Back to GetFilings.com

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 001-15473

OpenTV Corp.

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act: None

          Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

          Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of the Class A ordinary shares of the Registrant held of record by non-affiliates of the Registrant as of June 30, 2003, computed by reference to the last sales price of such Class A ordinary shares on the Nasdaq National Market as of the close of trading on June 30, 2003, was approximately $46,836,071. For purposes of this calculation, the directors and executive officers of the Registrant as of June 30, 2003 and the holders of record of 10% or more of any class of the Registrant’s ordinary shares outstanding as of June 30, 2003 (excluding Cede & Co., nominee of the Depository Trust Company) are deemed to be affiliates of the Registrant. Treasury shares are excluded. The determination of affiliate status for this calculation is not necessarily a conclusive determination for other purposes.

      As of February 27, 2004, the Registrant had outstanding (not including 76,327 Class A ordinary shares held in treasury):

89,500,635 Class A ordinary shares; and

      Portions of the Registrant’s definitive Proxy Statement, to be delivered to stockholders in connection with the Registrant’s 2004 Annual Meeting of Stockholders, are incorporated by reference into Part III of this Report.

Table of Contents

OPENTV CORP.

TABLE OF CONTENTS

OpenTV, the OpenTV logo and our product names are trademarks or registered trademarks of OpenTV Corp. or its subsidiaries in the United States and other countries. Other product names mentioned herein may be trademarks or registered trademarks of their respective owners.

1

Table of Contents

This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of OpenTV Corp. and its consolidated subsidiaries to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, gross margin, expenses, earnings or losses from operations; any statements of the plans, strategies and objectives of management for future operation; any statements concerning developments, performance or market conditions relating to products or services; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. All these forward-looking statements are based on information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ materially from those projected in these forward-looking statements as a result of many factors, including those identified in the section titled “Factors That May Affect Future Results” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere. We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect our future results.

PART I

Item 1.     Business

Overview

      We are one of the world’s leading providers of software, content and applications and professional services for interactive and enhanced television. We provide the core software and related technologies that permit cable, satellite and terrestrial operators, which we refer to as “network operators”, television programmers and advertisers to offer viewers interactive and enhanced television experiences. By developing content and applications designed for digital television and by offering professional services focused on the integration of interactive software, content and applications, we believe that we are uniquely positioned within the digital television industry to help our customers differentiate their product offerings, enhance viewer retention and accelerate the use of television for gaming, commerce, information retrieval, entertainment and similar purposes.

      Since our founding in 1996, we have offered our customers a comprehensive suite of interactive and enhanced television solutions that leverage our software and technologies and worldwide patent portfolio. Our core software products enable network operators to manage the creation and delivery of interactive and enhanced television services to their subscribers. We develop and manage branded television channels that allow viewers to play interactive games, and we offer applications that enable viewers to engage in commerce transactions, retrieve information such as weather reports and sports updates, and engage in other interactive services, such as fixed-odds gaming, through their televisions. We also recently began efforts to market and commercially deploy targeted and addressable advertising solutions and research analyses detailing how viewers engage and interact with programs and advertisements. Each of those offerings, and others that we anticipate offering in the future, leverages and extends our fundamental core technologies, which we believe provide us with the foundation for further penetration of the digital television market as it continues to evolve. To complement our technologies and interactive content and applications, we also offer a full suite of professional engineering and consulting services. These services allow us to manage various interactive television projects, from discrete integration or development assignments to complete end-to-end digital programming solutions for network operators.

      We provide our technologies, interactive content and applications and professional services in more than 90 countries. We have deployed our software solutions and technologies to more than 40 network operators throughout the world. Major set-top box manufacturers incorporate our software directly into over 100

2

Table of Contents

      We have invested significant resources in developing our software solutions and believe that our patent portfolio protects many of the key elements necessary to support digital interactive and enhanced television. We believe that we have established an industry leading technology position, and, as of December 31, 2003, had 82 patents issued in the United States, 335 patents issued outside of the United States and 711 patent applications pending throughout the world.

Corporate Background

      We are incorporated in the British Virgin Islands. Over the past several years, we have significantly extended our product and service offerings through a number of acquisitions.

      In 2000, we acquired Spyglass, Inc., a provider of Internet software solutions and professional services, and CableSoft Corporation, a provider of “on-demand information” software solutions for broadband network operators. In 2001, we acquired Static 2358 Holdings Limited, an interactive television media and entertainment company that developed our PlayJam games offering.

      In 2002, we acquired Wink Communications, Inc., a provider of technology that enables network operators, programmers and advertisers to add interactive content to television broadcasts. In July 2003, we acquired ACTV, Inc., a developer and provider of technologies and services for interactive television advertising, personalized programming applications and enhanced media, and in August 2003, we acquired substantially all of the assets of BettingCorp Limited, a developer and operator of remote betting and gaming technologies and services.

      With these acquisitions and the continued evolution of our technologies, content and applications, we are able to offer an end-to-end solution for interactive and enhanced television.

