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IPG business racking up lots of deals and dough

Fri, 11/30/2001 - 7:00pm
Mike Lafferty

Google Factor: 2,140

When Gemstar announced its intention to buy TV Guide in October 1999, many industry professionals knew the merger had the potential to bring real changes to the industry. Now, just two years later, they've been proved right over and over again as the combined company continues to spread its nearly ubiquitous interactive program guide into numerous cable and direct broadcast satellite systems.

The TV Guide Interactive system-an on-screen digital cable guide–and its Guide Plus system-the on-screen guide built directly into TV sets and VCRs–currently reach more than 13 million American television households.

The company's growth these past few years has been fueled by service providers and advertisers who want to stake claim to the invaluable screen real estate IPGs occupy. While the IPG performs a valuable (and very popular) service for viewers by sorting through the many choices that digital television offers, service providers and advertisers nearly salivate at the thought of all the opportunities they have to offer consumers, such as the chance to buy merchandise, as they continually interact with these virtual Web browsers for cable and satellite TV.

This past year has dramatically underscored the popularity of Gemstar's screen real estate, as the company signed up a number of big-ticket advertisers for its IPG platform.

At the same time, Gemstar-TV Guide announced a number of long-term, exclusive and non-exclusive agreements with a variety of cable operators, including Shaw Cablesystems G.P., Cogeco Cable Inc., Comcast Corp. and Charter Communications. The company also announced a deal to integrate Wink Communications' interactive television services on the Motorola DCT-2000 digital set-top box platform running the TV Guide IPG. Once completed, the project will allow both services to run simultaneously on the same DCT-2000 set-top box.

Reportedly, operators are so anxious to have Gemstar's IPG, they're willing to sign lopsided agreements that guarantee Gemstar up to 85 percent cut of future national advertising and a 50 percent cut of revenues generated by future television commerce, such as pay-per-view movie services.

With almost 200 interactive technology patents under its corporate belt (which the company has fought tooth and nail to protect), the company has attracted a number of high-profile investors and IPG deals. Rupert Murdoch of News Corp. fame, owns 43 percent of Gemstar-TV Guide (see below). Microsoft, meanwhile, has licensing agreements with Gemstar for its WebTV and Ultimate TV set-tops, as well as for its Windows 98 software. It's been reported Microsoft paid $45 million upfront for the deal, plus an additional $10 to $30 a box, depending on volume.

As a result of these and other lucrative deals, analysts predict total revenue from the company's IPG will jump from $100 million this year to more than $1 billion by the end of 2004, and possibly even $10 billion by the end of the decade.

Economic impact note:

Gemstar-TV Guide's stock took more than a 10 percent dip on news of the pending Echostar-DirecTV deal. Seems Rupert Murdoch had plans to put Gemstar's IPG on a global platform once his acquisition of DirecTV was finalized. Now that it seems that it's not going to happen, investors are reportedly a little skittish on the stock.

Others to watch:

iSurfTV and Motorola Inc.'s Broadband Sector recently announced they had entered into a multi-year agreement to speed deployment of iSurfTV's IPG, called SurfGuide. The agreement will make the IPG SurfGuide available on Motorola's DCT-2000 and DCT-5000 platforms.

In addition, iSurfTV signed a letter of intent earlier this year with the National Cable Television Cooperative (which represents more than 13 million cable subscribers) to jointly develop and market a turnkey IPG based on SurfGuide technology.

Meanwhile, TVGateway LLC, a cable industry consortium, has announced the availability of the latest version of its IPG. The upgrade, which can be delivered via a simple download, has already begun in certain locations. The TVGateway IPG is currently available through Charter, Comcast, Metrocast and AT&T's HITS.

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