It is not a matter of if, but simply when Netflix settles with Rovi. You can see how ROVI stock reacted with the HULU settlement. Although, the question remains how will the licensing agreement with Netflix be structured.
According to IR at ROVI, there appears to be an exceleration of legal pressure to get this done very soon.
I personally think ROVI goes back over $30 for a time as soon as this news is released.
Rovi Corporation (NASDAQ:ROVI): The company announced a licensing deal with Hulu, which causes Brean Capital to think that the deal creates a reference point in negotiations with other OTT service providers, along with reducing the risk posed by Rovi. There has been an increase in the firm’s confidence in the company’s ability to meet or beat its 2013 guidance and generate 15 to 20 percent EPS growth during 2014 through 2016. Brean continues to be convinced that Rovi’s multiple has the ability to expand and it keeps its Buy rating on the stock."
Because of the Hulu deal, it is likely that others internet TV platforms, consumer electronics manufacturers, and pay-TV providers will settle their patent cases and enter into license agreements with Rovi. If Hulu's subscriber growth continues at a blistering pace, so too will the royalties that Rovi collects on the expanding subscriber base covered by its license agreements.
Apple, too, is also a Rovi licensee, having entered into an agreement in 2010, which at the time (and may still be today) was believed to be an indication that Apple was entering the TV business. If Apple does unveil a TV product, expect Rovi shares to soar.
The next catalyst with respect to Rovi's licensing model is resolution of a patent dispute with Netflix.. Based on recent settlement evidence, including the Hulu deal, I expect the Netflix matter to result in a license agreement, providing another boost to Rovi's share price and future stream of earnings from royalties and Netflix's expanding customer base.
With the proliferation of devices and content services that employ Rovi's unique and patentable ideas, Rovi's unique, scalable and high margin licensing model should push its intrinsic value higher as the world moves to a TV Everywhere and multi-device content consumption concept.