The stock dropped about 40% this morning following the digital entertainment company’s warning last night that revenues would come in far lower, and losses would be much higher, than investors envisioned for this year. The company is “misfiring on all cylinders,” Cowen and Co analyst Robert Stone says this morning as he downgraded Rovi to “neutral” and cut his revenue estimate for 2012 by 13.3% to $670M. Rovi makes most of its money by selling interactive TV software — including program guides and copy protection mechanisms — to consumer electronics and pay TV companies. But it said last night that it’s been hurt by delays in adding or renewing patent licenses, including for TV Everywhere initiatives. Rovi declined to sign deals because “some expected licensees would not agree to acceptable terms,” CEO Tom Carson said. He added that when deals are made — possibly next year — “we expect these deals will include catch-up payments.” The company also said it’s been hit by “softness in the global consumer electronics and interactive TV markets.” As a result, Rovi said it expects to report Q2 revenue of $158M, down 12% from the period last year. Losses per share from continuing operations also could triple to 18 cents.
SANTA CLARA, Calif. (GLOBE NEWSWIRE)—December 15, 2011—Rovi Corporation (NASDAQ: ROVI) announced today the appointment of Thomas Carson as its President and Chief Executive Officer effective immediately, succeeding Alfred J. Amoroso, who has held the position since July 2005. Mr. Carson has also been elected to the Rovi Board of Directors. Mr. Amoroso will assist the Board and Mr. Carson during a transition period, as announced in May 2011. Mr. Carson joined Rovi in May 2008, with the acquisition of Gemstar-TV Guide International and most recently served as Executive Vice President of Worldwide Sales and Marketing. From April 2006 to May 2008, Mr. Carson served in various capacities at Gemstar, including President of the North American IPG business and President for North American CE business. Prior to Gemstar, Mr. Carson held a variety of executive positions at Thomson Corporation, including Executive Vice President, Global Sales and Services.
It was a dreary day for the markets — but few were hit as hard as the digital entertainment technology company Rovi, formerly known as Macrovision. It told investors on a conference call last night that its analog copy-protection business is nearly kaput, and there’s been a steep decline in sales of consumer software such as its Roxio DVD burning product. Also, consumer electronics companies are just lukewarm on Rovi’s TotalGuide on-screen TV programming guide. Making things worse are the weakening global economy — it will “persist as a challenge for the CE industry throughout 2012″ says CFO James Budge — and floods in Thailand that interrupted production of hard drives. That adds up to a financial forecast below most expectations. Who’ll lead Rovi out of the mess? Analysts thought they’d know by now; CEO Fred Amoroso said in May that he plans to leave this June. The company says it’s still making up its mind and should have a decision by January. But lots of investors are fed up and several analysts downgraded Rovi stock. The “uncertainty due to a lack of clarity on CEO transition and transparency for underlying business trends make the stock hard to defend at this juncture,” says Brean Murray Carret analyst Todd Mitchell, who dropped Rovi to “hold” from “buy.”
UPDATE 4:10 PM: The markets couldn’t sustain an early afternoon rally amid concerns that France might lose its AAA debt rating and that Spain or Italy might default on payments. The Dow Jones Industrial Average fell 4.6% while the S&P 500 dropped 4.4% and NASDAQ was down 4.1%. But media companies were mixed, with some showing big improvements from mid-day. Disney remained the hardest hit of the Big Guns with shares falling 9.1%. It was followed by Sony (-5.7%), CBS (-5.4%), News Corp (-4.7%), Time Warner (-4.6%), Comcast (-4.5%), and Viacom (-0.3%). Among other media companies, Crown Media, Westwood One, and E.W. Scripps fell at least 10%. Entercom, The New York Times, and Gannett were off at least 9%. And Martha Stewart Living Omnimedia, AOL, and LIN TV were down at least 8%. Some companies were up including Cinedigm (+8.7%), National CineMedia (+4.3%), New Frontier Media (+2.7%), DreamWorks Animation (+2%), Lionsgate (+1.8%), Pandora Media (+0.6%), and Coinstar (+0.1%).
