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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: PaulW who wrote (28704)	1/25/1998 10:09:00 AM
From: John Rieman	Respond to of 50808

The interactive guides. Microsoft is coming.............................. multichannel.com Merger Likely To Bolster Guide Sales By KENT GIBBONS Last week's agreement between United Video Satellite Group Inc. and Gemstar International Group Ltd. to merge their interactive guides should give a needed boost to the guide business, which, in turn, helps cable operators to sell more product. The companies created a joint venture, Interactive Prevue Guide Inc. (IPG), which will be 51 percent-owned by UVSG. UVSG continues to own and market Prevue Channel and Sneak Prevue, while Gemstar retains full control of its VCR Plus+ guides, which are aimed at consumer-electronics manufacturers. The new venture starts off with a 10-year affiliation deal with Tele-Communications Inc., which controls UVSG, for distribution in digital boxes. That deal extends to TCI's Headend in the Sky affiliates. Critically, UVSG and Gemstar agreed to drop their lawsuits against one another. Those lawsuits, which go back to 1993, scared some operators away from either UVSG's Prevue Interactive or Gemstar's StarSight guide. Gemstar bought StarSight Telecast Inc. this past May, largely because of its own litigation battles with StarSight. Time Warner Cable, for one, uses the manufacturers' "native" guides in advanced-analog converters because it was afraid of being sued over its guide selection, said the MSO's vice president for public affairs, Michael Luftman. "Now, that threat goes away, and we're very anxious to talk to the joint venture about coming to an agreement whereby we could use their guide," Luftman added. Guides are expected to be a crucial feature as digital boxes with greatly expanded channel capacity become widespread. Analysts said that was a key reason why TCI chairman and CEO John Malone recently swung a deal to raise TCI's stake in UVSG from 40 percent to 73 percent by buying out all of former UVSG chairman Lawrence Flinn's holdings. Even in advanced-analog boxes, guides are popular with consumers, and they help to drive buy-rates for programming tiers and pay-per-view offerings. In Time Warner's system in Memphis, Tenn., advanced-analog boxes equipped with native guides have helped to generate 30 percent more operating cash flow per subscriber than before the boxes were introduced, Luftman said. UVSG president and chief operating officer Peter C. Boylan III said last week that the companies will have engineering teams evaluate how to cherry-pick the best features from each guide. It's likely that the new guide will include StarSight's patented one-button VCR function and Prevue's video-clip capabilities. Boylan said the new-look guide should be ready in 60 to 90 days, to go with a new rate card. Most current StarSight affiliates should save under the new pricing structure, which will be "competitive" with what Prevue Interactive affiliates pay now, Boylan said. Investors and analysts liked the deal. "It'll firm up the [guide] pricing, facilitate the rollout and do a lot of good things for both companies," Media Group Research analyst Mark Riely said. Analyst Kian Ghazi at Lehman Bros. said the agreement "makes it clear that Gemstar's product is the de facto standard in the industry." Neither he nor Riely thought that the deal would have problems clearing antitrust reviews. Gemstar's share price shot up $2, or 6 percent, to $32.94 on the news last Wednesday, while UVSG was flat at $33 that day after seeing a $1.88 (6 percent) bump the previous Friday. Gemstar has been rising steadily since its Jan. 13 announcement of a guide cross-licensing deal with Microsoft Corp. Before that deal, Gemstar's stock price was $24. Boylan said the talks with Gemstar began shortly after it acquired StarSight. He and UVSG chairman Gary Howard flew to Pasadena, Calif., to meet with Gemstar CEO Henry Yuen and explore ways of settling the lawsuits. Yuen was receptive, so negotiations began in August and finally ended last week. We met once a week every week and, over the last two to three months, literally every day," Boylan said. Boylan said he figures that Microsoft's guide -- which will be part of the upcoming Windows CE set-top operating system and in its WebTV Plus set-top boxes -- will be IPG's chief competitor. Native guides "won't be a business, in my opinion," he said, because the features will be inferior to IPG, and those guides won't enjoy the intellectual-property protection that IPG promises. Gemstar wins either way, because Microsoft has to pay a royalty for each box that carries the Microsoft guide with Gemstar's technology, Ghazi said.