News

Replay, TiVo Get Cash For Consumer Push

4/04/1999 8:00 PM Eastern

Replay Networks Inc. and TiVo Inc. are capping their
commercial-product launches with new investments from partners that are eager to
capitalize on their "time-shifting" video-recording technology.

Replay landed an $8 million infusion from a venture-capital
group led by Kleiner Perkins Caufield & Byers, which became the company's lead
investor, and from Paul Allen's Vulcan Ventures Inc.

Replay does not have any deals yet with Vulcan's cable
MSO, Charter Communications. But Vulcan praised the recording service as a good fit with
the rest of its "wired-world" investment portfolio, which also includes content
providers and Internet portals, as well as TiVo's service.

"Clearly, personal television is going to change the
way that people watch TV, and it will have a dramatic effect on content," William
Savoy, Vulcan's president, said in a prepared statement.

"Replay Networks' technology is attractive to us
because it fits into today's television infrastructure and it can expand with
tomorrow's digital-television world," Savoy added.

Also investing in Replay's first venture round was
Tribune Co., which is already a content provider for the Replay service's channel
guide.

TiVo began selling a Philips Consumer Electronics
Co.-branded digital hard-drive video recorder March 31 through its Web site, a toll-free
phone number and direct mail.

The company concurrently announced that it had landed an
unspecified equity investment from Showtime Networks Inc., which was already its partner
in developing specialized promotional programming for TiVo users.

SNI also unveiled a deal to develop similar programming
with Replay -- so-called Replay Zones promoting various SNI programs and making it easier
for Replay and cable subscribers to view or make customized lineups from offerings on
Showtime, The Movie Channel, Sundance Channel and Encore Media Group's Flix movie
channels.

Investors and programming partners believe that by enabling
subscribers to record shows, to search channel content for genre- or actor-specific
programs and to create their own customized program lineups, the boxes and recording
services will drive viewership and new subscribers to premium and pay-per view channels.

They also see a vehicle for expanded advertising
opportunities, such as ad insertions that are customized to match subscribers'
viewing preferences or habits.

"We think that these appliances and this technology
have the opportunity to make some very significant inroads with consumers," said Jeff
Morris, SNI's senior vice president of new media and technology development. "We
are embracing this category."

Forrester Research Inc. has estimated that the
"personal video recorder" category could balloon to 14 million consumers in the
next five years, both through stand-alone boxes and through PVR capabilities integrated
with other devices, such as DVD players and digital-TV receivers.

Cable has some company in the digital-recording arena.

Direct-broadcast satellite carrier EchoStar Communications
Corp. plans a retail launch next week (April 12) of its own advanced Dish Network
receiver, the "7100," incorporating both Microsoft Corp. subsidiary WebTV
Networks' technology and a digital hard drive enabling program recording, searches
and such VCR-type capabilities as pause.

The $499 set will initially be available to Dish Network
retailers nationwide, EchoStar said.

The category formally got off the ground with TiVo's
commercial launch of its equipment and service, which have been in field trials since
December.

The Palo Alto, Calif.-based company initially offered two
recorder models made by strategic partner Philips -- a $499 model with 14 hours of
recording capability, and a $999 model with 30-hour capacity.

TiVo takes programming from all formats -- broadcast, cable
and DBS -- while viewer commands or updates from the TiVo service are transmitted to the
device through a dial-up phone line.

TiVo's initial pricing tiers were $9.95 per month, $99
per year or $199 for a lifetime subscription.

The company said it wanted a relatively controlled
commercial rollout to ensure that any problems with the boxes or service were ironed out
by the time consumer-electronics makers begin building their licensed versions for the
retail market.

Tom Marr, general manager of multimedia marketing for
Philips, said his company expected a national rollout through its existing retail channels
by the summer. A DirecTV Inc. receiver with integrated TiVo functionality could be
available by early next year, he added.

Replay said it had to delay by a couple of weeks its plans
to begin shipping product to consumers by the end of March. The company is more focused on
a later, mass-market launch by consumer-electronics manufacturers that license the
product, although no such licensing agreements have been announced yet.

"The main business model is based on licensing this to
other consumer-electronics manufacturers and having them build Replay Networks-enabled
products," said Jim Plant, Replay's director of marketing. "We're
fairly confident that we'll be shipping those in the fall."

Initial availability will be from Replay's Web site or
from a toll-free phone number. Replay's business plan is to charge $699 for the
recording device -- which will have expandable storage capacity via daisy-chainable
modules that are now being developed -- and to offer free recording service subsidized by
advertising.

Plant said the addition of Kleiner Perkins -- which will
place partner and former @Home Network CEO Will Hearst III on Replay's board -- would
open the doors to more capital-raising later this year and to further business
opportunities.

Those could include partnerships with a variety of hardware
vendors that may want access to Replay's technology, either on a networked or an
embedded basis, Plant said.

He noted that the initial model of Replay's box
included an expansion port based on the IEEE 1394 "fire-wire" specification for
moving digital signals between TV sets and other devices.

The port will not be enabled in the first generation of
boxes, but it can be activated via a downloadable software upgrade once industry standards
for copyright protection and encryption are in place, he said.

September