Audio Video News

Curiouser and curiouser. Wonderland's Alice would feel right at home in the topsy-turvy world of Silicon Valley, where companies never have to show a profit to make their founders wealthy, and where probable courtroom adversaries invest in each others' businesses. That's exactly what happened August 17 at RePlay Networks, which received a whopping $57 million in financing from a group of investors including Time Warner Inc., The Walt Disney Co., Liberty Media Group, United Television Inc., Showtime Networks Inc., and a division of industrial giant Matsushita, whose Panasonic company makes one version of the RePlay hard-disk-based video recorder.

Interestingly, Warner and Disney are members of the Advanced Television Copyright Coalition, which is threatening to sue RePlay and its rival, TiVo, over copyright issues. The two companies are makers of hard-disk devices sometimes known as Personal Video Recorders. PVRs provide TV viewers with unprecedented flexibility and freedom to control what they watch, including skipping commercials. Both PVR makers offer their products as part of a network package that allows them to insert their own commercials in place of those the program providers have been paid to run. The ATCC wants to ensure that content licenses are signed by the two startups, and it is threatening legal action.

RePlay's cash infusion adds to already substantial investments by heavyweights like Netscape founder Marc Andreessen and Microsoft co-founder Paul Allen. "We have now reached critical mass," says RePlay CEO Anthony Wood. "This investment by leading media companies provides us with the resources to take the company to the next level."

Apparently, the strategy among the investors is: "If you can't fight 'em, join 'em." Observers note that previous attempts to stop new technology on the copyright front have failed. The most spectacular flop was the Disney-backed attempt to suppress the VCR in the early 1980s—a fight that went all the way to the US Supreme Court. More recently, the music industry failed to stop the proliferation of MP3 players, which the court ruled were "space-shifting" devices. PVRs are time-shifters, and it's unlikely that they will be stopped either.

However, RePlay doesn't appear to be interested in alienating its new benefactors. A company statement on the current situation makes this clear: "RePlay Networks is working closely with many television and advertising companies to promote features in the RePlay Network Service that increase revenues for the television industry and do not undermine an advertising-based model."