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Analyst: Rovi Entertainment Store Having Troubles Ramping Up

12 Jun, 2012 By: Chris Tribbey, Erik Gruenwedel

Rovi Corp.’s rollout of the Rovi Entertainment Store (formerly RoxioNow) platform aimed at assisting third-party Internet-based video distributors has stalled as additional capital investment is required for it to attain enterprise-level functionality, an analyst said.

Ralph Schackart, with William Blair & Co. in Chicago, outlined the entertainment store’s status in a note following comments presented June 12 by Rovi CFO Peter Halt at Blair’s 32nd annual Growth Stock Conference.

Halt told attendees rollout of RES was taking longer than expected, as additional capital resources were required to attain “enterprise class” compatibility. Typically, enterprise functionality enables technology to operate seamlessly across a corporation’s network of connected devices.

Third-party customers using RES include over-the-top video services and transactional VOD platforms offering cloud-based content storage, among other features.

Rovi earlier this year announced it was enabling RES to include UltraViolet digital library support within existing and future customers’ storefronts, thereby allowing consumers to buy UltraViolet-enabled content and/or access their digital video files from a broad range of compatible consumer electronics devices such as connected TVs, Web stores, Blu-ray Disc Players, iOS devices, Android mobile devices and game consoles (PlayStation 3 and Xbox 360).

“The longer-than-expected investment cycle necessary to bring the product up to enterprise class could result in management reducing 2012 revenue guidance if it cannot get the product up to enterprise class soon,” Schackart wrote in a note. “[Rovi] management noted that Rovi Entertainment Store revenue acceleration cannot begin until [the] platform is rebuilt to an enterprise-class level.”

Separately, Schackart said an undefined portion of Rovi’s IP-licensing and product licensing (i.e., TotalGuide) are flat-fee licenses, and that it plans to transition other licensees to flat-fee models going forward.

As a result, Rovi management expects TV-licensing revenues to be flat in 2013 with revenue growth in consumer electronics driven by advertising, DivX licensing, as well as the potential upside if two TV manufacturers (i.e., Vizio and LG) Rovi is in litigation with regarding its IP technology settle and become paying licensees.

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