Rovi To Acquire TiVo. Strategic Fit Or A Synergy Play? (original) (raw)

In the spirit of confusing four letter words, TiVo and Rovi are in talks to merge.

Though a Rovi spokeswoman claimed in an emailed statement that she wouldn’t “comment on rumors in the marketplace regarding speculation of possible M&A transactions or otherwise,” it’s pretty obvious at this point that TiVo, the pioneering DVR maker, is in advanced negotiations to be acquired by Rovi. The stockmarket reflects as much, and the pairing seems like a perfect fit… for Rovi, anyway. Maybe not so much for TiVo, which will lose its independence and brand-awareness, and gain a potentially less-than-tech-savvy CEO.

According to Variety, “the deal would bring together TiVo — which has shifted its business to selling software and hardware to pay-TV operators, away from retail sales of DVRs — with Rovi, a supplier of interactive program guides, entertainment metadata and related products to cable and satellite operators, consumer-electronics makers, media and entertainment firms, and Internet companies.”

The source of current profits for both companies is largely their issued and pending patents worldwide. Lucrative licensing deals and litigation have spurred growth for shareholders. But while Rovi holds over 5,000 patents, TiVo holds far fewer. This likely strengthens TiVo’s market position.

But what will the merger mean for us Regular Joe viewers?

According the NY Times, “the transaction would end the independence of TivO, a perennial takeover target whose suitors were said to have included Apple, Google and Microsoft.”

And this is because TiVo manufactures an actual product – they make DVRs with proprietary technology – which is great… but there’s fierce competition from Samsung and others, who routinely try to replicate TiVo’s patents. What makes TiVo and Rovi such a good fit is Rovi’s services, creating a system lock-in.

Viewers already recognize TiVo as the brand-name for digital video recording that popularized DVR and revolutionized “time-shifting” and fast-forwarding. We already love TiVo for freeing us from the seemingly endless ads during our favorite shows (each network drama episode is structured to cram in 6 ads in under 60 minutes!).

What we’re less familiar with is Rovi, which provides services such as TotalGuide xD and CE, Passport Guide, i-Guide, G-Guide, DTA Guide and Total TV, combining big data with predictive analytics to provide TV audience insights and advertising campaign management. Its ad Optimizer also provides campaign management and media planning capabilities to TV networks and multichannel video programming distributors (MVPDs), and its Promo Optimizer uses past viewing data to enable cable and broadcast networks to create plans for on-air promos.

What may make things even less palatable for TiVo’s fanbase is Rovi’s CEO, Tom Carson, a marketing strategist. He’s essentially a salesman, who may not truly understand TiVo’s and Rovi’s underlying technology. So although he may believe that the merger makes sense on paper from a marketing standpoint, should he fail to outline a clear value proposition to execute this desired transformation, to create bonding relationships with TiVo’s corporate partners, and use both to develop a strategic agenda, this collective bargaining opportunity may be squandered. Rovi could end up dismantling itself, and we may read future claims that the company needs to “focus on its core competency” instead of maximizing shareholders’ profit potential through new partnerships.

Only time will tell.