Collapsing under the weight of a $500 million deficit and only enough cash on hand to last a few more weeks, video-on-demand vendor Diva Systems Corp. completed its death spiral in late May, filing Chapter 11 in the U.S. Bankruptcy Court for the Northern District of California.
Holding true to rumors that had swirled for weeks, Gemstar-TV Guide International then swooped in to acquire Diva's intellectual property and technology assets for a cool $40 million as part of a pre-packaged bankruptcy deal.
As expected, Gemstar won't pick up Diva as part of a plan to build its own VOD company, but will instead absorb Diva's intellectual property into its own broad patent portfolio. Gemstar said it will incorporate some Diva-grown technologies to build out its IPG-based advertising and other promotional strategies.
Diva's VOD clients included AT&T Broadband, Insight Communications and investor Charter Communications. While Charter has already found VOD server and system replacements via deals with Concurrent Computer Corp. and nCUBE Corp., Diva's other VOD affiliates had yet to come forward with their strategies by CED's press time.
An AT&T Broadband spokeswoman said the MSO's VOD customers won't see any change in the service in the near-term. AT&T Broadband presently offers VOD with Diva in Culver City and Westchester County, Calif. and in the Atlanta, Ga. area. The MSO originally also planned to tap Diva to launch VOD in Pittsburgh, Pa. and San Francisco, Calif., but hasn't disclosed a launch date.
AT&T Broadband has "thoroughly evaluated all other VOD providers," the spokeswoman said, but has yet to announce any deals.
Insight, meanwhile, was much further along in terms of VOD deployments, having launched the service in more than 10 markets so far. Insight, through Diva's help, served about 200,000 VOD-enabled homes at the end of the first quarter of 2002.
An Insight spokeswoman said the MSO's VOD customers won't see any changes in the service for now, as Gemstar-TV Guide has agreed to support it for a "significant amount of time…well past the end of this year."
Even with a new provider, the change likely will be an expensive one. Charter acknowledged that it cannot reuse Diva's servers and software alongside other vendors', thanks to their proprietary nature. However, Charter will not have to change out the legacy digital transport equipment used for VOD, a company spokesman said.
Despite the set-back with Diva, Charter will remain aggressive with VOD, and plans to have 1 million digital subscribers with access to the advanced service by the end of this year.