      Liberty Media Corporation beneficially owns an approximately 32.9% economic interest in our company, which because of its ownership of approximately 99.6% of our super-voting Class B ordinary shares, provides it with an approximate 79.4% voting interest in our company, in each case based on the number of our ordinary shares outstanding as of December 31, 2003. As a result of that voting power, Liberty Media has the ability to elect all of the members of our board of directors and, subject to applicable law and stockholder agreements, the right to approve or disapprove all matters presented to a vote of our stockholders. Liberty Media initially acquired its controlling interest in our company in August 2002 in a transaction with our former controlling shareholder, MIH Limited. Liberty Media is a holding company, which, through its ownership of interests in other companies, is primarily engaged in (i) electronic retailing, (ii) international cable television distribution, telephony and programming and (iii) the production, acquisition and distribution through various media of branded entertainment, educational and informational programming and software. Companies in which Liberty Media owns interests are also engaged, among other things, in (i) interactive commerce through the Internet, television and telephone, (ii) cable and satellite broadband distribution services within the United States and (iii) wireless telephony and other technology ventures. From time to time, we have entered into commercial relationships with Liberty Media affiliates and expect to continue to do so in the future if advantageous opportunities become available.

Financial Information about Operating Segments and Geographic Areas

      We are not organized into business units and we do not calculate our revenues, profits or loss, or total assets based on segmentation of our business. We believe that we operate in a single industry segment. Please see “Note 14. Segment Information” to our Consolidated Financial Statements for a further discussion of segment information.

      A significant portion of our total net revenue comes from outside of the United States. A summary of our domestic and international revenue, capital expenditures and long-lived assets is set forth in “Note 14. Segment Information” to our Consolidated Financial Statements, which is incorporated herein by reference.

3

Table of Contents

Products and Services

              Overview

      We develop the software solutions and related technologies that many network operators utilize to permit them to manage and deliver interactive and enhanced programming, advertising and other content and applications. Our product and service offerings generally fall into the following categories:

	•	Software and Related Technologies. Our core software and technologies consist of integrated and modular software products that enable network operators to manage the creation, delivery and execution of interactive and enhanced television services to their subscribers. We develop and provide interactive solutions that permit targeted and addressable advertising, purchase and sales transactions through a viewer’s remote control, requests for information from advertisers or programmers in real-time as the viewer sees the advertisement or television program and audience and media research capabilities to determine viewing preferences. We generally realize revenues from our software and technology solutions through one-time royalty payments and ongoing license fees.
	•	Content and Applications. We develop and manage branded interactive television channels, including our games channel “PlayJam” and our fixed-odds and casino games service “PlayMonteCarlo”. We also work jointly with network operators, programmers and advertisers to develop applications that help to differentiate their programming content. We provide email applications, interactive weather applications that permit viewers to obtain local weather information, applications that permit multiple camera angles and audio feeds to be delivered for viewing and listening on a single television screen and many other applications that transform the conventional television into a more expansive source of information and entertainment. In addition, we support a third-party development community that seeks to develop compelling interactive television content for our platform. We generally realize revenues from our content and applications through license and other fees and revenue sharing arrangements. We also may seek, in the future, to derive more of our revenues from those product offerings through subscriber-based fee arrangements.
	•	Interactive Network. We offer a suite of managed services and applications to simplify the business of interactive television and market research for network operators, programmers and advertisers. We accomplish this by leveraging our technology, content and operational and distribution experience in the field of interactive television. We generally realize revenues from our interactive network services from service fees and revenue sharing arrangements.
	•	Professional Services and Support. Our worldwide team of skilled and experienced managers and software engineers help network operators and set-top box manufacturers build, integrate and deploy interactive and enhanced television services. We can provide the professional services necessary for discrete projects, as well as the resources that allow a network operator effectively to outsource an entire end-to-end digital solution. We also help train our customers in the use of our development tools and can provide other educational services that allow our customers to accelerate their use of interactive technologies. In addition, we provide worldwide, around-the-clock support for our product offerings. We generally realize revenues from fees paid for professional services and support rendered to our customers, which we charge on a time and materials, fixed cost or other basis.

      Our integrated software and related technologies provide a common platform for network operators, set-top box manufacturers and manufacturers of other devices, programmers, content producers, advertisers and interactive application developers to create, deliver and manage interactive and enhanced television applications and content for different digital television environments and network architectures. Our software and technologies enable interactive content and applications to run on cable, satellite and terrestrial networks and through various set-top boxes and other products manufactured by a multitude of vendors. In general, that means interactive and enhanced television content and applications only have to be written once in order to run on the various set-top boxes that a network operator may have deployed in its network.

4

Table of Contents

      We have software and technologies that work on set-top boxes as well as at the network operator’s head end. We also offer enterprise solutions that more effectively integrate the software in a set-top box with the operator’s, programmer’s and advertiser’s backend systems. Additionally, we have development tools that permit users to create, test and deliver interactive content and applications. Our software and related technologies consist of the following:

      OpenTV Embedded Set-top Box Solutions. The foundation of our offering is a software platform that is installed primarily on set-top boxes and serves as the gateway for delivering and managing interactive and enhanced television to viewers.

      OpenTV Embedded Set-top Box Solutions consist of OpenTV Core, OpenTV ProSync, OpenTV SpotOn, and OpenTV Device Mosaic, as described below:

OpenTV Core. This is our principal set-top box middleware product, which includes the software and related components that provide network operators with a full-featured interactive and enhanced television delivery and development environment for both basic and advanced set-top boxes. OpenTV Core can manage a wide range of interactive television applications, including virtual channels, enhanced broadcasts, electronic commerce applications, games and on-demand news and information services.

