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TiVo Corp. (TIVO) & Netflix Enter into Multiple Agreements

Zacks

Digital home entertainment services and solutions provider, TiVo Corporation TIVO has entered into a series of deals pertaining to products, licensing and intellectual property agreement with streaming video giant Netflix Inc. NFLX. The financial terms of the deal were not disclosed.

Per the product agreement, TiVo will carry on navigating user interface and will integrate web entertainment from Netflix to its set-top boxes. These services will be available to consumers through pay-TV providers and retail stores.

TiVo currently provides software solutions to more than 70 Pay-TV operators across 30 countries. Therefore, the deal is expected to expand TiVo’s product offerings as well as global presence, which in turn will boost revenues.

Separately in an intellectual property agreement, Netflix now has a license to TiVo patent portfolios for over-the-top (OTT) offerings.

According to Tom Carson, CEO TiVo, “Our agreements with Netflix represent a major milestone for TiVo as we expand our offerings for the fast-growing OTT space, and further demonstrate our commitment to delivering innovative technologies to new and emerging markets.”

We believe that an agreement through these licensing agreements would be incrementally beneficial for the company. Additionally, the deal would enhance use experience and provide the necessary competitive edge over its peers in the emerging market of online video streaming.

We think competition in the online movie business is escalating and integrating Netflix will play a key role in adding subscribers and retaining existing ones. The new deal will help TiVo to remain a few notches above its peers.

As stated by Bill Holmes, Netflix’s global head of business development, “Building on this history, the agreements provide consumers freedom to watch their favorite TV shows and movies whenever and wherever, with an integrated experience across more devices.”

TiVo generated a year-to-date return of 24.55% compared with the Zacks Internet Services industry gain of 0.22%.

Bottom Line

Both TiVo and Netflix are focused on improving the viewing experience and believe that cloud or service are the most important mediums through which this goal can be achieved.

We continue to believe that recent deals with leading companies coupled with new customer wins, product launches and international expansion will drive top-line growth.

It should be noted that TiVo was formerly known as Rovi Corporation. Upon successfully completing the acquisition of TiVo Inc. early this September, Rovi adopted the iconic TiVo brand name.

The new TiVo Corporation is now the global leader in entertainment technology and audience insights. The company has a diverse product portfolio that ranges from interactive program guide to the DVR. The combined company has emerged as the world’s leading media and entertainment provider to deliver the ultimate entertainment experience.

Nonetheless, the actual synergies from the merger will take some time to reflect in the company’s performance and much depends on how successfully it integrates the legacy business of TiVo.

The company faces significant competition from Alphabet Inc.’s GOOGL Google TV, Roku and Apple Inc.’s AAPL TV.

Currently, TiVo carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

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