DN May Have To Shut Down 8M DVRs After TiVo Legal Loss - FTA Files FTA Keys and FTA Instructions for FTA Receivers

**Putski** · #1 (**permalink**) 03-06-2010, 01:23 PM

Satellite TV Operator May Lose Ability to Offer DVR, Says Sanford Bernstein's Moffett

Todd Spangler -- Multichannel News, 3/4/2010 1:57:26 PM
DN may be forced to disable as many as 8 million of its DVRs within a month, after the satellite TV operator lost an appeals court decision Thursday in its years-long battle with TiVo. Moreover, D*sh could even lose the ability to offer a DVR altogether, according to Sanford Bernstein analyst Craig Moffett.
The U.S. Court of Appeals for the Federal Circuit upheld a lower court's contempt ruling against D*sh and Ech*Star, under which the companies would pay at least $300 million to TiVo.
Following the announcement of the ruling shortly before 12 noon (ET), TiVo's stock price soared more than 50% to around $15.82 per share while D*sh shares dropped 6%, to around $20.41 per share.
D*sh DVR"D*sh DVR"Dish said it plans to appeal the decision with the full Federal Circuit and said DVR subscribers are currently not affected by the court ruling. The operator also said it will propose a new workaround that does not infringe TiVo's "Time Warp" patent.
The implications of the appeals court ruling for DN "are enormous, and go far, far beyond the retrospective licensing fees and damages that will now be payable to TiVo," Moffett wrote in a research note. "What is at stake is nothing less than their ability to continue to offer DVRs. And without DVRs... well, you can fill in the blank here, but it wouldn't be pretty."
TiVo now has tremendous leverage to negotiate a settlement with D*sh, which will likely be even higher than previous proposed licensing fees of up to $2.25 per month per subscriber, according to Moffett. Each $1 per subscriber per month would cut D*sh's earnings before interest, taxes, depreciation and amortization by $96 million per year, he estimated.
In the worst-case scenario, D*sh's loss in the case could give TiVo an opening to negotiate an exclusive distribution deal with DTV in the satellite space. In 2008, TiVo struck a new deal with DTV under which the DVR maker is developing an HD DVR as an option for DTV subscribers.
"[i]f one assumed that DN would no longer be a viable competitor without a DVR offering - not an entirely unreasonable proposition - then DTV's gain from exclusivity would be nothing less than all current and future satellite subscribers," Moffett said. "Alternatively, DTV could merely threaten such an outcome... and thereby radically increase the urgency of settlement for DN, forcing D*sh to pay significantly more for any settlement. Higher licensing fees for D*sh would create a significant price umbrella for DTV."
In any case, D*sh's delays in the case appear to have run their course, Moffett said, noting that "given the five-year history of D*sh losses in the case, one can assume that Judge Folsom's patience has long since worn thin," referring to the judge presiding over the case in the U.S District Court for the Eastern District of Texas.

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