      The following features and functions are supported by OpenTV Core:

	•	Basic and Advanced Set-top Boxes. OpenTV Core can run with the relatively limited processing power and memory found in most mass-market digital set-top boxes currently deployed by network operators. OpenTV Core is also suitable for more advanced digital set-top boxes expected to be deployed in the future, which contain increased processing power and memory. This capability permits us to offer technical solutions that address the limited capabilities of many set-top boxes that are currently deployed by various network operators, while simultaneously offering a solution that will position them to take advantage of more powerful set-top boxes in the future.
	•	HTML Applications. Our OpenTV HTML Package is an extension to OpenTV Core which allows network operators to deliver existing Web-based HTML and JavaScript content to its subscribers through a digital set-top box.
	•	MHP Applications. Our OpenTV MHP Package is an extension to OpenTV Core which allows network operators to deliver Java-based content to its subscribers through a digital set-top box in a manner that is compliant with the Multimedia Home Platform standard that is being developed in Europe.
	•	OpenTV Measure. Our OpenTV Measure Package is an extension to OpenTV Core that we are currently developing to enable network operators, programmers and advertisers to collect information and data regarding viewer preferences, viewing habits and other analytical information that helps to assess the efficacy of programming and advertising.
	•	Connectivity. OpenTV Core provides solutions for broadcast or point-to-multipoint networks as well as high bandwidth, bi-directional, point-to-point networks. OpenTV Core includes modules that support common interactive television-related communication protocols, including the DOCSIS communications protocol (providing a data return channel for cable modem set-top boxes that enables viewers to retrieve information from the Internet at broadband speed).
	•	Localization. OpenTV Core supports text input and presentation of substantially all languages in common use (including double byte Asian languages), which allows for localization of interactive television services for different countries.
	•	Personal Video Recorders. Many network operators are specifying that set-top boxes support the ability to record and playback a broadcast program using an internal hard drive resident in the set-top box. OpenTV Core currently enables the seamless integration of third-party mass storage solutions to meet this requirement.

5

Table of Contents

	OpenTV ProSync. OpenTV ProSync is an application engine that enables network operators to deliver interactive applications along with broadcast video to viewers’ televisions. Network operators may choose to deploy OpenTV ProSync where a full OpenTV Core solution is not required or where set-top box resources are limited. This product enables advertisers and programmers to process e-commerce transactions while offering viewers instant interactive entertainment and information retrieval.
	OpenTV SpotOn. OpenTV SpotOn enables network operators to offer addressable advertising that can be delivered to particular households based on individual profiles. Advertisers have the ability to develop different ads for the same product or service that are designed for specific audiences, ensuring that the message appeals to all of the audience for the commercial. Different advertising messages are then simultaneously targeted to households through the use of technology that permits set-top boxes to seamlessly jump between video signals, thereby invisibly tailoring the video experience to the profile of the viewing household. With this technology, which we acquired when we purchased ACTV in 2003, a network operator can for example deliver an advertisement for a pick-up truck to one household while simultaneously delivering an advertisement, in the same interval, for a sedan or sports coupe to a different household based on demographic profiles.
	OpenTV Device Mosaic. OpenTV Device Mosaic is a customizable, stand-alone browser designed specifically for information appliances other than personal computers. OpenTV Device Mosaic supports HTML, Broadcast Markup Language, or BML, and JavaScript based applications and is optimized and designed for advanced products and applications. We have developed an integrated browser with Matsushita Electric Company, one of Japan’s largest consumer electronics companies, which has been incorporated into certain Panasonic branded digital television sets shipped within Japan since September 2003.

      OpenTV Headend Solutions. OpenTV Headend Solutions consist of OpenTV Streamer, OpenTV Publisher, OpenTV H2O and OpenTV Gateway. These components are installed at a network operator’s broadcast facility or cable headend and enable the network operator to utilize their existing digital television broadcast infrastructure to manage the creation and delivery of interactive and enhanced television services to and from the set-top boxes where OpenTV Embedded Set-top Box Solutions reside.

	OpenTV Streamer. OpenTV Streamer, the foundation of our headend solutions, enables network operators to integrate applications and data with audio and video signals for reception on set-top boxes enabled with OpenTV Core. OpenTV Streamer relies on hardware architecture that is capable of interfacing with any standard digital broadcast system.
	OpenTV Publisher. OpenTV Publisher works in conjunction with OpenTV Streamer to enable content developers and network operators to use the popular Web-based Extensible Markup Language, or XML, content format to build and deliver interactive content to set-top boxes enabled with OpenTV Core.
	OpenTV H2O. OpenTV H2O enables the transformation of Web-based HTML and JavaScript content into interactive applications that can run on basic digital set-top boxes.
	OpenTV Gateway. OpenTV Gateway manages communications traffic originating from basic digital set-top boxes to standard e-mail and commerce servers.

      OpenTV Enterprise Solutions. Our enterprise solutions, consisting of OpenTV Account, OpenTV Advertise, OpenTV Notify and OpenTV AdVision, are used in conjunction with our embedded set-top box solutions to manage the secure commerce and advertising functions of a network operator’s interactive television service.

	OpenTV Account. OpenTV Account enables electronic commerce features within interactive television applications and gives network operators the opportunity to develop commerce-related interactive television revenue streams. Key features of OpenTV Account include single sign-on management, electronic-receipt management, electronic-wallet and address book management and security features.

6

Table of Contents

	OpenTV Advertise. OpenTV Advertise enables network operators to control the process of integrating and managing advertisements within content and applications running on OpenTV Core. Key features of OpenTV Advertise include the ability to schedule and insert advertisements, and to generate reports on the status of advertising campaign delivery and performance.
	OpenTV Notify. OpenTV Notify enables network operators to send broadcast notifications to individual or multiple set-top boxes allowing network operators to deliver convenient messaging, such as email, instant messaging, order confirmation and news alerts, to their subscribers.
	OpenTV Advision. OpenTV Advision is an advertising sales and traffic system that manages various media platforms and outlets, simultaneously providing network operators the tools to manage local cable television, cable networks, and proprietary broadband networks.

