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DirecTV, Philips Invest in TiVo

Personal-television-service provider TiVo Inc. won the
financial backing of two corporate investors last week, DirecTV Inc. and Philips Consumer
Electronics Co.

Both the direct-broadcast satellite provider and the
consumer-electronics giant had previously agreed to incorporate TiVo's technology in
their products and to market the subscription service to their customers.

TiVo technology allows users to digitally record and store
programming, as well as to pause and rewind live shows.

TiVo will also use subscriber input to search and record
the types of shows desired so that the viewer doesn't have to remember in advance to
set the recorder for a specific time.

In its agreement last week, DirecTV became TiVo's
largest corporate investor, with an ownership stake of more than 10 percent. The DirecTV
deal does not prohibit TiVo from seeking other partnerships with cable companies.

TiVo director of product and services marketing Joe Harris
said he expects to add another corporate investor -- one of the top four broadcasters --
possibly within the next week.

DirecTV's deal with TiVo was not a straight
cash-for-equity deal, according to DirecTV vice president of advanced products Brad Beale,
who declined to specify how much the company paid for its ownership stake.

"The companies had various currencies that they could
have used to consummate this deal," Beale said. "Equity is one currency that a
start-up company like TiVo has to offer."

DirecTV also bargained for a share of TiVo's
subscription revenues from DirecTV subscribers. In return, they committed marketing
resources and bandwidth to TiVo, in addition to "a little cash," Beale said.

TiVo will use DirecTV bandwidth to deliver preview trailers
and other specially created programming to their joint customers.

DirecTV customers currently need stand-alone TiVo boxes to
access the personal-television service.

Late this year, Philips will ship an integrated DirecTV DBS
receiver and TiVo system. Pricing has not yet been established. Today's equipment
ranges from $499 to $1,200, depending on storage capacity and on whether the consumer pays
a lifetime subscription fee upfront.

DirecTV plans to introduce three interactive-television
services to subscribers as early as this year.

In addition to TiVo's service, the company has signed
with Wink Communications Inc. to deliver what Beales called "baseline
interactivity." And at the advanced end, DirecTV plans to deliver a TV online service
with full Internet access through both a telephone-return path and satellite-delivered

Beale confirmed that DirecTV was in talks with America
Online Inc., adding that the company has been involved in discussions with other
TV-focused Internet-service providers, including Microsoft Corp.'s WebTV Networks

DirecTV hopes to have a TV-based Internet product on the
market by the end of the year.