TiVo Inc. and DirecTV Group Inc. Wednesday said they would extend their service and support agreement for three years, sending TiVo's shares up 9 percent in premarket trading.
Satellite TV broadcaster DirecTV said last August that it would no longer market TiVo's digital video recorders and would use its own system made by News Corp.-controlled NDS Group Plc.
While DirecTV still will not be marketing TiVo, the two companies extended a deal under which customers can receive TiVo through DirecTV. Maintenance and support for the service will be provided by TiVo, which would have been under no obligation to service DirecTV customers without an extension to the agreement, due to expire in 2007.
The statement from the two companies did not give financial terms of the extension, but said "the recurring monthly economics of the agreement are similar to the economics for DirecTV receivers with TiVo service activated since 2003."
DirecTV is a top TiVo customer and the extension of the deal was initially greeted positively on Wall Street, where there had been concerns that DirecTV would transition their TiVo customers to its own service if an extension was not reached.
DirecTV's decision to stop marketing TiVo and instead focus on News Corp. technology is part of a broader plan to replicate video-on-demand viewing, which has been a defining competitive advantage of cable operators.
Satellite television technology only provides for a one-way broadcast of video programming, unlike cable TV, which also lets users send requests back to the cable system.
Cable customers are able to order movies and shows with a click of their remote control.
Another part of Wednesday's deal includes a provision under which TiVo and DirecTV agreed not to assert patent rights against the other. TiVo is currently in a legal battle with satellite television company EchoStar Communications Corp. over patent claims.
In the case, TiVo charges EchoStar with stealing technology that allows users to record one TV program while watching another via a DVR.