Fan TV sells to Rovi after finding that it’s hard to revolutionize the cable box

Sometimes, even Yves Behar isn’t enough to help you succeed. Such is the case with Fan TV, a startup that built a beautiful set-top box with an innovative new remote control, only to have pay TV operators balk at its business plan. On Monday, Fan TV announced that it has been acquired by entertainment metadata specialist Rovi.

Both parties didn’t reveal any numbers, but Recode reported that the total acquisition price is likely below the $40 million Fan TV raised over several rounds. Fan TV’s executives, as well as all of its staff, are joining Rovi’s content discovery team. And when I talked to Fan TV CEO Gilles BianRosa as well as Omar Javaid, SVP and GM of Rovi’s Discovery Group Monday, they tried to assure me that it will be business as usual for Fan TV. The company’s app will stay around, and Fan TV will continue to sell its set-top box to consumers. “In the short term, it doesn’t mean anything different,” said BianRosa.

But over time, that story may well change.

A great-looking box with a tough proposition

Fan TV began as a spin-off project of the company behind the BitTorrent client Vuze, and initially focused on a video discovery iOS app. Then called Fanhattan, the app helped users to keep track of the movie and TV shows they liked, and deep link to other apps to make it easier to start watching. Over time, Fanhattan added a web app, and eventually launched a dedicated set-top box called Fan TV in early 2013.

The idea behind Fan TV was to bring BYOD to the world of pay TV. Instead of relying on outdated set-top boxes provided by cable companies, consumers were supposed to buy the Fan TV device for $149, which would offer them both access to their TV service as well as online video services through a sleek new interface, and with a remote control that didn’t feature a single button. The hardware was designed by Yves Behar, who reportedly made the company start over on the design of the remote control months into the process. Behar previously designed Jawbone’s Jambox and Ouya’s game console, and will be speaking about the relationsip between users and devices at our Roadmap design conference in San Francisco this month.

Fan TV’s vision was daring, but not without problems: The biggest challenge was that the company had to strike alliances with pay TV operators to make its device work, and most operators didn’t like the idea of giving up control over their UI and hardware. I’ve heard that Fan TV had conversations with a number of operators who seemed interested in some aspect of its technology, but balked at the thought of a Fan TV-branded set-top box.

The company ran a brief, very small trial with Cox in Southern California last summer that ended prematurely, and finally landed a deal with Time Warner Cable this spring. The partnership with the 11 million household cable TV operator was arguably a big win for Fan TV, but it lived on borrowed time. Time Warner Cable is looking to merge with Comcast, a company that has invested a lot of money and resources into developing its own next-generation set-top box, and that is unlikely to cede control over the experience to any third party. Time Warner Cable’s Fan TV FAQ is pretty frank about this point, stating:

Will the service end for TWC customers after the merger closes?

It is too early to comment on that.

That doesn’t really make you want to spend $150 on a new device, does it?

Fan TV has been looking for an exit for some time

Fan TV didn’t just have a hard time finding operator partners, the company also failed to complete a round of funding that would have given it some more time to execute earlier this year. Since then, it had been looking for an exit, and I’ve been told by multiple sources that Fan TV executives talked to all the major pay TV operator, as well as big consumer companies like Apple and Google. Early on, Fan TV was looking for a very high valuation, looking to sell for a multiple of the $40 million it raised over time. Recode reported that more recently it had reduced the price tag to around $15 million.

Rovi could be a good fit for Fan TV, as the company is already in the business of licensing TV guide software to operators and consumer electronics manufacturers. But Rovi isn’t very good at selling services direct to consumers. The company spun off most of its consumer-facing services last year, including SideReel – a video discovery company that tried to do very much what Fan TV originally set out to do. BianRosa and Javaid tried to differentiate Fan TV from those efforts by pointing out that the company is less about monetizing consumer services these days. “There is a clear B2B component to it,” BianRosa said.

Both also insisted that nothing will change for Fan TV users in the immediate future, but there was a clear undertone of a bigger B2B focus throughout our conversation. Javaid said that Fan TV’s device or technology “could be white-labeled in the future,” and BianRosa agreed that the company “might be experimenting with different models going forward.” Javaid also said that there is interest from third-party OEMs to potentially build devices based on Fan TV’s technology.

So what does all of that mean for Fan TV? In all likelihood, Rovi will eventually decide to take parts of the Fan TV experience, and license them white-labeled to operators and consumer electronics manufacturers. Some may decide that they just want the guide, others may license the entire platform to build their own hardware, and ship it to consumers under their own branding, running their own set of services. But Fan TV as a device that consumers buy and hook up to their TV to replace their cable box is likely going to remain a niche — which makes you wonder how long Rovi is really going to keep it around in this form.