Dish Names Blockbuster President, Settles With TiVo

2 May, 2011 By: Erik Gruenwedel

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Satellite TV operator agrees to pay TiVo $500 million to settle DVR patent dispute

Dish Network, new owner of Blockbuster LLC, May 2 named senior executive Michael Kelly president of the venerable rental chain.

Kelly, EVP of Dish’s direct sales and media sales, was instrumental in the satellite TV operator’s $320 million acquisition of Blockbuster, according to CEO Charlie Ergen.

"Michael was the visionary behind our acquisition of Blockbuster," Ergen said in a statement. "His leadership will be key to returning Blockbuster to profitability and improving the experience we offer to consumers across the U.S. and globally."

Kelly previously served in various executive positions for Dish, including management of field service, customer care operations and strategic initiatives. His company, Kelly Broadcasting Systems, a leader in distributing international radio and television programming in the United States, was acquired by Dish in 2000.

Separately, Dish and EchoStar Corp. agreed to pay TiVo $500 million to settle a seven-year legal battle concerning alleged misuse of digital video recording patents held by TiVo. Engelwood, Colo.-based Dish/EchoStar will pay TiVo $300 million immediately. 

“We are pleased to put this litigation behind us and move forward,” said Ergen, who also is CEO of EchoStar. “Our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo’s Time Warp patent, which ultimately will allow us to enhance the performance” of the company’s digital video recorders.

Since losing a jury trial four years ago and paying TiVo $100 million in damages, Dish/EchoStar have filed separate appeals in 2008 and 2010.

"We are extremely pleased to reach an agreement with Dish Network and EchoStar which recognizes the value of our intellectual property," said Tom Rogers, CEO of TiVo. "The compensation from this settlement, including the resulting reduction in legal expenditures, puts TiVo in an enviable financial and strategic position. This settlement, which brings the total compensation paid by Dish for use of TiVo's patents to over $600 million, demonstrates the significant return afforded to our shareholders by diligent enforcement of TiVo's intellectual property rights. Those efforts will aggressively continue with other parties."

In addition, TiVo will play a role in helping Dish promote Blockbuster's digital video service, including a possible streaming option.

"We are excited to work with TiVo to help develop our Blockbuster video service. Resolving the patent infringement case allows us to further engage with TiVo on a variety of exciting strategic initiatives, like Blockbuster, where we are uniquely positioned to collaborate," Ergen said.

Finally, Dish reported first-quarter (ended March 31) income of $549 million, up 137% from income of $231 million during the previous-year period. The company added 58,000 subscribers in the period, down 76% from 237,000 subscriber additions last year.

Dish said subscriber, equipment, customer service and installation issues contributed to the decline.

"Most of these factors have affected both gross new subscriber additions as well as existing subscriber churn," the company said in a statement. Dish ended the quarter with nearly 14.2 million subscribers.

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