Gemstar-TV Guide Mends Fences With Time Warner

CEO Jeff Shell cuts unusually flexible deal with the cable operator

In a sign that it's repairing strained relations with operators, Gemstar-TV Guide last week struck an unusual deal with Time Warner Cable for its interactive program guide and underlying technology.

It's a significant score for Gemstar CEO Jeff Shell, who took over the company amidst accounting scandals and lost court cases.

Operators have other alternatives from digital set-top makers Scientific-Atlanta and Pioneer (although Gemstar has sued both for patent infringement). Also, operators balked at Gemstar's demands for, among other things, 85% of all local and national ad revenues from the interactive guide.

Shell cut a much more flexible deal with Time Warner Cable. First, the MSO is licensing TV Guide's interactive-guide patents, paying Gemstar a fee per digital sub no matter what actual guide it uses.

But even those guides must incorporate the TV Guide brand onscreen and run its video previews, news and other content. TV Guide and Time Warner will split all ad revenue 50-50.

Goldman Sachs media analyst Richard Rosenstein estimates the deal will pay Gemstar 20¢ per digital sub monthly, not including potential ad revenue.