Fans of personal video recorders were dismayed, but not surprised, to hear that Sonicblue, parent company of ReplayTV, is filing for bankruptcy.
On Friday the company announced its plans to file for Chapter 11 and sell off its assets. D&M Holdings will buy Sonicblue's ReplayTV personal video recorder and Rio digital audio player business units for $40 million plus assuming $5 million in liabilities. Opta Systems will acquire the GoVideo DVD player division for $12.5 million.
"We and our financial advisers have concluded that the best outcome for our creditors and our employees is to sell our businesses to better-heeled owners," CEO Greg Ballard said in a statement. "We expect the entire transition process to be completed by the end of April, and our current business units to be running smoothly in their new homes at that time."
Analysts were not surprised by the news.
"Sonicblue has been in a precarious position for quite a while," said Greg Ireland, an analyst with market research company IDC. "The idea that they would be breaking up is certainly nothing new."
Personal video recorders like ReplayTV and TiVo, also known as digital video recorders, enable consumers to store television programs on a hard drive for later viewing, or pause or rewind live TV.
Ireland said Sonicblue's bankruptcy would not have much of an effect on the PVR market because ReplayTV was not a dominant player. Sonicblue has never publicly disclosed ReplayTV sales, Ireland said, but he estimates that the ReplayTV boxes have, at best, about 15 percent of the stand-alone PVR market. He said TiVo has the rest.
Chief among Sonicblue's problems was a lawsuit brought against it by 27 entertainment companies that object to features on ReplayTV that allow users to share recorded shows and automatically skip over commercials.
At a February summit on digital rights, Sonicblue's Ballard lamented the fact that his company was spending $3 million a quarter on legal expenses.
"The availability of these features offended a lot of major media companies," said Adi Kishore, an analyst with the Yankee Group. Sonicblue "has been caught in an expensive legal battle with companies with huge resources."
"I think (Sonicblue) put a lot of resources behind ReplayTV, and that's not a product that has been successful in the market," he said. In an effort to drive sales, Sonicblue focused on features like ad skipping and file sharing.
"I think they took this antagonistic approach (to advertisers and mainstream media companies) because they thought it would spur consumer adoption," Kishore said. "They thought these features would really drive sales, but that strategy didn't work out."
"Replay had yet to emerge as a strong brand," Ireland said. "TiVo overwhelmingly is the market leader."
Ireland pointed out that Sonicblue would have faced even greater competition from consumer electronics giants that are entering the PVR market, including Sony, Thompson RCA and Toshiba.
Still, what the news means for consumers is unclear.
There are two likely scenarios, Kishore said. Either D&M Holdings plans to support the service and try to grow the market, or it may simply have sought Sonicblue's intellectual property, which it may plan to license or sell.
At least one ReplayTV owner was optimistic that ReplayTV would live on.
"D&M is a great company (the parent company of Denon and Marantz)," read one post on the Planet Replay message board. "They know how to run a business. I never bought a Denon or Marantz product that I was not happy with. I think things will get better now."
"I just hope that whoever they sell the assets to continues the fight for consumer rights," said Craig Newmark, founder of Craigslist and the lead plaintiff in a lawsuit countersuing the media companies suing Sonicblue.
Other posters, however, seemed to view Sonicblue's financial woes as a death knell for PVR technology.
"Perhaps if they had been able to market better, there would have been more success," read a Slashdot post. "People see PVRs as 'fancy VCRs,' and in that respect can't justify the price tag. VCRs are in the $100 range, so why spend $500+ for the 'same thing'?"
"It's a shame -- DVR was a fantastic idea, but it doesn't appear to have really caught on with the consumers, and being fought by Hollywood and television executives didn't help any," wrote another.