TiVo, EchoStar, DISH Network Make Nice Nice (To The Tune Of $500 Million)

Dave Zatz —  May 2, 2011

tivo-slays-dish

After decades of DVR patent litigation, the court’s most recent decision has forced EchoStar (SATS) and DISH Network into a $500 million settlement with TiVo. Above and beyond the court-sanctioned penalty of $100+ million paid in 2008.

As the story goes, TiVo approached DISH way back when to partner and dropped off an early DVR for evaluation. Well, a deal didn’t get done and that DVR was never seen (by TiVo) again. Yet the underlying tech was reverse engineered, finding its way into EchoStar’s own DVR offerings. And, thus, TiVo filed suit. It’s been a long and winding road. Including a sleep-inducing visit to the US Courts of Appeals by yours truly. While most other corporate entities would probably have settled sooner at a smaller cost, DISH/Echo CEO Charlie’s Ergen’s strategy appears to have been dragging litigation out as long as possible until they either caught a lucky break or TiVo ceases to exist. Heck, TiVo challenged the courts to do the right thing and wrap this up in a timely fashion. It didn’t happen, DISH/Echo were found in contempt (again), and here we are. $500 million isn’t the $1 billion (!) TiVo was posturing for. However, for a company that has very rarely found profitability by actually selling its own product, this is a huge windfall and the respective parties can finally put it to bed. Assuming the courts let them.

Some details of the settlement from a joint announcement:

Under the terms of the settlement, DISH Network and EchoStar agreed to pay TiVo $500 million, including an initial payment of $300 million with the remaining $200 million distributed in six equal annual installments between 2012 and 2017. TiVo, DISH Network and EchoStar agreed to dismiss all pending litigation between the companies with prejudice and to dissolve all injunctions against DISH Network and EchoStar.

The parties also granted certain patent licenses to each other. TiVo granted DISH Network a license under its Time Warp patent (US Pat. No. 6,233,389) and certain related patents, for the remaining life of those patents. TiVo also granted EchoStar a license under the same ‘389 patent and certain related patents, for the remaining life of those patents, to design and make certain DVR-enabled products solely for DISH Network and two international customers. EchoStar granted TiVo a license under certain DVR-related patents for TiVo-branded, co-branded and ingredient-branded products.

This large influx of cash will certainly come in handy as TiVo hopes for a repeat by taking on Verizon, Motorola, AT&T and Microsoft. Also, one hopes a newly flush TiVo won’t necessarily have to abandon retail. Although, there’s no guarantee they won’t.

27 responses to TiVo, EchoStar, DISH Network Make Nice Nice (To The Tune Of $500 Million)

  1. Two other notes… Many thanks to Davis Freeberg for the most awesome graphic we’ve used for years to cover this story. And do you remember that time when TiVo bought the bull in Marshall, Texas? Ah, the memories. ;)

  2. Thanks for covering!

  3. It will be interesting to see what DVR patents Dish owns unless they are talking about Slingbox.

  4. Oh my god….seriously? Dish is finally signing a licensing agreement and giving up on this fight?
    Now this is truly a day to celebrate.
    Not that I would have minded to see those Dish dvr’s shut down…..just for a little bit first, but oh well.

  5. Another thought occurred to me. I wonder if we will see a DishTiVo before we see a new DirecTiVo lol.

  6. Listening to TiVo call. Seems like they will cover Blockbuster relationship on this call too.

  7. TiVo will work with DISH Network to expand and grow the Blockbuster product offered on TiVos. (Paraphrase)

    They state this settlement validates their patents validity, and are calling out AT&T & MS.

  8. By calling out, I meant, “warning” AT&T, Verizon & MS and others the validity and enforceability of the TiVo IP and Patents.

