Updated August 18, 7:25 AM PT
Replay Networks Inc. announced Wednesday it received a $57 million strategic investment from media giants Time Warner Inc., Walt Disney Co. and NBC. High-tech luminaries Marc Andreessen, Sky Dayton and Paul Allen have also bought into the company.
The announcement comes one day after Replay's chief rival, TiVo Inc., announced a partnership and equity investment from America Online. And TiVo announced last month its own who's who of media investors as backers continue to line up behind the two chief manufacturers of "personal TV" systems.
Replay allows users to record programming and create personal television "channels" based on favorite shows, themes or actors, using a $699 set-top storage device scheduled to hit stores in time for the holiday season.
Besides Time Warner (NYSE:TWX), Disney (NYSE:DIS) and NBC, other Replay investors are Liberty Media Group, Showtime Networks Inc., United Television Inc., Panasonic parent company Matsushita Kotobuki Electronics Industries Ltd., venture capital firm Kleiner Perkins Caufield & Byers and Microsoft Corp. (Nasdaq:MSFT) cofounder Paul Allen's Vulcan Ventures Inc. Andreessen, America Online Inc.'s (NYSE:AOL) Chief Technology Officer, and Dayton, EarthLink's chairman, are increasing their individual stakes in the company, Replay officials said.
"This investment by leading media companies and Matsushita provides us with the resources to take the company to the next level. We have now reached critical mass," Replay Networks CEO Anthony Wood said in a statement.
Matsushita Kotobuki announced in June it will manufacture the Panasonic-brand Replay Networks storage device.
Investors in rival TiVo include Disney, CBS and cable companies Comcast Corp., Cox Communications, Discovery Communications Inc. and Liberty Media. Advance/Newhouse and TV Guide Interactive rounded out the investors announced in July.
Money flowing in
Replay and TiVo are already caught up in controversy. A controversial feature on Replay is a button that effectively cuts out commercials by letting users skip ahead 30 seconds. That makes some broadcasters nervous because it threatens to undermine a major source of revenue.
Last week, several major television and cable networks formed a coalition that wants the companies to pay licensing fees on the grounds the devices modify copyrighted material.
The coalition, which includes new Replay investors Disney and Time Warner, as well as CBS Corp. and News Corp., also noted the technology could allow the companies to insert their own commercials in place of network ones. The coalition threatened to sue the makers of the new digital television recorders.
Genie’s out of the bottle
Replay tried to soothe those worries.
"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," it said.
Josh Bernoff, an analyst with Forrester Research, said the media companies were trying to use both business relationships and legal muscle to protect their turf. But he was skeptical they could wring a concession such as a licensing fee.
"The legal challenge was going to come but its difficult to see how they're going to be stopped," Bernoff said of Replay and TiVo. "The hue and cry from consumers would be incredible. The genie's out of the bottle now and there's really no way to stuff it back in."
Reuters contributed to this report