PREVIOUS, 9:00 AM: Here we go again. Stock markets at mid-day have given up just about all of yesterday’s gains following the Fed’s pledge to keep interest rates low — and media companies are being hammered. The Dow Jones U.S. media index is -4.7% while the Dow Jones Industrial Average is -4.1%. Similarly the S&P media index is off 5.5% while the S&P 500 is -3.8% and NASDAQ’s media shares are -4.8 vs. the overall exchange which is -3.3%. Here’s how industry giants are faring at mid-day: Disney (-10.7%), CBS …
UPDATE, 2 PM: The market deteriorated as the day wore on, continuing the worst market slump since 2008. The Dow Jones U.S. Broadcasting and Entertainment Index closed down 7.3% — exceeding the 5.6% decline in the Dow Jones Industrial Average, 6.7% drop in the Standard & Poor’s 500, and 6.9% fall at NASDAQ. CBS’ -10.3% slide made it the leading loser among media’s Big Guns. It was followed by News Corp (-7.7%), Viacom (-7.1%), Comcast (-6.6%), Sony (-6.4%), Disney (-6.1%), and Time Warner (-5.8%).
Double-digit losers include AMC Networks (-12.8%), LIN TV (-12.7%), Sirius XM (-12.7%), RealD (-12.6%), Cumulus Media (-11.9%), TiVo (-11.4%), Entercom (-10.9%), Westwood One (-10.8%), and E.W. Scripps (-10.3%). Those losing at least 9% include National CineMedia, Dish Network, Arbitron, Sinclair Broadcasting, Rovi, Outdoor Channel, Crown Media, Electronic Arts, Cablevision, and Coinstar.
EXCLUSIVE: This is exactly the kind of information that shareholders of Big Media need to know but rarely see. It’s considered a red flag when any public company pays one of its bigwigs – usually the CEO – three times more than the average for the four other top executives which the SEC requires them to list. So I’ve taken proxy statements and done the computations and discovered that at least 16 of 35 companies failed that test. Often miserably. Nearly half of the media company compensation packages disclosed so far for 2010 show a startling degree of hero-worship as boards of directors pay their top dogs sums that far exceed what the pay was for other top execs in the company.
Stock grants accounted for big chunks of the compensation for those who top this list, including Discovery Communications CEO David Zaslav, Viacom CEO Philippe Dauman, DirecTV CEO Michael White, Nielsen CEO David Calhoun, and CBS chief Les Moonves. Radio station owner Entercom was off the charts: CEO David Field’s $9.1 million compensation was modest by media company standards but still 25.4 times bigger than average for the company’s other four executives. It includes $7.9 million from stock grants that only pay off if Entercom shares rise to hit certain target prices.
Still, corporate governance experts who focus on what’s often called “CEO centrality” say that an out-of-whack pay package is bad news for shareholders. It indicates that the board of directors may be in the pocket of a CEO – or believes he or she has near super-human power to help the company succeed. In either case, the board is likely to give the CEO all the credit when things go well, and blame others when they go badly. Research shows that usually hurts the stock price over time.
I’ll track this and other measures of lop-sided pay as other media companies release information for 2010. But there are a few things to keep in mind: The SEC reporting rules only cover the top-paid executives of publicly traded U.S. companies. That means we probably won’t know how much privately held Hearst pays CEO Frank Bennack, or how much Japan’s Sony pays CEO Howard Stringer. It also means that we’ll miss a lot of highly paid people who work at subsidiaries of a big company; Universal Studios’ Ron Meyer may be a big deal in Hollywood, but he was a relatively small fish last year at parent company General Electric.
To make comparisons in our list here as fair as possible, we looked at the compensation for the five most highly paid employees for 2010. Sometimes companies report the pay for more than five people — for example, when a top executive is replaced during the year a corporation will include the incoming and outgoing person’s compensation. And the pay data given the SEC can spike in a year when an executive cashes in stock or collects deferred compensation. So here’s how the companies stack up, with the top paid executive’s 2010 reported compensation and comparison to the average (median) pay for the four other highest-paid honchos:
1. Entercom: David Field. The son of company founder Joseph Field became CEO in 2002, about 15 years after leaving his job as an investment banker at Goldman Sachs. Field made $9.1 million last year – the total of his $791,723 salary, $444,308 bonus, $7.9 million in stock, and $28,000 in other perks including medical insurance premiums. That’s a 348% raise in a year when company shares appreciated 53.2%. Though considered a strong operating executive, his salary stands out because it’s 25.4 times higher than the $358,692 average for the four other top executives listed in Entercom’s proxy statement. Field’s salary and the $3.9 million paid to CFO Stephen Fisher accounted for 93% of the $14 million that Entercom paid to its top five executives.