  9. Of course, those scenarios are entirely different. But it may be more efficient, if not more cost effective, for the targets to settle. Interestingly, TiVo itself runs on Motorola hardware (as part of their botched Comcast offering/deployment)… as does Verizon FiOS and AT&T U-Verse. Do all three rely on the same low level recording functions, and was OK when TiVo did it, or were they introduced by the third party software. If these cases move forward, it should get interesting…

  10. Okay, so lemme get this straight. DISH already OWED TIVO 300M from the previous court agreement in 2009, but didn’t pay. They continued to take it court, and now two years later agree to settle for 500MM, thinking about it now from a TVM or PV standpoint, I think DISH is the winner in the battle actually.

  11. Yeah, they had DISH on the ropes. Not sure why they agreed to settle. Perhaps TiVo figured the extra hundred millions would be too costly (time and cash) or too uncertain to go after? Maybe they need that cash now that they’ve got several other high profile cases to fund? Who knows.

  12. Despite the payout, this really doesn’t feel like a win for TiVo. They were hoping for a licensing deal with recurring payments. A $500 million dollar boost is nothing to sneeze at, but with TiVo hemorrhaging subscribers, they need a steady revenue stream.

    The next big question is whether $500 million dollars ($300 mil really since the remaining won’t be paid off till 2017) will be enough to simultaneously take on AT&T, Verizon and Microsoft while trying to operate the company on a day to day basis.

    Oh and I guess we know why Dish bought Blockbuster, to use as leverage against TiVo. :) Blockbuster should have been allowed to die, instead we’re going to get a zombie rental service.

  13. Silly commentary from DBSTalk repeated on Investor Village. The theory goes that the two were more likely to settle once Blockbuster was acquired because they are a ‘major retailer’ for TiVo. First off, there’s no such thing as a highly successful retail outlet for TiVo. Secondly, Blockbuster never carried the Premiere and had to actually liquidate TiVo HD and S2 hardware at like half off prices to clear the inventory they couldn’t sell.

  14. their 8-k filing just now seems to indicate that there WILL be recurring revenue for licensing and additional marketing going forward from DISH, which makes sense. (ca. 50M yearly)

    they might need the war chest for the additional suits outstanding, but here’s my trader hat talking:

    IF we see another settlement, or hear about talks – it is REALLY time to buy as it would be a huge indicator that there might be an acquirer in the wings but only willing to jump IF they have settled most of the outstanding court cases.

    disclaimer: I am not an analyst nor making a direct recommendation of TIVO – although I AM right 8 times out of 10. :-) I was short TIVO till last week, but have no current position in TIVO.

  15. I think the ‘major retailer’ means that TIVO is a major provider of content delivery for the blockbuster streaming service, which was recently bought by DISH.

  16. Except no one cares about or uses Blockbuster streaming and it wouldn’t force TiVo’s hand to accept a settlement.

  17. Not sure this validates Tivo’s case. I mean, DISH got slapped hard by the court for lying, not for the strength of tivo’s patents.

    Other companies are a bit smarter.

  18. I’m a bit disappointed TiVo settled for $500M, but if Tivoboy is right and it’s $500M + ~$50M/year, it makes more sense.

    Interestingly, Dish stock is up more than 16% right now while TiVo is up only about 5%. I guess, Dish investors think the company dodged a bullet.

    P.S. Agree with everyone on Blockbuster — that couldn’t have had much influence on the settlement.

  19. Funny how TiVo’s stock seems to move more on prior court decisions/victories, like the one last month, rather than the actual cash payout. Guess folks assume TiVo’s upside is limited now that this case is wrapped up.

  20. It’s not $50M/year, it’s actually about $33.3 million a year.

    There’s 6 payments from 2012 to 2017 (that’s 6 years). The patents expire in 2018. With Dish’s estimated 19.2 million subscribers (as of end of 2010) that’s about $1.75 per subscriber per year. That’s actually not that bad a deal.

    The part of the deal that’s not great is the back pay of $300M, but that’s the damage amount the courts decided on.

  21. Interestingly enough, so far Dish’s stock is up more than TiVo’s today. 15.73% versus 4.49%.

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