TiVo Pact With Best Buy On Non-DVR TVs Expires January 2013

TiVo’s agreement to develop “non-DVR” products with Best Buy runs through January 2013 and applies to TVs that can’t record programs to a hard drive, a staple feature of TiVo standalone DVRs, TiVo said in an SEC filing.

TiVo filed a copy of its Best Buy agreement at the SEC, outlining some of the terms governing a marketing and development alliance formed in July 2009. The pact was amended recently to cover a “non-DVR” project for Best Buy’s private label Insignia TVs, TiVo said. In addition to not being able to record to a hard drive, the so-called non-DVR media application can’t control a TV display, including pausing, fast forwarding and rewinding, TiVo said. The Insignia branded products are expected to ship late this year.

The DVR developer also will promote Insignia-branded non-DVR products through its web site and will be able integrate advertising with the device’s user interface, TiVo said. TiVo also will collect audience research data gleaned from the non-DVR media applications, TiVo said. TiVo will be required to fix any software bugs in the platform and provide “critical” patches, the company said. But TiVo won’t have to provide software updates or upgrades, the company said. TiVo will own the rights to the non-DVR media application, it said.

The pact also covers the remote control that be packaged with the TV. The non-DVR application can include background animations and use TiVo trademark sounds that play in the user interface, TiVo said. These sounds include an arrow up/down, page up/down, central chime and others, TiVo said. TiVo’s Q2 technology revenue declined to $6.4 million from $7.3 million due to “the time and progress” of development work with Best Buy, Comcast and DirecTV, it said. In Q2, R&D costs rose to $19.3 million from $14.3 million a year earlier. Hardware sales improved to $9.4 million from $8.7 million due to launch of TiVo’s Premiere DVRs and a distribution pact with RCN, TiVo said. In connection with the introduction of new products, TiVo’s sales and marketing expenses rose to $6.6 million from $5.4 million, it said.

TiVo also has signed a licensing pact with Sony’s Gracenote to get access to its DVD cover art, the company said. The deal is an extension of a license that TiVo data provider Tribune Media Services signed with Gracenote in May 2007, TiVo said.

Meanwhile, a TiVo severance agreement with Mark Roberts, senior vice president of engineering, produced $901,000 in Q2 headcount-related costs and non-cash stock-based compensation expenses, TiVo said. Roberts resigned in June, but remains employed by the company through Feb. 28, TiVo said. Provided he signs release agreements, Roberts will get one year’s salary on March 15 in a lump sum payment, TiVo said.

TiVo’s Q2 general and administrative expenses rose to $14.1 million from $11.2 million, as legal costs increased by $2.6 million, the company said. A federal appeals court hearing in TiVo’s long-running legal battle with EchoStar is scheduled for Nov. 9 in Washington. TiVo also incurred a $324,000 increase in rent expenses as it leases additional space at its Alviso, Calif., headquarters.

TiVo’s average revenue per user (ARPU) for its own DVRs rose to $7.63 from $7.58 a year ago. The ARPU from MSOs and DirecTV improved to $1.20 from $1.12 in Q1 and 95 cents a year ago. TiVo has $4.8 million in deferred costs tied to its work for Virgin Media that will be recognized when revenue flows from its development pact with the U.K. MSO, the company said. Virgin is expected to launch TiVo sales this fall.