TiVo snaps up Digitalsmiths for $135M

TiVo (Nasdaq: TIVO) just dropped $135 million to purchase cloud-based content discovery and recommendation engine Digitalsmiths. The company currently has deals with seven pay-TV providers in the U.S., including Time Warner Cable (NYSE: TWC) and Zeebox, and reaches about 64 percent of pay-TV households.

According to TiVo, the Digitalsmiths deal opens up new opportunities for the company to deploy cloud-based services to operators, which could be offered either in conjunction with TiVo or independent of the service.  

The deal is expected to close in the first quarter of fiscal 2015 and TiVo will pay cash for the company.  TiVo separately announced a plan to increase its current stock repurchase authorization by $100 million, which gives the company approximately $186 million of unused repurchase capacity as of the current date.

Digitalsmiths' technology lets operators integrate search, recommendations, discovery and browsing services across multiple devices including set-top boxes, Roku, Xbox, PlayStation, Kindle and iOS and Android devices. The company's cloud service handled almost 150 million transactions in December, which was up from 90 million in July.

Digitalsmiths competes with technology providers such as ThinkAnalytics, Jinni, Viacess-Orca and Digit.

TiVo said in a release that the company expects Digitalsmiths to continue its strong growth trajectory. The company's current customer base represents about 10 percent of the total potential user based licensed under its current contracts.  TiVo expects that to grow to more than 50 percent in the next few years.

In the third quarter, TiVo picked up 295,000 cable subscriber net additions through distribution deals with Virgin Media (Nasdaq: VMED), RCN, Grande Communications and other pay TV distributors.  The company ended the quarter with 3.9 million subscribers overall.

TiVo has been talking to Charter Communications (Nasdaq: CHTR), which has said that it is considering using TiVo software for a new cloud-based interactive program guide.

In a recent interview with FierceCable, TiVo CEO Tom Rogers talked about the potential that he sees from offering improved content recommendations as well as the impact of cable consolidation and more. See FierceCable's interview with Rogers and Jeff Klugman, TiVo's EVP of products and revenue.

For more:
- see this press release
- see this On the Hot Seat interview with Tivo's Tom Rogers and Jeff Klugman

 Related articles:
Time Warner Cable rolling recommendation engine from Digitalsmiths
Zeebox signs Digitalsmiths to offer viewers personalized TV recommendations
TiVo gains 295,000 cable subs in Q3 2013

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