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Technology Stocks : Gemstar Intl (GMST)

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To: scott who started this subject	3/14/2004 3:27:50 AM
From: NY Stew	Read Replies (1) of 6516

Mike and Tinker, The TiVo agreement is cross-licensing with net royalties going to Gemstar similar to the terms (in this respect) to the Microsoft perpetual agreement. Gemstar is granted IPR to IPG patents produced by either licensed competitor. The new TiVo Series2 PVRs will pay a royalty on a per unit basis just as the DTVs, DVRs and DVDRs by major CEMs do. TiVo was granted the right to choose the IPG data provider. Since the agreement TiVo has renewed the Tribune data contract for an additional 3 years. The terms are indeed non exclusive however this condition might need to be looked at in another light. It's that perception thing again. EchoStar and Comcast prepaid royalties for the duration of their non exclusive agreements. The TiVo prepayment for PVRs already deployed (excluding DirecTV) was waived by Gemstar for certain specified and unspecified considerations. TiVo stated the following (8K) concerning the waiver: In the event that the agreement is terminated because of a material breach by us of our obligations to provide Gemstar with TiVo Showcases and certain other branding that is not cured within a certain period of time, we are contractually required to pay liquidated damages to Gemstar in the amount of the upfront license fee. biz.yahoo.com Although not exclusive in terms, I'd consider prepayment (especially when done in the hundreds of millions) as a fairly solid argument as to intentions. I don't believe the net terms of recent agreements are any weaker than those before. In fact, they might be stronger because they are structured better and are sustainable. None of the past cable agreements were exclusive with the exception of the very first between AT&T Broadband and United Video. If I remember correctly, the Comcast and Charter contracts were for a simple majority in terms of deployment and Adelphia was/is for 85% ... the greater the distribution the lower the rates, and the OEM 'double dipping' actually stopped with the original cable agreements several years ago. The 'old' terms required Gemstar to reimburse the carrier their 15% advertising share (in a formula I never really grasped) and is why the Company was actually losing money on each IPG. The carriers were apparently getting advertising monies whether there was any or not. Now it's mutually beneficial to develop, deploy AND monetize the IPG. I don't believe the Company's IPR decreased in any meaningful manner unless this industry is forever stalled at the IPG 101-02 level. The new iGuide might just be the first at the 201-02 level ... either way, weighting and waiting this out with patience and hopefully sound reasoning. Regards Stew

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