December 12, 2007
Macrovision’s risky play turns sour
It must have seemed a good idea at the time. Combine a company that produces an electronic programming guide with one that makes content protection technology, and you get an outfit that is perfectly positioned to help media companies navigate the challenging waters of internet-delivered TV. That is, if you don’t end up with a trainwreck first.
Macrovision’s proposed $2.8bn purchase of Gemstar-TV Guide may survive the elevator pitch test, but it looks monumentally difficult to make work. For a start, Gemstar will be a very big and complicated dish to swallow. Some 55 per cent of its revenues don’t even come from electronic programming guides, but from the TV Guide magazine and cable channels. Unpicking the pieces, selling off unwanted assets and paying down debt may eventually leave the smaller Macrovision in a position to digest what’s left, but Gemstar has been a playground for intellectual property litigators for so long that it’s hard to imagine this turning out clean and simple.
The shares of both companies haven’t stopped falling since the deal was announced last Friday. Macrovision is down nearly 30 per cent and at $4.44, Gemstar is now trading 30 per cent below the original value of the cash-and-stock deal. For News Corp, which has put its 41 per cent stake in Gemstar behind the deal, it seems a fitting end to a disastrous investment. It’s also a reminder that assembling the next generation of media technology services companies out of today’s complicated patchwork of point-product vendors is likely to be a messy business.
