TiVo's new CEO details his plan to split up the embattled TV company to make it more attractive to buyers and sellers

• New TiVo CEO Dave Shull explained to Business Insider his strategy for breaking up the beleaguered TV company and making the parts more attractive to potential buyers and sellers.
• The company is on track to split its product and patent-licensing businesses in the first half of 2020, Shull said.
• The standalone product side will launch new services aimed at streaming audiences and cord-cutters, and explore new revenue streams like advertising.
• The more profitable patent-licensing business will take on all the debt and continue to pursue patent-infringement cases.
• One analyst said the separation plans could spur potential buyers to pursue the product business now, before the company splits off.
• Taking cues from his days as CEO of The Weather Channel, which sold part of is business in 2015 and the rest last year, Shull plans to focus on the parts of TiVo's business that work and cut the rest.
• "There's a real desire - on the part of the team, the media, the consumers - to hear a clear vision, and then to be laser-like focused, and maybe even a little bit ruthless, in terms of our execution," Shull said. "What that means is the stuff that's not tied to the vision gets cut."
• Click here for more BI Prime stories.

Beleaguered TV company TiVo is breaking up to survive.

New CEO Dave Shull was named in May to lead the split by creating one business that will hold all of TiVo's platform, software, and services, and another focused on patent licensing. The ultimate goal, Shull said in an interview with Business Insider, is to create two companies that are in healthier positions to be bought by other companies, or be buyers themselves.

"We're on strategic dialogues on both sides," Shull said. "Maybe they sell when they're separate, but I would much rather see both of them be able to do the purchases and be buyers and consolidate. They can only do that if they're in a strong financial shape going forward."

The break up is on track to happen during the first half of next year.

It'll go down like this:

TiVo's product business will be spun off, and aim to launch new services and revenue streams geared toward streaming audiences.

TiVo's product business today consists of video platforms, software, and services that are mostly co-sold through partnerships with small- and mid-tier cable operators around the world.

That business will be spun off into a new public company, under the TiVo name.

Shull plans to introduce new products, like the forthcoming TiVo Plus offering - rolling out in October - that will aggregate more streaming services in the company's TV platform. He also wants to improve the user experience, and bring in other revenue streams, like advertising or sponsorship dollars.

Subscription fees from TiVo's cable partners make up of the bulk of the product side's revenue, which totaled $176 million during the first six months of 2019, down 15% from last year.

The company said it reaches about 22 million households globally. Shull said he wants to double that with the help of these new offerings aimed at streaming viewers and cord-cutters. The company also announced deals today to bring its video services to Liberty Latin America customers and its content discovery platform into Vodafone TV services in Portugal.

The separation plans could build more demand for the product business.

It's unclear what company would want to buy the product business when it's spun off. But the plans could also prompt bids for the product business before the separation is even completed, one analyst said.

"Given that it would likely be much easier to acquire the product business in its current state vs. as a standalone public company, we also believe any interested buyers would be motivated to complete a transaction sooner rather than later," wrote Eric Wold, senior entertainment and media analyst at B. Riley FBR, in an August 1 note.

Some analysts had hoped the business would sell to Roku, a company Shull says he admires. "Roku is doing an amazing job in retail, a much better job than we are," he said.

If TiVo were in the buyer's seat, Shull said he'd look for deals that could bring TiVo to more consumer electronics.

The patent-licensing business would take on all the debt, and continue to litigate.

Meanwhile, the more profitable patent business, which licenses to pay-TV and other video providers, will rebrand. It will take on TiVo's more than $600 million in long-term debt and hold its tax credits.

It will look to grow in three ways:

• License to more social-media companies. TiVo recently landed its first social-media client, the company said during its second-quarter earnings announcement.
• Expand in Canada, where Shull said the company has penetrated about 50% of the market.
• Build on its smart-home offerings, centered on voice. Shull said he's working to build more relationships with universities and startups in the space.

The company will also continuing pursuing patent-infringement lawsuits.

TiVo is currently in battle with cable-giant Comcast over some of its X1 video features. The dispute has dragged TiVo's stock. Shares of TiVo closed at $8.37 on Thursday, down nearly 40% from a year ago.

"You have to be willing to litigate," Shull said. "That's a big driver for why I want to split the companies because an IP company needs to be willing to litigate and litigate for years."

Analysts are largely in favor of the break-up plan, though some worry about the time it will take to complete and that it might not be as lucrative as an outright sale of TiVo's product business, MarketWatch reported.

Shull was chosen to lead TiVo after helping The Weather Channel chop up and sell its businesses.

Shull was picked to lead TiVo's through the separation after helping The Weather Channel navigate similar waters as CEO. He led the company when it sold its data business and website to IBM in 2015, and unloaded its cable network in a $300 million deal with Byron Allen last year.

Shull was also an executive at satellite provider Dish Network.

He said he plans to follow the same two-step formula that worked for him at The Weather Channel: focus and lay out a clear path forward.

"There's a real desire - on the part of the team, the media, the consumers - to hear a clear vision, and then to be laser-like focused, and maybe even a little bit ruthless, in terms of our execution," Shull said. "What that means is the stuff that's not tied to the vision gets cut."

The stock is up from a close of $6.76 on the day Shull's appointment was announced.