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Alan Breznick
Gearing up for the first personal video recorder retail wars this fall, TiVo Inc. and Replay Networks Inc. both unveiled fresh cash infusions by major media, computer and consumer electronics companies last week.
In what's likely the larger of the two investments announced last week, Replay said a group of nine broadcasting, cable and consumer electronics giants have funneled $57 million into the privately held startup. The lineup - which consists of Time Warner Inc., the Walt Disney Co., Liberty Media Group, NBC, United Television Inc., Showtime Networks Inc., Tribune Co., CTV and Matsushita Kotobuki Electronic Industries Ltd - features many of the same companies that recently sank a combined $32.5 million into TiVo.
As part of this new round of financing, Replay said several existing investors have boosted their stakes in the firm. This list includes Paul Allen's Vulcan Ventures Inc., EarthLink Network Inc., chairman Sky Dayton and senior America Online Inc. executive Marc Andreessen.
"This investment by leading media companies and Matsushita provides us with the resources to take the company to the next level," Replay CEO Anthony Wood said in a statement. "We have now reached critical mass."
But Replay, which plans to use the funds mainly for a retail marketing push with Matsushita's Panasonic unit in the fall, may soon announce up to $8 million in additional cash from yet another, undisclosed investor. The company may also pursue an initial public offering in the near future, similar to the $80 million IPO that TiVo has already filed to sell.
At the same time, TiVo made a big splash by announcing that AOL has taken a minority stake in the company, joining CBS Corp., Comcast Corp., Cox Communications Inc., Discovery Communications Inc., Disney, NBC and Liberty Media, among others. Neither TiVo nor AOL would disclose the size of the investment.
Besides pouring capital into the startup, the online service provider said it will work with TiVo to blend the company's personal TV service with AOL's planned Internet TV service, AOL TV. In particular, AOL and TiVo hope to combine the two services' features in a joint new DBS set-top box with DirecTV Inc., which has signed distribution deals with both companies.
"There's potential for a DirecTV/AOL/TiVo box," said Morgan Guenther, VP-business development for TiVo. He noted that AOL has "significant relationships" with both DirecTV and Philips Electronics, which are also investors in TiVo.
The twin investment announcements came despite growing tensions between the Silicon Valley rivals and major TV programmers concerning copyright protection and the potential loss of advertising revenues.
Programmers like CBS, Discovery, Disney, News Corp. and Time Warner fear that the two companies' "personal TV devices," new digital VCRs that allow viewers to pause, rewind, fast-forward and store running TV shows on a computer hard-disk drive, will violate their copyrights by modifying programs and hurt their ad revenues by making it too easy to skip commercials. Anxious to defend their turf, they have formed a coalition to protect their interests and threaten legal action, even while insisting that they don't really want to sue.
At a digital TV conference sponsored by Paul Kagan Asssociates Inc. in New York last week, TiVo and Replay executives stressed that they have no intention of changing shows or encouraging viewers to zap commercials. But they and other industry experts argued that the new technology is here to stay.
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