TiVo gains muscle in DVR game thanks to court ruling

If it will survive, Dish will have to pursue one of a few options following today’s rulings. It maintains that it will appeal the ruling, which stems from legal battles with TiVo that date back to 2004, but if it doesn’t, Dish’s other option could be to form a licensing agreement with TiVo that would allow it to use its technology. The most likely scenario is that Dish will settle with TiVo and agree to pay it a monthly licensing fee, according to Bernstein Research senior analyst Craig Moffett.

“Faced with a worst-case scenario of having to disable DVRs for nearly a quarter of its total installed base of subscribers and the potentially astronomical churn rates that would follow, and further, now without the ability to offer a legally compliant DVR service even to new subscribers, Dish Network would now appear to have little choice but to settle,” he wrote in a research note.

TiVo now effectively holds all the cards, Moffett added. The set-top box maker also has licensing agreements with cable company Comcast (NASDAQ:CMCSA) and leading satellite provider DirecTV (NASDAQ:DTV) but would be inclined to charge Dish – along with future potential partners – a much higher monthly fee. TiVo also has the option of auctioning exclusive rights to its DVR patent to the highest bidder, he noted.

Moffett estimated that an exclusive for DirecTV could be worth more than $3.5 billion. For DirecTV, an exclusive agreement like this might be smart if it’s a path to acquisition for them, Altman added, but it remains to be seen how the market will shake out.

“I think the whole situation with Dish and DirecTV and who might acquire them is very, very fluid,” he said. “If you believe the triple play is supreme, then what is the long-term future for DirecTV? It’s tough to say. On the other hand, DirecTV has done well playing along with the RBOCs, so it’s tough to say what the outcome will be.”