Dish’s $500 Million TiVo Settlement a Win for Both Sides, Says Ergen
Dish Network and EchoStar’s $500 million settlement with TiVo marked a win for all sides involved, Dish CEO and EchoStar Chairman Charlie Ergen said on the DBS company’s earnings call Monday. The settlement includes an initial payment of $300 million to TiVo, with the last $200 million paid out in six equal annual payments between 2012 and 2017, the companies said in a news release Monday. The agreement ends all pending litigation between the companies “with prejudice” and dissolves all injunctions against Dish and EchoStar, the companies said. The settlement effectively ends several expensive years of litigation between the two companies over Dish’s alleged infringement of TiVo’s time-warp patent, which allows DVR recording of one program while watching another.
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EchoStar won’t bid to buy the rest of TerreStar Networks in an upcoming bankruptcy auction, but isn’t ruling out selling its 50 percent stake in the company, EchoStar executives said Monday on another conference call. While Dish has proposed buying DBSD and its 20 MHz of mobile satellite spectrum for $1 billion, it also is said to be interested purchasing TerreStar to combine the companies’ respective S-band spectrum. Bids for TerreStar’s assets are due in U.S. Bankruptcy Court, New York, on June 8.
The TiVo-EchoStar settlement deal emerged when some of the risks and costs involved became clear, Ergen said. His companies and TiVo will work together in the future, including on the development of Dish’s recently bought Blockbuster assets, he said. TiVo also granted Dish a license under its time-warp patent. During its seven-year legal battle with TiVo, Dish redesigned its satellite receiver/DVR to avoid infringing TiVo’s time-warp patent. Further judicial decisions up the appeals ladder could have forced Dish to disable millions of DVRs if Dish didn’t settle with TiVo. The settlement was much lower than expected, said analysts. Bernstein Research’s Craig Moffett said the “modest price tag on the settlement” suggests that the number of boxes covered by the original disablement injunction was at the low end of estimates.
Ergen likened Dish’s overall strategy, which has included the purchases of Blockbuster and the ongoing effort to buy DBSD out of bankruptcy, to the sitcom Seinfeld. Like Seinfeld, there are several story lines which observers won’t know how they come together until the end, he said. The management knows “where we want to go,” and each new asset opens doors to new opportunities, he said.
EchoStar views its investment in TerreStar as “very valuable” because of the S-band spectrum involved, CEO Michael Dugan said. EchoStar’s goal from “day one” has been to make money on the investment, and it wouldn’t rule out selling its stake for the right price, he said. In response to an analyst question, Dugan wouldn’t respond directly to whether EchoStar would consider selling the TerreStar stake to Dish.
Having only briefly owned Blockbuster, many questions remain unanswered for Dish, Ergen said. The number of physical stores to be retained will likely depend on agreements with movie studios and how much they would like to have presence in such stores, he said. Blockbuster probably won’t be a direct online competitor to Netflix due to Netflix’s “formidable” and possibly “insurmountable” lead in that space, said Ergen.
Ergen doesn’t expect FCC approval of the DBSD purchase to include buildout conditions because DBSD remains in compliance with mobile satellite service/ancillary terrestrial component rules, he said. Dish isn’t planning to build out a purely terrestrial company, though any future efforts to increase terrestrial services would likely include some kind of partnership with another entity with more “expertise” terrestrially, he said. Ergen said he’s continuing to watch LightSquared closely, and Dish is experimenting with several uses for the company’s 700 MHz spectrum holdings.
Dish Q1 sales rose 5.5 percent to $3.22 billion from a year earlier. Profit more than doubled to $549 million. Dish gained 58,000 net subscribers, ending Q1 with 14.19 million total, the company said. Dish shares closed up 19 percent Monday, ending the day at $29.79.