Gemstar-TV Guide International

» see gemstar.com as it lived, on the wayback machine

~ the obit ~

You could not buy a Gemstar. There was no box with the name on it and no service you subscribed to. What the company owned was a portfolio of patents covering the idea of a television schedule displayed on the television itself, and for about fifteen years that turned out to be one of the more valuable things anybody owned in consumer electronics.

Henry Yuen had a doctorate in applied mathematics from Caltech and, later, a law degree, which proved to be the more useful of the two. He and Daniel Kwoh started Gemstar in 1986 and shipped VCR Plus+ in 1990, the compression scheme that squeezed a channel and a start time into a short number a newspaper could print in the corner of a listing. That product made the company real. The patents underneath it made the company rich.

By the late nineties Gemstar was suing or licensing most of the industry. It fought Scientific-Atlanta and General Instrument, and it hauled Pioneer and EchoStar in front of the International Trade Commission. Microsoft paid it royalties for the guides inside WebTV and UltimateTV. The press called Yuen a patent terrorist and he did not appear to mind. In 1999 the company paid $7.9 billion for TV Guide, which meant it now owned the printed magazine as well as the patents on the thing that was going to replace it.

None of this reached me as a product. Turkish television listings in 2001 lived in the newspaper and in the weekly magazines rather than on the screen, and nothing in a living room in Ankara was paying anybody in Pasadena. I only ever met Gemstar backwards, through the settlements, reading later about who had been made to pay whom for the right to draw a grid of program names. It is one of the few businesses in this graveyard that was invisible to its own end users on purpose.

~ the rap sheet ~

~ the money ~

The licensing model was close to perfect while it lasted. Gemstar did not manufacture the guides, did not sell them, and did not have to persuade a single viewer of anything. It sat between the people who made televisions and the people who made schedules, and it charged for the crossing. At the top of the market in 2000 that arrangement was worth twenty billion dollars.

By 2005 the same company was worth a little over one billion. Some of that was the general collapse of anything with an interactive television story attached to it. Most of it was that the licensing revenue had been overstated and everybody now knew.

~ what actually broke ~

In 2002 Gemstar disclosed that roughly $108 million of booked revenue had never been collected, most of it from Scientific-Atlanta licensing agreements that had expired in 1999 and were being litigated rather than paid. Yuen and CFO Elsie Leung had recorded it on the theory that it would arrive eventually. Revenue recognition does not work that way, and the restatement took the stock apart.

Yuen was replaced as chief executive in October 2002 by Jeff Shell of Fox Cable Networks, then fired outright in 2003 when the company described what had happened as criminal manipulation of revenue recognition. A federal court found against him on securities fraud in 2006 and ordered him to pay around $22 million. By 2007 nobody reporting on the case could say where he was.

~ the long tail ~

Macrovision signed the acquisition on 7 December 2007 at roughly $2.8 billion and closed it on 2 May 2008. The buyer renamed itself Rovi on 16 July 2009 and the Gemstar name went with the old letterhead. The patents did not die with the company, which was always the arrangement.

The ending has a shape worth noting. Rovi spent years licensing guide patents against the DVR makers, then bought TiVo in 2016 and took the name of the company it had been suing. The patent business survived every product it was ever attached to and ended up wearing somebody else's brand, which is more or less what Gemstar had been doing since 1986.

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