AOL, TiVo program $200 mil deal

Three-year exclusive pact benefits enhanced TV service

HOLLYWOOD — America Online has given a huge boost to digital video recording company TiVo Inc. with a $200 million equity investment and a strategic programming partnership.

The three-year deal will make TiVo a programming partner in AOL’s new AOLTV enhanced TV service, building TiVo features like pause and rewinding of live programming and digital searching and storage of TV programs into set-top boxes with AOLTV.

AOLTV is intended to offer AOL subscribers limited access to e-mail and the Internet on a TV, in addition to other enhanced TV features.

The exclusive deal gives TiVo an edge on rivals Replay Networks and Microsoft’s WebTV, which have been scrambling to make similar alliances in recent weeks. But none of those deals, including Microsoft’s deal earlier this week with DirecTV, is exclusive.

TiVo and AOL also have deals with DirecTV to incorporate each of their services into set-top boxes that combine DirecTV’s satellite programming with TiVo and AOLTV services later this year.

The TiVo/AOL deal will make TiVo the exclusive provider of digital video recording services on dual-purpose AOLTV-branded set-top boxes. Those boxes are to be introduced next year.

The deal also gives AOL warrants to purchase additional TiVo shares.

The announcement early Wednesday sent TiVo stock soaring up more than 70% (15 points) in early trading.TiVo’s stock has been languishing in recent months, having dropped below its initial offering price of $16 a few weeks ago and hovering in the mid-20s lately after reaching a high of nearly $79 in January. TiVo’s stock climbed that high on AOL’s announced purchase of Time Warner, which came just four months after TiVo and AOL first announced an unspecific alliance to collaborate on interactive programming related to AOLTV.

“We believe our agreement with AOL positions us to lead the evolution of personal TV to the next level and begins to bring TiVo closer to delivering the ultimate television experience,” said Mike Ramsay, TiVo’s President and Chief Executive Officer.

“We’re pleased to expand our relationship with TiVo, a pioneer in personal television, to enhance the services we will be providing AOLTV subscribers,” said Barry Schuler, President of AOL Interactive Services.

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