TiVo president and CEO Tom Rogers said his company expects to get "very substantial" revenue from its patent holdings and pending litigation, while he also said that partnering with cable operators is critical to TiVo's future.
Rogers, speaking June 6 at the TV 3.0 event at the Paley Center for Media in New York, was interviewed by CNBC Squawk Box coanchor Becky Quick. "We were flatly rejected by the cable industry when it came to the DVR," Rogers said, noting that MSOs opted for generic digital video recorders.
Now, with the need to meld live TV, recorded content, video-on-demand and Internet-delivered video, many cable operators are turning to TiVo for help, according to Rogers. "We've kind of been called back into action," he said. "We very much have allied our future with theirs." TiVo has distribution deals with several pay TV providers, including Charter Communications, Suddenlink Communications, Virgin Media, RCN and DirecTV.
Asked by Quick about TiVo's litigation strategy, Rogers said the company's preference is to work out business relationships, characterizing litigation as a last resort. "When you invent a technology and it has real distinct value…we have to be able to protect the value of that innovation for our shareholders," Rogers said, adding, "We'll get some very substantial revenue from that."
Earlier this week, TiVo filed a patent-infringement lawsuit against Cisco Systems after Cisco proactively sued TiVo seeking to void the same four patents. TiVo is suing Verizon Communications and Time Warner Cable -- both large Cisco customers -- and has legal action pending against Motorola Mobility.
In the past year, the company won large settlements from Dish Network and AT&T. In May 2011, TiVo reached a landmark $500 million settlement with Dish after seven years of litigation, on top of $105 million Dish and EchoStar paid to TiVo up to that point. Then in January TiVo announced a settlement and patent-licensing deal with AT&T, under which the telco will pay a minimum of $215 million -- and as much as $300 million -- through June 2018.
Meanwhile, Rogers opined that the television industry has failed to address the problem of how ad-skipping -- enabled by TiVo's DVRs -- is eroding the value of TV advertising. More than 40 million households have DVRs, more than 50% of viewing is recorded, and more than half of those viewers are skipping ads, Rogers said. "Very little being done to say, what's the alternative to reaching those people," he said. "The industry has really done very little to approach that problem."
TiVo offers various options for marketers to advertise on its DVRs, including presenting an ad when a viewer pauses a video or showing one at the end of a show. "There are other ways to use that screen…that would give marketers all kinds of way to engage with their audience," Rogers said.
Rogers touched on Dish Network's Auto Hop feature, which lets users automatically skip ads in recorded primetime broadcast programming. Several broadcast networks have sued Dish over the feature. "Charlie Ergen's taken that to the extreme and said, push one button and cut everything out," Rogers said.
In contrast to the Dish's Auto Hop approach, "We've taken a position geared toward balancing consumer choice and consumer control with the fact that we're all part of the television industry," Rogers said.
However, Rogers added, "No matter where you are on that whole issue…interrupting shows with 30-second ads and pods is not the viewing public's preferred mode for how they want to be marketed to."
Rogers was asked his opinion about another legal case in the TV industry: Major broadcasters have sued startup Aereo, which offers subscribers access to live TV and DVR content across various devices. Aereo's service pulls the TV signals down via micro-antennas and then transcodes the video for delivery over the Internet.
"I'm not surprised to see the legal challenges that it's under," Rogers said. "But I do think the industry is going to move more and more to cloud-based services."
While today TiVo's deployments with operators are based on DVRs in the home, Rogers sees network-based DVRs becoming more prevalent once technical issues like latency are worked out.
For cable operators, to the extent that they can update their services with software, rather than through DVRs or other hardware, "that could change the dynamics of the cable industry in terms of its free cash flow," Rogers said.