      OpenTV Tools. We encourage content developers to design and create applications that are compatible with OpenTV software and technologies by offering a series of application development tools and supporting toolsets enabling them to develop and market applications directly to network operators. The tools can be used alone or in combination with other third-party tools to meet virtually any interactive television development need, such as creating virtual channels, building interactive ads, enhancing existing programs with interactive features and testing interactive television content through a simulated broadcast environment.

      We develop and operate branded interactive television channels that are distributed by network operators utilizing OpenTV Core and interactive television middleware platforms provided by third parties. These channels feature play-for-fun or fee based entertainment, fixed-odds and casino games and help network operators around the world realize new revenue streams and business opportunities from interactive television. In addition, we provide email applications, interactive weather applications that permit viewers to obtain local weather information, and many other applications, many of which are also included as “managed services” as described in more detail below under “Interactive Network,” that transform the conventional television into a more expansive source of information and entertainment.

      PlayJam. PlayJam is one of the world’s first multi-platform interactive television entertainment and gaming channels. We offer a library of more than 300 different single- or multi-player games that can run on PlayJam. These include quizzes, arcade-style games, puzzles, adult-theme games, and competition and editorial games. A wide selection of these games can be customized and used as unique branding vehicles.

      Launched in early 2001 on the British Sky Broadcasting, or BSkyB, network in the United Kingdom, PlayJam currently is available to over 20 million subscribers through distribution on BSkyB, cable operators NTL Group Ltd. and Telewest Broadband in the United Kingdom, satellite operators Television Par Satellite (TPS) and Canal Satellite in France, and satellite operator EchoStar Communications Corporation in the United States. PlayJam runs on the OpenTV platform as well as those provided by other middleware providers.

      In the United Kingdom and in France, PlayJam charges a fee, via a premium rate telephone call using the telephone or the remote control, for membership registration, game score registration for the chance to win prizes, and for access to pay-per-play content. We have also sold advertising and sponsorship space from time to time on PlayJam games. In the United States, PlayJam is offered as a subscription based service on EchoStar, for which we receive a revenue share.

      Fixed-Odds and Casino Gaming. With our acquisition of the assets of BettingCorp in 2003, we began to focus additional efforts on developing fixed-odds and casino games for interactive television. Through BettingCorp, we can enable a network operator to offer a wide variety of products, from casino games and pool products to scratchcards and lotteries, across multiple media using a single back-end management system.

      Subject to local laws and regulations and based on the licenses BettingCorp holds, we are able to offer our customers fixed-odds and casino gaming services. These services include PlayMonteCarlo, which is offered as an interactive television application and through the Internet, and PlayMonteCarlo.com and TotoPools.com,

7

Table of Contents

      Third Party Applications. We also encourage content developers to design and create applications for the OpenTV platform through the use of our series of application development tools. In addition, we offer the OpenTV Partner Program to support independent developers that create OpenTV-enabled applications. Through the OpenTV Partner Program, members can gain access to various resources, including free evaluation periods for selected releases of our software, discounts on our authoring and development tools, training sessions, e-mail support, access to a members-only Web site and regional conferences.

      The OpenTV Interactive Network simplifies the business of interactive television for network operators, programmers and advertisers by offering a suite of managed services and applications. OpenTV Interactive Network is a customized interactive television offering, which includes those applications specifically desired by the customer, such as a combination of OpenTV ProSync, OpenTV SpotOn, OpenTV Measure, PlayMonteCarlo and PlayJam. This service allows our customers to stay focused on what they do best while we enable them to deliver a compelling interactive television experience in a cost-effective manner. Network operators can use the network to gain access to interactive content. Programmers can use a single interactive platform on which to develop content, making the process of enhancing their content more affordable. Advertisers can utilize the network to enhance their advertisements with interactivity and rely on a single source for transaction management and data processing.

      The OpenTV Interactive Network offers our customers a suite of standardized applications that can be licensed by or customized for a particular customer. These applications include:

	•	Interactive and Addressable Advertising
	•	Enhanced Television
	•	News
	•	Games
	•	Commerce
	•	Gambling and Lottery
	•	Messaging and Communications (including email, instant messaging and chat)
	•	Customer Care
	•	Activity Reporting and Analysis

      Apart from these standardized applications, we also develop stand-alone applications for network operators on a revenue sharing or fee-for-service basis.

      To complement our technologies and interactive content and applications, we provide a comprehensive suite of professional engineering and consulting services on a worldwide basis to network operators, set-top box manufacturers and content and application developers in support of our product offerings. The services that we provide include interactive television business consulting, middleware porting and integration, application customization and localization, launch management and educational training services. These services allow us to manage various interactive television projects, from discrete integration or development assignments to complete end-to-end digital programming solutions for network operators. Our services include around-the-clock maintenance and support for our products after they have been installed and commercially deployed by our network operators and set-top box manufacturers, including the provision of product updates. Services are provided on a paid engagement basis and are either executed on a time and materials or fixed price contract basis.

8

Table of Contents

      We also provide platform-neutral testing, development, integration and certification services. We use a state-of-the-art interactive television infrastructure solution center that enables network operators, set-top box manufacturers, infrastructure providers and application developers to develop interactive television products and services in a controlled environment.

