The news this week that Rovi had signed a multi year patent deal with Apple, has left us pondering just why Apple might need this? The move shifted Rovi’s share price up considerably, but no one is really any the wiser about just what it can mean in revenue terms.
The Roki 8K SEC filing was brief and to the point, Apple has done a deal with it, that’s all, and no details will be given.
Rovi is the amalgam of Macrovision and Gemstar ‘ one with patents in content protection, the other universally acclaimed as the inventor of the format for the modern EPG (Electronic Programming Guide).
The early days of Gemstar were truly litigious, and it sued just about anybody in sight in order to establish its patents, most of which can be summed up as that little box of squares that shift with timings on your TV set, when you want to see what’s on in the coming hours, days, weeks. It also sued and then bought companies, including Starsight Telecast, over a decade ago, a company that designed the electronics inside TV sets which track when a program actually starts, rather than when it is scheduled, in order to automate its recording. This is used to control DVRs and VHS recorder start times.
Apple does not need the protection patents, since its uses AES based encryption and private key infrastructure techniques for its own Fairplay DRM, and this therefore based on standards and so has never been legally challenged. So it must be the Gemstar TV intellectual property that Apple has been keen to license. That makes it either the EPG or surrounding patents like those held by Starsight or the new cloud based tools which Rovi has been building in its online TotalGuide, for searching, finding and supplying online content. Since Apple hosts all of its own content for iTunes and offers traditional textual search, we can’t see TotalGuide being of too much interest to Apple. It could have built something similar of its own.
That leaves us with the EPG stuff and right now this can only mean one of three things. First that Rovi has been pestering Apple because of its ability to use the iPhone and the iPad as a TV remote control, saying that showing a Pay TV EPG on the phone requires a license; secondly that this is all about the Apple TV and again Rovi has been pushing for a license for years or thirdly that Apple will introduce products that really need the EPG ‘ like for instance DVRs or TV sets or both, and Apple wants all its ducks in a row before it goes ahead.
Apple can certainly resist pestering from the likes of Rovi and has shown itself in the past not to worry overmuch about the threat of legal actions. The Apple TV does not constitute a volume device, so why would it be a material fact that Rovi has to announce on the SEC site? So option three it is then.
That points to Apple entering the TV markets with DVRs, TV sets or set tops or all three in the coming months, something that a handful of financial analysts have been saying for about two years.
The Rovi share price has shot up over 10% since the documents were filed on Monday. If Apple is really going into this market, perhaps that’s an under stated rise that should have been significantly higher. Certainly if Apple ‘re-invents’ the TV market in any way, and it relies in any small part on Rovi technology, there will be a hoard of copycats and followers for Rovi to license, with a corresponding effect on its revenues.