• by Paul Gough , January 27, 2004

In a surprise move that may signal a new broadband direction for TiVo, the digital video recorder marketer has quietly purchased a company that creates broadband-based content delivery systems, MediaDailyNews has learned.

TiVo made the disclosure Friday with the Securities and Exchange Commission, which regulates financial dealings with publicly traded companies. The purchase of Strangeberry Inc., a privately held company based in Palo Alto, Calif., was given no more and no less space than other developments about TiVo that had previously been released. TiVo didn't return multiple calls and emails for comment Monday.

Thus, few details were available about the Strangeberry purchase, which closed on Jan. 12. No purchase price was disclosed in the SEC filings, although TiVo said that it had exchanged stock in Strangeberry for TiVo common stock in a private placement. Future SEC filings will be made for the resale of TiVo stock by Strangeberry's stockholders, TiVo said.

Equally few details were given about Strangeberry and what the acquisition will do to help TiVo, which is trying to transition from a digital video recording service to become a hub of home networking that includes but isn't limited to DVRs. In the SEC filing, TiVo described Strangeberry's specialty as "using home network and broadband technology to create new entertainment experiences on television." Strangeberry has created technology that "enables the development of new broadband-based content delivery services," the SEC filing said.

Strangeberry was founded in April 2002 by Arthur van Hoff, Jonathan Payne, and Adam Doppelt. All three formerly worked with Marimba, a Mountain View, Calif., technology company that produces end-to-end change and configuration management software. Payne and van Hoff co-founded the company; Doppelt was a member of the advanced development group. Van Hoff was also a key player in the development of the Web language Java at JavaSoft and C+++ while working for Sun Microsystems in the early 1990s. Executives from Strangeberry could not be reached for comment Monday. Strangeberry's home page linked to a page that said the company had been acquired by TiVo.

How Strangeberry would fit into TiVo's strategy was a topic that has been hotly debated within the past 24 hours or so on web sites here in the United States and in the Netherlands, where a friend of van Hoff's runs a mostly Dutch-language Web site.

Tim Hanlon, senior vice president and director of emerging contacts at Chicago-based Starcom MediaVest Group, said Monday afternoon that he didn't have direct knowledge of what TiVo was doing, but suspected it had to do with home networking and the delivery of broadband video into television and vice versa.

"We're already starting to see how television content plays in broadband," Hanlon said. "It only stands to reason that it should and will work the other way as well. My suspicion is that it's getting us further/closer to the true seamlessness of video across multiple touchpoints ... It's not about watching television anymore. It is about consuming video."

Analysts say TiVo's recent moves are designed to move the company from licensing and providing DVR services to a future where the DVR is just one part of the package. TiVo has to do that, observers say, to survive in a world where the DVR has become a commodity, offered as a routine service by satellite and cable TV subscribers.

"They're trying to build up their case for TiVo as a technology and TiVo as a delivery of content," said Sean Badding, president and senior analyst of The Carmel Group in Carmel, Calif. Badding said that he felt the Strangeberry acquisition plays into TiVo's home networking option, which is an add-on service for subscribers that offers connectivity to other TiVos and electronic devices in the home that show digital photos and play digital music.

"They're accessorizing the DVR module and putting as many accessories around it, and it gives more appeal to DVR subscribers to join their company and pay them [TiVo] more," Badding said.

Rob Aksman, senior analyst at BrightLine Partners, said that TiVo has been moving in the direction of adding to the functionality of the home networking option. He said that TiVo has made a conscious decision to try to stay on top of innovation. But looming in the background is Microsoft's moves to incorporate DVR functionality into the Windows platform.

"This whole concept of home networking, it isn't restricted to the PC. It could potentially be a response to the Microsoft additions," Aksman said. "From the perspective of TiVo, that's a significant move into their turf."

Hanlon thinks that a good measure of TiVo's future depends on their ability to embed their version of the DVR into mainstream cable and/or satellite services. TiVo hasn't had much success to date in the cable arena, although a deal with DirecTV has added tens of thousands of subscribers in the past nine months or so. Yet News Corp.'s acquisition of DirecTV--and its ownership of a separate DVR technology--has thrown TiVo's deal with DirecTV into some confusion if not doubt. DirecTV's competing service, Dish Network, has its own TiVo service, which was sued by TiVo for copyright infringement earlier this month. That could be years away from being settled.

Meanwhile, TiVo must survive and avoid the fate of another pioneer in digital video recording, ReplayTV, which admittedly took a different road than TiVo and took on (unsuccessfully) content providers.

"The bad news is that DVR is becoming a commoditized product, whether they like it or not," Hanlon said. "TiVo's survival depends on their ability to differentiate themselves from the generic DVR and carve out a premium market."

In Hanlon's view, that includes making TiVo's video components more portable than they are today. Portability would allow, within a digital rights management framework, video to be stored and then played back at a later time on portable devices. It would take TiVo out of the box and into the hands of subscribers, wherever they happen to be.

"Anything that broadens their horizons in those two platforms, home networking and portability, helps them become more broadband-based," Hanlon said.