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The Most Important Company You've Never Heard Of: Rovi
A little known Silicon Valley company is ready to make a big splash in online video this year.
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Rovi has quietly assembled all the pieces needed to build a killer video service that could challenge Amazon, Netflix, and even iTunes.
It's not going to take on those companies directly. Instead, it wants to be the technology provider for countless other online video services.
"We're not trying to be the Rovi brand everywhere," explains executive vice president Corey Ferengul. "We're trying to be behind everywhere else."
Rovi has done a good job staying anonymous -- a 2009 name change from Macrovision probably helped -- but lately it has been turning heads with a mysterious new Apple deal and the acquisition of Sonic Solutions.
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So who is Rovi? And how will they change the business of online video?
Digital video services like Netflix and Hulu make their money by gathering end users and charging them a subscription fee or putting ads in front of them. Technology and electronics companies try to sell gadgets that provide the best overall entertainment experience.
But Rovi, which changed its name from Macrovision in 2009, sells pieces of its platform to everybody else. Think of it like the difference between Apple selling iPhones and the (often unnamed) suppliers selling parts to Apple.
It's already got a big footprint: Rovi's guides for TV, movies, and other media have shipped in 163 million devices and are used by 122 million subscribers to cable TV and other services.
Rovi's guide and search services help users find what's on TV and what's available from other sources, like video-on-demand or the Internet. Rovi also HAS guides for music downloads, games, and books, and offers some of this information on free consumer-facing Web sites like AllMusic.com.
You know those ads you see in your on-screen TV guide? If you're one of the 30 million households using a Rovi guide, then Rovi may be selling the ads -- it has a direct ad sales force -- and providing the technology to target those ads and track results for advertisers. It currently provides a variety of ad products, from simple banners to the interactive "dynamic portal" shown here.
RoxioNow, which Rovi will get in its acquisition of Sonic Solutions, is a platform for third parties (like Sears and Best Buy) to build their own on-demand video services. It offers more than 10,000 titles, many of which are available on the same day as the Blu-ray and DVD release. Users can buy a movie once and watch it on multiple devices, rather than having to move the file around.
Sonic built RoxioNow out of its 2008 acquisition of CinemaNow. Best Buy uses CinemaNow as the brand for its store based on RoxioNow, but other stores will have different names.
DivX, which Sonic Solutions acquired last year, offers a set of technologies that consumer electronics manufacturers use to ensure that their products -- TVs, Blu-ray players, other connected boxes -- can play nearly any common form of Internet video. A certification program lets consumers know what they're getting.
DivX also has its own video codec and other core video technology.
DivX also recently launched DivX TV, a platform that brings Internet video content to the TV and connected devices. So far, the selection of content is pretty limited, and LG is the first customer (it's embedding it in some new Blu-ray players), but it's another piece of the puzzle.
Sonic Solutions owns the Roxio line of software tools for PC and Mac users to rip, create, manipulate, and play video (and audio and images). The acquisition of DivX added more tools to the arsenal.
These tools are mostly for consumers, and probably wouldn't be much use in building and running an online movie service. But a lot of technology and expertise went into building them, and those people and patents could be useful in other areas of Rovi's business.
As this slide from the company's last investors' meeting shows, Rovi has deals with most of the major consumer electronics companies, US cable providers, online retailers, and movie studios.
It's even got a mysterious deal with Apple -- Rovi is not allowed to say anything more, but Apple might be using Rovi's guide information to power a future version of Apple TV with live TV programming...or may simply be using Rovi's guide information for iTunes.
The addition of Sonic Solutions -- particularly DivX -- will bring more consumer electronics companies into the fold.
With the acquisition of Sonic Solutions, Rovi's assets look a lot like what Microsoft used to have with Windows Media in the early 2000s: core technology, tools for video creators, and relationships with content providers and consumer electronics companies.
But the business goal of Windows Media always came back to promoting Windows, and as a result Microsoft missed a lot of shifts in consumer habits, like the rise of the iPod. Eventually, Microsoft lost interest and shifted to other entertainment products -- like the Xbox -- instead.
Rovi doesn't have any other business to promote. This is its business.
Eventually, some other company is going to put these pieces together into a great service. Or, a bigger company that wants to get a leg up in digital entertainment (Google?) might swallow Rovi whole. When that happens, Rovi could suddenly become a lot more prominent.
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