ReplayTV Set for IPO

ReplayTV, Inc., one of several set-top box manufacturers at the forefront of the coming interactive television age, is preparing to go public.

The company is attempting to target consumers that do not have or want personal computers by enabling them to pause a television program, record it to a hard disk, use the screen for e-commerce or other applications, and then resume watching the program from the point at which it was paused.

On Thursday, the Mountain View, California-based company said it received $84.9 million (US$) in financing from a number of electronics and advertising companies, including EchoStar Communications (Nasdaq: DISH), Comcast Corp. (NYSE: CMCSK), Excite@Home (Nasdaq: ATHM) and News Corp. (NYSE: NWS).

In January, the company filed with the U.S. Securities and Exchange Commission (SEC) to sell 8.5 million common shares. The shares are likely to be priced in the $13 to $15 range.

Changing the Economics of TV

The Replay TV system, which is almost identical to a system provided by competitor TiVo, Inc. allows viewers to essentially program their own television channels by recording programs based on personal preferences.

Today, the system can only be used for digital recording. The company plans, however, to make it part of a complete interactive digital TV system that would include e-commerce.

However, some analysts believe that the technology has the potential to wreck the economic structure of the television industry, as consumers will skip over the 20 minutes of commercials that come with an hour of TV programming.

Big Boom

The E-Commerce Times projects that TV-based business-to-consumer (B2C) e-commerce will total $15 million in 2002 and rise to $105 million by 2006 — equaling PC-based consumer purchasing by that date.

In its SEC filing, Replay TV said, “We believe the ReplayTV Service will transform the way consumers access television programming, advertising and, ultimately, commerce services. We also believe our portal creates a new, more effective medium for advertisers, content providers and cable and satellite system operators to target consumers.”

The firm added that it expects to eventually generate most of its revenue from the sale of advertising on its service, though the amount will not be significant for some time.

In the meantime, the company said, “We expect to continue to incur significant losses and negative operating cash flow for the foreseeable future.” Revenue will also come from “future services” like transaction fees, it said.

TiVo went public last September at $30 a share, rose above $70 earlier this year, and now trades at about $35.