Gemstar shines with interactive agreement

Co. inks licensing pact with Insight

Gemstar-TV Guide got a whiff of good news Wednesday to offset the legal stench surrounding the company’s past management and fiscal misdeeds, announcing its second major cable licensing deal in a month for its interactive program guide technology.

Gemstar signed a wide-ranging licensing agreement with 1.3 million- home cable operator Insight Communications, under which the company will deploy its TV Guide Interactive IPG to support Insight’s digital service, including video-on-demand, high-definition and digital video recorder features. Deal comes on the heals of a much larger licensing agreement with Time Warner Cable, which many say changed the tone and structure of Gemstar’s deals with operators.

Under the guidance of chief exec Jeff Shell, who took the helm a year ago after controlling shareholder News Corp. ousted former CEO and founder Henry Yuen, Gemstar management has been struggling to regain industry and investor respect despite the ever-escalating charges against Yuen and his associates along with the tail end of its long-running patent litigation against set-top box maker Scientific Atlanta.

Interactive service during holidays

Insight customers will be able to use TV Guide Interactive as early as the upcoming holiday retail season. The cabler also agreed to extend its existing commitments to distribute Gemstar’s TV Guide Channel.

Company would not disclose financial terms of the deal, but sources speculate Gemstar is getting somewhere between 10 and 20 cents per month per subscriber.

The Time Warner Cable deal covers some 4.2 million homes. Gemstar-TV Guide is licensing both the guide and its technology to Time Warner and, significantly, for the first time allows the cabler to customize the technology to suit its needs. Under previous MSO deals operators licensed TV Guide Interactive, whereas the new arrangements allow the MSO to use any guide it wishes provided it incorporates the TV Guide brand logo and Gemstar TV Guide’s content.

Analysts say the Time Warner deal is exclusive and does not require carriage of advertising unless agreed to by both parties. Gemstar would be entitled to 50% of ad proceeds, compared with previous deals that gave it 85%.

Talks continue

Gemstar says it continues to negotiate with other cable operators to extend and/or incorporate its IPG services and technology onto their digital platforms. Some cablers have expressed some unease about tying up with Gemstar, given that its controlling shareholder is News Corp. Rupert Murdoch has suggested in the past that the Gemstar IPG could become the de facto IPG technology on rival DirecTV once its acquisition by News Corp. is complete.

Both the Insight and Time Warner pacts should help the fortunes of financially wobbly Gemstar as it grapples with ongoing patent infringement lawsuits as well as the SEC and Justice Dept. pursuit of former Gemstar execs on accusations of securities fraud.

Last week, federal prosecutors seeking criminal charges against four former Gemstar execs asked an L.A. court to delay an existing civil probe by the Securities and Exchange Commission so it can seek criminal indictments. The judge denied this request on Tuesday.

The SEC continues its own investigation into Yuen and former chief financial officer Elsie Leung, alleging that the two schemed to overstate sales at the company by at least $223 million between 2000 and 2002. The four executives under criminal investigation by the Justice Dept. were not named.

Gemstar said it is cooperating with the SEC and the Justice Dept.

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