ReplayTV is abandoning the advertising- and marketing-related initiatives it began earlier this year, and moving into the technology licensing business.
The Mountain View, Calif. company, which manufactured networked devices that lets users digitally record or pause live television, said Tuesday it will focus on licensing the technology it uses to run these devices to set-top box manufacturers and network operators.
These firms, in turn, would be able to offer ReplayTV’s services, which ultimately would include video on demand, targeted advertising and e-commerce.
“In order to best capitalize on the emerging personal television category, we have shifted our corporate strategy, leveraging our core technology, resources and management expertise to reposition ReplayTV from a consumer hardware and service provider to an enabling infrastructure and managed services company,” said company founder Anthony Wood.
The company will license software including video clients, content distribution servers and set-top-box ad servers.
ReplayTV said it expects these products to appeal to a wide array of consumer-electronics manufacturers, personal-computer companies, telephony businesses and set-top box manufacturers for cable, satellite and terrestrial operators.
Executives also said its new corporate direction will result in the “strengthening” of the company’s core engineering and development teams — and a reduction in its marketing, sales and manufacturing staff. About half of the 260-person company would be cut and ReplayTV will close its Los Angeles and New York offices, according to a source close to the firm.
Layoffs also extended to senior management — Wood, who currently serves as a director, will become the new chief executive officer and chairman, replacing Kim LeMasters, who joined the three-year-old firm last September.
Other management cuts include: Dan Levin, chief technical officer; Alex Gray, senior vice president of operations; “Buzz” Kaplan, chief administrative officer and executive vice president of sales and marketing; Michael Teicher, SVP of ad sales; Mark Stratton, SVP, product marketing; Rob Kenneally, EVP, ReplayTV Service; and Peter Sheil, SVP, ReplayTV Service.
Wood said ReplayTV would commit fewer resources to the manufacturing and direct marketing of its house-brand digital video recorders. Wood said consumers using ReplayTV’s devices and companies that include ReplayTV’s hardware in their products would not be affected by the shift.
ReplayTV had been positioning itself as something of an interactive television marketing company — striking deals since September with big-name offline advertisers to create specialized advertising campaigns on its system, which would make certain content available only to ReplayTV users. Advertisers included Toyota, Ford, McDonald’s, Coca-Cola and Universal Pictures.
“Replay has basically allowed [the advertisers] to void their contracts,” said the source.
And last week, the company announced that it planned to create an in-house studio to create original movie trailers and content as part of its work for Universal.
Now, that office “will be a lot smaller than they had initially announced,” said the source.
In creating interactive television campaigns for advertisers, ReplayTV sought ways to further monetize its user base beyond the retail cost of a ReplayTV box — about $600.
Now, that initiative apparently has been superceded by the search to find a stable business model: The company had raised $57 million in venture capital last August 1999, but apparently burned much of that in operations, manufacturing and rebates. The company had filed to go public, but pulled the IPO in August.
“Their business model was very cash-intensive … and they had to subsidize the cost of units, each of which was about $200,” said the source. “It was not a good business model going forward.”
The source denied that the company was shopping itself to be purchased.
At any rate, ReplayTV is not alone in focusing on content- and ad-serving technology for set-top boxes; several other firms are banking that as interactive television takes off, that sort of technology will be right where the money is. Several online ad companies, including DoubleClick and 24/7 Media, have acknowledged that they are exploring interactive television ad serving technologies.
“Storing information like television programming offline and then making it available when consumers want it and in the form that they want it, is a new paradigm,” Wood said. “By making our technology available to a broad set of system and service providers, they can all now make networked entertainment services available to their customers.”
ReplayTV’s archrival TiVo, however, remains in the thick of both the hardware and technology businesses, having recently landed advertising deals with NBC, Showtime, and the PGA. Unlike ReplayTV, publicly traded TiVo retails its units for about $300 but charges a subscription.
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