Customer and Industry Relationships

      We have established significant relationships with many of the leading network operators, set-top box manufacturers, chip set manufacturers, programming networks and advertisers around the world. Our customer and industry relationships include the following:

	•	Network Operators. Over 40 network operators around the world have launched our OpenTV Core platform, including Auna Telecommunications, S.A. in Spain, Austar Entertainment Pty Ltd. and Foxtel in Australia, Bell ExpressVu in Canada, BSkyB in the United Kingdom, EchoStar’s DISH Network in the United States, Noos and TPS in France and Shanghai Cable Network Co. Ltd. (SCN) in China. In addition, two network operators have deployed our OpenTV ProSync offering, Charter Communications in the United States and Rogers Communications, Inc. in Canada.
	•	Set-top Box Manufacturers. Our software is available on 35 manufacturers’ set-top boxes, including Advanced Digital Broadcast (ADB), Matsushita Electric, Motorola, Inc., Nokia Satellite Systems, Pace Micro Technology, Sagem, S.A., Samsung, Scientific-Atlanta, Inc., Sony Corporation, Thomson and UEC Technologies (Pty) Ltd.
	•	Chip Set Manufacturers. A number of chip set manufacturers have licensed our software tools to assure the compatibility of their products with ours, including STMicroelectronics, Conexant, and NEC Electronics Corporation.
	•	Programming Networks. We have worked with numerous programming networks including American Broadcasting Company (ABC), Turner Broadcasting System, Inc., Discovery Communications, Inc., ESPN Networks, National Broadcasting Company (NBC) and Showtime Networks, Inc. to enhance programming content and advertising on their networks.
	•	Advertisers. Over seventy advertisers representing more than 130 brands in North America have enhanced their television advertisements through use of our ProSync service, including Ford Motor Company, General Motors Corporation, Johnson & Johnson, MasterCard International, Nestle and Wal-Mart Stores, Inc.

      Motorola (together with its subsidiary General Instrument Corporation) accounted for approximately 10% of our revenues in 2003. The revenues received from Motorola in 2003 were associated with professional services and support. BSkyB directly and indirectly accounted for approximately 11% of our revenues during 2003 in the form of set-top box royalties and services and support. EchoStar accounted for approximately 12% of our revenues during 2003 in the form of royalties, services and support and license fees.

Sales and Marketing

      We promote and sell the majority of our products and services through our direct sales organization to corporate enterprises, including network operators, programmers, advertisers and set-top box manufacturers. As of December 31, 2003, we had a total of 26 people in our sales and marketing organization located in the United States, Europe and Asia Pacific.

Competition

      The markets in which we compete are intensely competitive and rapidly changing. Current and potential competitors in one or more aspects of our business include interactive television technology companies and companies developing interactive television content and applications. The principal competitive factors in our industry include product functionality, speed of product integration, breadth of network and platform coverage, scalability, price, possession of adequate intellectual property rights and sales and marketing efforts.

9

Table of Contents

      Our competitors offering interactive television-enabling technology include NDS Group plc, Microsoft Corporation, Liberate Technologies and Scientific-Atlanta, Inc. NDS Group historically provided conditional access and limited interactive application technologies to its customers. In 2003, it extended its interactive services offerings with its acquisition of MediaHighway from Thomson Multimedia and has begun to offer solutions that are more directly competitive with many of those that we offer. NDS Group is controlled by The News Corporation. The News Corporation recently completed its acquisition of a controlling stake in Hughes Electronics, the parent of DirecTV, one of the two largest satellite operators in the United States. The News Corporation also controls BSkyB, the largest satellite operator in the United Kingdom and one of our most significant customers, and other satellite operators throughout the world. While we continue to work with, and provide technology and services to many affiliates of The News Corporation, including BSkyB, its control of NDS Group, and the extension by NDS Group of its product offering, may significantly increase our competitive pressures and affect the willingness of other News Corporation affiliates to work with us or to obtain products or services from us. We cannot, therefore, be certain of the long-term implications related to News Corporation’s control of NDS Group or the effects that such control may have upon our relationships and opportunities to work with the many satellite operators throughout the world that are controlled by News Corporation.

      For several years, Microsoft Corporation has been working to create interactive television solutions. With equity interests in several network operators, Microsoft may be able to influence the network operator’s choice of providers of interactive television solutions. We expect that Microsoft will likely become a strong competitor in the market for interactive television solutions. Liberate Technologies manufactures and licenses its software to network operators and set-top box manufacturers and has announced relationships with several United States and United Kingdom cable operators. Scientific-Atlanta, Inc., in the form of PowerTV, develops and markets operating system and middleware software products for the advanced digital interactive cable television markets. Scientific-Atlanta is also a major manufacturer of set-top boxes, and many of our customers or potential customers may seek to deploy set-top boxes manufactured by Scientific-Atlanta. We have in the past competed with, and expect in the future to continue to compete with, both Liberate and Scientific-Atlanta.

      In the markets for enhanced television technology and services and addressable and interactive advertising technology, our primary competition comes from companies such as Navic Networks, Visible World Corporation and NDS Group. Addressable and interactive technology is in its initial stages, and we expect additional competitors to appear as the market continues to develop. Navic provides set-top data services for data connectivity to, from, and among digital set-top boxes. Visible World provides a suite of services enabling a media outlet to develop and deliver content and advertising that can be geographically and demographically customized as well as dynamically updated based on business parameters, market trends and demands.

      In the area of research and audience measurement, which we have begun efforts to market, we may encounter competition from traditional providers such as Nielsen Media Research, AGB Group and TNS, as well as new entrants into the markets such as DigiSoft or Erin Media Inc. Nielsen Media and others have significantly more experience and brand recognition in this sector than we do. We may, therefore, be at a significant disadvantage in light of the market acceptance and long term relationships that many of our likely competitors will have.

