Rovi, which provides TV content guides and copy protection for the video industry, plans to pay $720 million to acquire digital video company Sonic Solutions. The deal moves Rovi, previously a B2B company, into more direct competition with Netflix.
The deal is complicated because both companies offer a mish-mash of digital video products. But the key parts of the acquisition are RoxioNow and DivX TV, both of which bring Rovi into the business of distributing digital video on consumer electronics devices.
Rovi got its start as Macrovision, a provider of video copy-protection technology for DVDs and other content. Then it bought TV Guide/Gemstar, which provides the on-screen guide data for TV providers like cable companies, and to hardware companies making interactive TV products, including Apple TV.
Sonic was originally known for its Roxio brand of digital media tools for the PC, like CD burning software.
But more recently, Sonic began licensing movies for digital distribution through its RoxioNow platform, and now has the rights to more than 10,000 titles. RoxioNow provides the back-end for streaming video services from Blockbuster, Best Buy and other retailers, and ships with consumer electronics devices like connected TVs and Blu-ray players. The company says it will ship RoxioNow on more than 30 million devices next year.
Sonic also bought DivX for about $300 million earlier this year. DivX has a bunch of digital media products as well, but is best known for enabling users to download movies to play on DivX-enabled devices (DVD players, Blu-ray players, TV, and so on). DivX software has been distributed in more than 350 million devices, the company says. DivX also has a newer service called DivX TV that lets users download Internet video content, like FunnyOrDie videos, to play on their TV. So far, it's only supported on one device, an LG Blu-ray player, but the idea is similar to what Google is trying to do with Google TV.
Add it all up and Rovi just got the rights to a bunch of new content and channels to distribute it through.
Rovi CEO Fred Amoroso explained to Investors Business Daily that Rovi isn't in the distribution business itself, but simply wants to partner with other companies--like Blockbuster and movie studios--to provide distribution services. So Rovi may not charge consumers directly like Netflix does. But it's definitely setting itself up as an alternative distribution channel for streaming video.
To complete the acquisition, Rovi will pay $14.12 per share for Sonic's stock--about a 38% premium over the average stock price for the last 30 days. The companies expect the deal to close in the first quarter of 2011.
