Comcast and TiVo Strike Deal

TiVo and Comcast reach a deal to allow TiVo software on Comcast boxes.

It’s official. After reported rumors in both the Wall Street Journal and USA Today, TiVo and Comcast have announced a deal this morning. Comcast Corp. expects to begin selling the new DVRs, which will carry the TiVo brand, by mid to late 2006. Financial details were not disclosed but it was reported that Comcast will let TiVo extend to Comcast subscribers the advertising it sells in the form of interactive video clips that automatically appear in the TiVo menu.

From the press release:

“We are very excited that we will be able to offer TiVo to our customers along with our Video On Demand, High Definition and other premium services that add such great entertainment value. The strong TiVo brand, the clear track record of customer loyalty it has and its cutting edge features make this a terrific partnership and exciting new product for Comcast,” added Steve Burke, president of Comcast Cable and COO of Comcast.

“The chance to combine TiVo’s unmatched DVR features and innovative advertising capabilities with the power of Comcast’s advanced digital television services presents tremendous opportunities,” said Mike Ramsay, Chairman and CEO of TiVo. “Broad deployment to millions of Comcast homes nationwide will enhance TiVo’s recurring revenues. Together, both companies will work to offer customers the best and most convenient premium television service.”

“It is very important that TiVo has found a way to work with the nation’s largest cable operator on a cooperative basis to develop a state-of-the-art TiVo Service, fully integrated with a cable set-top box, that will make TiVo available to millions of cable viewers. By making TiVo available, Comcast once again shows that it is leading the way in providing advanced digital services, such as video-on-demand, to television viewers. This is a real milestone for TiVo and for the cable industry, but most importantly it is a milestone for television viewers,” said Tom Rogers, vice chairman of TiVo.”

There are several interesting questions that still remain regarding this deal.

One, how will this impact the previously announced TiVo/NetFlix arrangement? Will Comcast really want to allow NetFlix a video on demand option through their cable boxes competing with their own pay per view offerings?

Two, how will any advertising or “couch commerce” type dollars be split? Will TiVo get to keep all of the eventual revenue generated from the ancillary businesses that are part of it’s strategy? This may be a small percentage of TiVo’s revenue today, but especially with a much larger install base and critical mass this number could become much more significant.

Three, how much control, or disabling, will Comcast have over TiVo’s Tahiti initiative? Will the SDK HME stuff work on the new Comcast boxes? If someone develops a poker plug in for TiVo or say the current eBay plug in, will these work on the Comcast boxes?

Four, will this new agreement cannibalize TiVo retail sales and how will folks like Best Buy feel about this? After all, why buy a TiVo unit at Best Buy when I can just wait and get a new TiVo box from Comcast?

Also in what might be considered something of a controversial story, Dow Jones is reporting that Chairman and Chief Executive Michael Ramsay was granted 250,000 options to acquire company stock, according to a regulatory filing. The stock options have strike prices of $3.78 — a nice price, particularly given the run up today with the stock now at $5.72. Was this nice coincidental timing for Ramsay or was this some kind of reward payment for striking a cable deal. This seems like an awfully generous thing to do for an outgoing CEO who really is just doing his job by negotiating the deal.

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