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Macrovision Buys GLOBEtrotter Software

By Dave Marino-Nachison (TMF Braden)
June 20, 2000

Macrovision, a leader in several areas of electronic copy protection, wants to be a leader in the security of Internet-enabled software distribution. It's a key industry, even if digital music gets all the publicity these days.

Copy protection technology company Macrovision (Nasdaq: MVSN) last night said it will buy privately held GLOBEtrotter Software, a San Jose firm that develops electronic software licensing technology for vendors and suppliers. Macrovision will give GLOBEtrotter 8.9 million common shares -- about $644 million based on last night's close -- plus another 760,000 to assume the company's stock options. The company offered more shares in March but restructured the deal so it will boost earnings.

Shares of Sunnyvale, Calif.-based Macrovision have been on a tear over the last 12 months as demand for copy protection products has exploded. The flap over the rights to music and file-swapping technologies such as the MP3 format and Napster software have ruled the headlines lately, but that's just part of the picture. With the Internet changing the way software and media products are distributed, copy protection has become even more important to companies seeking to avoid piracy and lost revenues.

Macrovision, which saw its sales jump more than 50% in 1999, sells video copy protection products to movie studios, broadcasters, and set-top box makers; video encryption technology to companies sending signals from point to point; and copy protection products to publishers and developers of consumer and business software. Its SAFEDISC and SAFECAST products fight CD-Rom duplication in the former case and manage usage and distribution in the latter.

U.K. firm Ç-Dilla Ltd. was bought a year ago (and renamed Ç-Dilla Labs) and is working to develop secure technologies for electronic software distribution, a move that will likely complement SAFECAST well. That's also probably where GLOBEtrotter's FLEXlm electronic licensing technology -- Macrovision called it "the recognized de facto standard for license management" -- will fit in. That's the emerging area of Macrovision's business; revenues for the segment rose to $4.7 million in 1999 from $344,000 the year before. Other lines are growing, but not nearly as quickly.

Also worthy of note are Macrovision's efforts to get into the music copy protection business. At this point the company is primarily involved through investments in other companies, including one that wants to keep you from dubbing your CDs onto cassette tapes and recordable CDs, and others working on secure online media distribution and handheld audio-on-demand products.

"Copy protection," as a term, is simple enough to understand, but industry know-it-alls have things broken down even further. For a good rundown of the ins and outs of copy protection, you might want to check out Power Technologies' useful Software and Media Copy Protection Backgrounder. It's brief but informative, and the terms discussed will go a long way in aiding any examination of Macrovision and its industry.

Your Turn:
Though not directly related, Rule Maker contributor Rob Landley opened an interesting discourse on intellectual property in a May column. His contention? That companies spending too much time worrying about protection of their intellectual property suffer from short-term myopia. His thoughts spurred several responses on the Rule Maker Strategies discussion board.

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