      While we expect that interactive television betting and gaming may provide a future source of potential growth, we also expect to face intense competition in jurisdictions in which we are permitted to deploy those product offerings. Companies with which we expect to compete include TVG Network, BSkyB and Fancy a Flutter. Because this aspect of interactive television remains nascent, we cannot be certain as to how competition will develop or the precise nature of the competitors that we may expect to encounter. Because of the significant regulatory issues affecting this sector and the benefits derived from operating under that regulatory framework over a long period, we may also face competition in the future from more traditional casino companies with long histories in the betting and gaming sector.

10

Table of Contents

      Our interactive applications face competition from numerous parties. Companies that compete with our efforts to develop and launch applications on our middleware platform include dedicated applications providers (such as Gemstar-TV Guide International, NDS, Visiware, WorldGate Communications, and MetaTV), independent third parties that develop and provide applications for our middleware platform, and other middleware providers (such as Microsoft, Liberate Technologies and Canal+ Technologies)_ We also face competition from media companies that have publicly announced interactive television initiatives, such as The Discovery Channel, ESPN, Time Warner Cable and CNN. In addition, certain network operators such as BSkyB in the United Kingdom have entered into agreements, joint ventures, and other relationships with technology and entertainment companies. We expect competition in the interactive content and applications area to intensify as the general market for interactive television services further develops, particularly in the case of independent third parties that have the ability to develop applications for our middleware platform at relatively modest expense through the use of our applications development tools.

      In the professional services area, we compete with third party system integrators such as Accenture and Imagine Broadband, as well as with internal information technology staffs at our network operator customers. Other interactive television technology providers, such as Liberate Technologies and NDS Group, also provide a level of professional services in conjunction with their product offerings.

Regulations

      The telecommunications, media, broadcast and cable television industries are subject to extensive regulation by governmental agencies. These governmental agencies continue to oversee and adopt legislation and regulation over these industries, particularly in the areas of user privacy, consumer protection, the online distribution of content and the characteristics and quality of online products and services, which may affect our business, the development of our products, the decisions by market participants to adopt our products and services or the acceptance of interactive television by the marketplace in general.

      Recent attempts to establish industry-wide standards for interactive television software include an initiative by cable network operators in the United States to create a uniform platform for interactive television called Open Cable and an initiative by European television industry participants to create a platform called Multimedia Home Platform. The establishment of these standards or other similar standards could adversely affect the pricing of our products and services, significantly reduce the value of our intellectual property and the competitive advantage our proprietary technology provides, cause us to incur substantial expenditures to adapt our products or services to respond to these developments, or otherwise hurt our business, particularly if our products require significant redevelopment in order to conform to the newly established standards.

      If, and to the extent that, we continue to develop applications for the gaming and betting market, we also expect to become subject to additional regulatory oversight. Those laws and regulations are quickly evolving and changing. To adequately address the legal and regulatory issues inherent in that market, we will need to dedicate significant resources to those matters and maintain effective controls to monitor changes in various laws and the effects on our business.

Intellectual Property and Research and Development

      As of December 31, 2003, we had 82 patents issued in the United States, 335 patents issued outside of the United States, and 711 patent applications pending throughout the world. We believe that our patent portfolio protects many of the key elements necessary to support digital interactive television. Our research and development expenses, excluding in-process research and development charges related to acquisitions, amortization of share-based compensation, and non-cash warrant expense, for the years ended December 31, 2003, 2002 and 2001 were $25.3 million, $33.9 million and $40.3 million, respectively.

Employees

      As of December 31, 2003, we had 386 full-time employees, including 148 in engineering, 99 in sales, marketing, service and support, 84 in content and programming and 55 in finance and administrative services.

11

Table of Contents

Available Information

      Our Internet website is located at http://www.opentv.com, but the information contained on our website is not deemed to be incorporated herein. We make available free of charge on the investor relations page of our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC.

      The public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet site is located at http://www.sec.gov.

Item 2.     Properties

      Our corporate headquarters and principal executive offices are presently located at 275 Sacramento Street, San Francisco, California, 94111, where we occupy 60,458 square feet of space under a seven year lease that expires on January 31, 2010. In addition to the corporate headquarters, we have leased regional office space elsewhere in the United States, Europe, Asia and Australia.

      In May 2003, we completed the closure of our former headquarters in Mountain View, California as well as the facilities of our subsidiary Wink Communications in Alameda, California and relocated both operations to our new San Francisco location in an effort to reduce lease expense, consolidate operations and generate operational synergies and efficiencies. This restructuring also resulted in the closure of certain regional offices in 2003.

      We expect that we may from time to time close further regional offices or open additional regional offices as the circumstances of our business may require.

Item 3.     Legal Proceedings

      OpenTV, Inc. v. Liberate Technologies, Inc. On February 7, 2002, OpenTV, Inc., our subsidiary, filed a lawsuit against Liberate Technologies, Inc. alleging patent infringement in connection with two patents held by OpenTV, Inc. relating to interactive technology. The lawsuit is pending in the United States District Court for the Northern District of California. On March 21, 2002, Liberate Technologies filed a counterclaim against OpenTV, Inc. for alleged infringement of four patents allegedly owned by Liberate Technologies. Liberate Technologies has since dismissed its claims of infringement on two of those patents. In January 2003, the District Court granted two of OpenTV, Inc.’s motions for summary judgment pursuant to which the court dismissed Liberate Technologies’ claim of infringement on one of the remaining patents and dismissed a defense asserted by Liberate Technologies to OpenTV, Inc.’s infringement claims, resulting in only one patent of Liberate Technologies remaining in the counterclaim. The District Court issued a claims construction ruling for the two OpenTV patents and one Liberate patent remaining in the suit on December 2, 2003. We believe that our lawsuit is meritorious, and we intend to vigorously pursue prosecution of our claims against Liberate Technologies. In addition, we believe that we have meritorious defenses to the counterclaims brought against OpenTV, Inc. and will defend ourselves vigorously. No provision has been made in our consolidated financial statements for this matter. We are unable to predict the likelihood of a favorable outcome or estimate our potential liability, if any.

