Things like this keep life interesting. I was surprised today to read in Zatz Not Funny that DirecTV has purchased ReplayTV from D&M Holdings, their most recent owner. Well, it is more like the remains of ReplayTV, since they really haven’t existed as much of an entity for a while now. From the Reuters article:

Japan’s D&M Holdings Inc said on Thursday it had sold its ReplayTV business, which develops software for digital video recorders, to DirecTV of the United States for an undisclosed sum.

If you’ve followed the long, sad saga of ReplayTV, this makes their fourth owner. First, they were founded in 1997 as a standalone entity, about the same time as TiVo. They released their first DVR to market shortly after TiVo did, in 1999. Failing to compete successfully, ReplayTV in 2001 was was acquired by SonicBlue. SonicBlue re-invigorated the brand and continued to market RTV DVRs as TiVo’s primary competition. However, SonicBlue themselves went bankrupt in 2003, and D&M Holdings picked up the Rio and ReplayTV brands at SonicBlue’s bankruptcy sale for just $36 million.

D&M made Rio and ReplayTV part of Digital Networks North America (DNNA). However, DNNA didn’t seem to know what to do with ReplayTV, and they quickly canceled future development of both hardware and software. One final major update, 5.1, was released under DNNA, but promised software updates such as MP3 playback, USB WiFi adapter support, and interoperability between the 4000 and 5000 series units were killed. It was reported that DNNA had dissolved RTV’s engineering group, moving some engineers to other brands, such as Escient, while most of the engineers simply moved on to other companies. ReplayTV’s last hardware update came with the 5000 series units released under SonicBlue in 2003 (before the bankruptcy), the 5500 series units were the same hardware. And the last major software update, 5.1, was released in October, 2003. There were minor bug fix releases until late 2004, but that’s all. In December, 2005 DNNA announced it was pulling out of the DVR market, and focused on simply selling off the existing stock of units, which they accomplished by early 2006.

D&M Holdings sold off Rio in 2005 to Sigmatel, and all they’ve done with ReplayTV is to slap the brand name on some new PC DVR software and rebranded hardware. The ReplayTV PC Software completely failed to find a place in the crowded PC DVR market, so it isn’t a surprise that D&M would decide to cut their losses. Or, as they spun it:

The company said the sale of ReplayTV would allow it to focus resources on its other businesses, which include high-end audio brands Denon, Marantz and McIntosh.

Basically, going back to the brands they had before they started their ill-fated diversification that included acquiring Rio and ReplayTV.

While the DirecTV acquisition is for an ‘undisclosed sum’, seeing as D&M acquired Rio and RTV both for $36 million, when both brands held a lot more value than they do today, I’d have to guess DTV picked up RTV for a song.

Dave Zatz got his hands on what appears to be a letter from D&M CEO Eric Evans to the company’s employees, and he posted this excerpt:

Today D&M announced that we have sold ReplayTV® to DIRECTV, a US-based satellite television provider. D&M will continue to provide service to the current subscribers for the foreseeable future but will not solicit additional customers. All remaining assets, with the exception of the office space and some furniture, will be assumed by DIRECTV.

So it sounds like the DTV has not acquired the existing ReplayTV subscriber base, which I’d presume includes standalone and PC users, but rather D&M has retained those subscribers and will continue to service them (providing guide data, etc). And that they will no solicit new subscribers. To me this implies two things:
1. The ReplayTV PC software is defunct effective immediately. D&M will not be continuing to sell it – no new subscribers – and I don’t see it fitting with DirecTV’s product line. Also, if DirecTV intended to continue offering the software to new subscribers, it would’ve made more sense for them to acquire the existing customers to provide an installed base to grow from. The fact that DTV wasn’t interested in the subscribers combined with D&M not acquiring new subscribers implies, to me, that the product is dead.
2. DirecTV was really only interested in the intellectual property – especially the patents. They don’t really care about the products or the service. The products are all defunct now, and the service they left with D&M.

So what does this mean about the rumors of TiVo and DirecTV reuniting once Liberty Media finishes acquiring DTV from News Corp? Possibly nothing. ReplayTV hasn’t produced new DVR hardware or software since 2003, and all of the old RTV engineers are reportedly no longer with the company. Even if DTV acquired the PC software development group, developing for the PC and developing for specialized hardware aren’t the same thing. I don’t see DTV forming an ‘in-house’ DVR group based on the RTV software, let alone the hardware. The hardware is completely obsolete – the design is over 5 years old now. It isn’t even useful as a starting point, so just ignore that. The software is over four years old now, which is pretty stale in such a rapidly changing market. It would have to be brought up to date to start, ported to new hardware, and then be modernized with all of the features required to be competitive today, as well as to handle DTV’s systems. That’s a lot of work.

And it would be unusual for DTV – they’ve always outsourced that kind of work. Even the DirecTV branded set top boxes are produced by other vendors. TiVo has experience writing an OS for DirecTV, and they’ve maintained that capability in their code base even since the split. They’re already working on a new update for DirecTV’s existing TiVo-based units for 2008. The relationship is in place, the software is in place, and it wouldn’t be hard to produce a new STB based on the TiVo HD for DTV – just as they’re localizing it for Australia and DVB-T.

So why acquire RTV? Patents. As one of the early developers of DVR technology, ReplayTV, like TiVo, has some fundamental patents. Years ago ReplayTV and TiVo even sued each other, and settled out of court with a cross-licensing agreement. That agreement could well have transferred to DTV with the purchase, which would help insulate DirecTV from lawsuits like the one that TiVo has against DISH Network. It would also give DirecTV a better bargaining position in any negotiations with TiVo for future partnership agreements. And it would give DirecTV some capability to go after the competition and their own DVRs for patent infringement.

If my speculation that they picked up RTV for a song is correct, it was likely a very cost effective move on their part. (It kind of makes me wonder why TiVo didn’t snap up RTV for themselves, to consolidate their portfolio.)

I don’t expect to see a rebirth of ReplayTV out of this. I plan to ask some questions of DTV at CES next month, but I suspect that this purchase was all about the intellectual property and not at all about the software itself. I guess we’ll see if I’m right in time.