals and deliver substantial stockholder value.
Shared Customers, Global Reach
Rovi and TiVo serve many of the largest pay-TV operators both in the U.S. and around the world.
Unique Company, Further Innovation
Strong Intellectual Property Portfolios and Licensing Business
Together, Rovi and TiVo have worldwide portfolios of over 6,000 issued patents and pending applications worldwide.
The Most Powerful Analytics in the Industry
The combined company will offer the industry’s most powerful analytics platform dedicated to media and entertainment, helping service providers and media companies strengthen consumers’ connections to the content they love.
The Board of Directors of the combined company will include participation from TiVo’s current Board.
The boards of both companies have approved the transaction. The transaction is subject to customary closing conditions, including approval by TiVo’s and Rovi’s stockholders at special meetings to be held in connection with the transaction as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act. The companies believe that they will be able to obtain the requisite clearances on a timely basis and the transaction is expected to close in Q3 of 2016.
According to Merrick Kingston, principal analyst, IHS Technology, the acquisition is partly a tale of strategic repositioning, and partly a tale of boosting a plateauing business.
Over the past two years, both companies have faced rather strong headwinds. Rovi has struggled to secure major operator deployments, has seen its service provider IP-licensing business flat-line, has endured a sustained decline in its consumer-electronics licensing business, has experienced declining sales, and — by losing a high-profile infringement claim against Netflix — has had five key patents invalidated (encompassing content search, content filtering, and content recommendation based on viewing history).
TiVo’s consumer-hardware business is declining, the company has also struggled to amass new, large-scale operator deployments, and the company has witnessed its own IP-licensing fortunes plateau. Moreover, TiVo expects its entire IP-licensing business to contract by two orders of magnitude, and decline into irrelevance, by the mid-2020s.
The good news is that the two firms collectively preside over an invaluable set of media company relationships, and most importantly, they have at their disposal an ensemble of products with capabilities and underlying technology that are widely perceived to be peerless. Rovi possess a superlative search-and-recommendation product, has made major investments in its set-top based consumption analytics platform, and has a stranglehold on the content metadata that huge swaths of the media industry rely on to offer personalisation and recommendation features. TiVo’s UI is the standard-bearer for seamlessly navigating walled-garden and third-party OTT content. The company’s own recommendation platform is strong, and the firm’s subsidiary – TiVo Research – already provides multi-device, cross-platform audience data and consumption analytics to agencies, advertisers, and programmatic ad exchanges.
These complementary strengths will allow the combined entity to pursue the following three overarching opportunities:
1. Acquisition provides the means to address major changes in the types of technologies that media companies demand. Operators in particular cannot continue to rest their future fortunes on the sale of large, monolithic channel bundles. The structure of media distribution has changed, and with it the role of uncertainty. In the face of structural demographic change, new consumption behavior, the oversupply of choice, and the trend toward micro bundling, pay TV will require unprecedented insight into its audience: what it wants, to whom it should sell, and what it should sell. The future pay TV business will be anchored in analytics, and the new TiVo will be uniquely positioned to address this shift in technology demand.
2. The new TiVo will possess a client footprint of the highest calibre. Spanning Dish Network, DirecTV, AT&T, Verizon, Time Warner Cable, Com Hem, Korea Telecom, Samsung, LG, Panasonic, SK Broadband, ONO, Sharp, and Virgin Media and others, the new entity’s search, recommendation, UI, metadata, analytics, and advertising business will be well equipped to generate new value from an addressable market that is so strong.
3. The deal remains predicated on the companies’ conviction that their combined intellectual property portfolio will bolster a flagging revenue stream. This conviction shows chinks in its armor, however. Over the last eight quarters, Rovi’s average quarter-over-quarter IP-licensing income has contracted by 3 percent. TiVo largely anticipates that its licensing income will disappear altogether in 2020. While Rovi announced a major licensing deal with Intellectual Ventures (IV) this year – effectively becoming IV’s exclusive media-and-entertainment focused channel partner – the agreement is largely orthogonal to the TiVo acquisition. It is difficult to foresee how TiVo’s patent portfolio will materially change Rovi’s IP-licensing opportunities.