      Walt Disney Litigation. On December 20, 2000, ACTV, Inc. and its wholly owned subsidiary HyperTV Networks, Inc. filed a lawsuit in the United States District Court for the Southern District of New York against The Walt Disney Company and certain of its affiliates, which we collectively refer to as Walt Disney. We acquired ACTV, Inc. in July 2003. Walt Disney filed counterclaims against ACTV that sought a declaration that ACTV’s patents in the suit have not been infringed, are invalid and are unenforceable. On May 24, 2002, the District Court granted Walt Disney’s motion for summary judgment of non-infringement

12

Table of Contents

      Initial Public Offering Securities Litigation. In July 2001, the first of a series of putative securities class actions, Brody v. OpenTV Corp., et al., was filed in United States District Court for the Southern District of New York against certain investment banks which acted as underwriters for our initial public offering, us and various of our officers and directors. These lawsuits were consolidated and are captioned In re OpenTV Corp. Initial Public Offering Securities Litigation. The complaints allege undisclosed and improper practices concerning the allocation of our initial public offering shares, in violation of the federal securities laws, and seek unspecified damages on behalf of persons who purchased OpenTV Class A ordinary shares during the period from November 23, 1999 through December 6, 2000. The Court has appointed a lead plaintiff for the consolidated cases. On April 19, 2002, the plaintiffs filed an amended complaint. Other actions have been filed making similar allegations regarding the initial public offerings of more than 300 other companies, including Wink Communications as discussed in greater detail below. All of these lawsuits have been coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation. Defendants in these cases have filed omnibus motions to dismiss on common pleading issues. Oral arguments on these omnibus motions to dismiss were held on November 1, 2002. All claims against our officers and directors have been dismissed without prejudice in this litigation. On February 19, 2003, the Court denied in part and granted in part the motion to dismiss filed on behalf of defendants, including us. The Court’s order dismissed all claims against us except for a claim brought under Section 11 of the Securities Act of 1933. However, the Court has given plaintiffs an opportunity to amend their claims in order to state a claim. A proposal has been made for the settlement and release of claims against the issuer defendants, including us, in exchange for a guaranteed recovery to be paid by the insurance carriers of the issuer defendants and an assignment of certain claims. We have approved the settlement proposal and are awaiting definitive documentation. The settlement is subject to a number of conditions, including approval of the proposed settling parties and the Court. If the settlement does not occur, and the litigation against us continues, we believe that we have meritorious defenses to the claims asserted against us and will defend ourselves vigorously. No provision has been made in our consolidated financial statements for this matter. We are unable to predict the likelihood of an unfavorable outcome or estimate our potential liability, if any.

      In November 2001, a putative securities class action was filed in United States District Court for the Southern District of New York against Wink Communications and two of its officers and directors and certain investment banks which acted as underwriters for Wink Communications’ initial public offering. We acquired Wink Communications in October 2002. The lawsuit is now captioned In re Wink Communications, Inc. Initial Public Offering Securities Litigation. The operative amended complaint alleges undisclosed and improper practices concerning the allocation of Wink Communications’ initial public offering shares in violation of the federal securities laws, and seeks unspecified damages on behalf of persons who purchased Wink Communications’ common stock during the period from August 19, 1999 through December 6, 2000. This action is among the over 300 lawsuits that have been consolidated for pretrial purposes as In re Initial Public Offering Securities Litigation. On February 19, 2003, the Court ruled on the motions to dismiss filed by all defendants in the consolidated cases. The Court denied the motions to dismiss the claims under the Securities Act of 1933, granted the motion to dismiss the claims under Section 10(b) of the Securities Exchange Act of 1934 against Wink Communications and one individual defendant, and denied that motion against the other individual defendant. As described above, a proposal has been made for the settlement and release of claims against the issuer defendants. Wink Communications has approved the settlement proposal and is awaiting the definitive documentation. The settlement is subject to a number of conditions, including approval of the proposed settlement parties and the Court. If the settlement does not occur, and the litigation

13

Table of Contents

      Litigation Relating to the Acquisition of ACTV, Inc. On November 18, 2002, a purported class action complaint was filed in the Court of Chancery of the State of Delaware in and for the County of New Castle against ACTV, Inc., its directors and us. The complaint generally alleges that the directors of ACTV breached their fiduciary duties to the ACTV shareholders in approving the ACTV merger agreement pursuant to which we acquired ACTV on July 1, 2003, and that, in approving the ACTV merger agreement, ACTV’s directors failed to take steps to maximize the value of ACTV to its shareholders. The complaint further alleges that we aided and abetted the purported breaches of fiduciary duties committed by ACTV’s directors on the theory that the merger could not occur without our participation. No proceedings on the merits have occurred with respect to this action, and the case is dormant. We believe that the allegations are without merit and intend to defend against the complaint vigorously. No provision has been made in our consolidated financial statements for this matter. We are unable to predict the likelihood of an unfavorable outcome or estimate our potential liability, if any.

      Broadcast Innovation Matter. On November 30, 2001, a suit was filed in the United States District Court for the District of Colorado by Broadcast Innovation, L.L.C., or BI, alleging that DIRECTV, Inc., EchoStar Communications Corporation, Hughes Electronics Corporation, Thomson Multimedia, Inc., Dotcast, Inc. and Pegasus Satellite Television, Inc. are infringing certain claims of United States patent no. 6,076,094, assigned to or licensed by BI. Though we are not currently a defendant in the suit, BI may allege that certain of our products, possibly in combination with the products provided by some of the defendants, infringe BI’s patent. The agreements between (1) OpenTV, Inc. and EchoStar and (2) Wink Communications and DIRECTV include indemnification obligations of OpenTV, Inc. and Wink Communications, respectively, that may be triggered by the litigation. If liability is found against EchoStar in this matter, and if such a decision implicates our technology or products, EchoStar has notified OpenTV, Inc. of its expectation of indemnification, in which case our business performance, financial position, results of operations or cash flows may be adversely affected. Likewise, if OpenTV, Inc. were to be named as a defendant and it is determined that the products of OpenTV, Inc. infringe any of the asserted claims, and/or it is determined that OpenTV, Inc. is obligated to defend EchoStar in this matter, our business performance, financial position, results of operations or cash flows may be adversely affected. Based on publicly available information, we believe that certain of the defendants in the suit, including DIRECTV, reached agreement with BI to settle the litigation on July 17, 2003. We are unaware of the specific terms of that settlement and are unable to assess the implications of that settlement, if any, on Wink Communications. No provision has been made in our condensed consolidated financial statements for these matters. We are unable to estimate our potential liability, if any.

      Personalized Media Communications, LLC. On December 4, 2000, a suit was filed in the United States District Court for the District of Delaware by Pegasus Development Corporation and Personalized Media Communications, LLC alleging that DIRECTV, Inc., Hughes Electronics Corp., Thomson Consumer Electronics and Philips Electronics North America, Inc. are willfully infringing certain claims of seven U.S. patents assigned or licensed to Personalized Media Communications. Based on publicly available information, we believe that the case has been stayed in the District Court pending re-examination by the United States Patent and Trademark Office. Though Wink Communications is not a defendant in the suit, Personalized Media Communications may allege that certain products of Wink Communications, possibly in combination with products provided by the defendants, infringe Personalized Media Communication’s patents. The agreements between Wink Communications and each of the defendants include indemnification obligations that may be triggered by this litigation. If it is determined that Wink Communications is obligated to defend any defendant in this matter, and/or that the products of Wink Communications infringe any of the asserted claims, our business performance, financial position, results of operations or cash flows may be adversely affected. No provision has been made in our consolidated financial statements for this matter. We are unable to estimate our potential liability, if any.

14

Table of Contents

      Other Matters. From time to time in the ordinary course of our business, we are also party to other legal proceedings or receive correspondence regarding potential or threatened legal proceedings. While we currently believe that the ultimate outcome of these other proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in our results of operations, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations of the period in which the ruling occurs. The estimate of the potential impact on our financial position or overall results of operations for any of the legal proceedings described in this section could change in the future.

Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of our security holders during the fourth quarter of 2003.

PART II.

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

      Our Class A ordinary shares began trading on the Nasdaq National Market and on the Official Segment of the stock market of Euronext Amsterdam N.V., or Euronext Amsterdam, under the symbol “OPTV” on November 23, 1999. On December 31, 2003, we consolidated the public trading of our Class A ordinary shares on the Nasdaq National Market by discontinuing the listing of our Class A ordinary shares on Euronext Amsterdam. Our Class B ordinary shares are not publicly traded.

      The following table lists the high and low sales prices for our Class A ordinary shares on both the Nasdaq National Market and the Euronext Amsterdam for the periods indicated. We obtained our Euronext Amsterdam quotes, which are reported in United States dollars, from Bloomberg L.P.

Holders

      As of February 29, 2004, there were approximately 650 holders of record of our Class A ordinary shares and three holders of record of our Class B ordinary shares. Banks, brokers and other institutions hold many of our Class A ordinary shares on behalf of our stockholders.

Dividends

      We have never paid any cash dividends on our ordinary shares. We anticipate that any earnings in the foreseeable future will be retained to finance our business, and we have no current intention to pay cash dividends on our ordinary shares. The payment of dividends is within the discretion of our board of directors and will be dependent upon, among other factors, our results of operations, financial condition, capital requirements, legal requirements and any restrictions imposed by financing arrangements.

15

Table of Contents

Certain Aspects of British Virgin Islands Law

      There are no governmental laws, decrees or regulations in the British Virgin Islands that restrict the export or import of capital, including, but not limited to, foreign exchange controls, or that affect the remittance of dividends or other payments to holders of our ordinary shares who are not residents of the British Virgin Islands. In particular, the British Virgin Islands does not impose a withholding tax on dividends paid by companies such as us that are incorporated under the International Business Companies Act of the British Virgin Islands.

      Under the International Business Companies Act of the British Virgin Islands, a holder of our ordinary shares who is not a resident of the British Virgin Islands is exempt from British Virgin Islands income tax on dividends paid on our ordinary shares and no holders of our ordinary shares are liable to the British Virgin Islands for income tax on gains realized during any taxable year on sale or disposal of our ordinary shares. There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on the holders of our ordinary shares. In addition, our ordinary shares are not subject to transfer taxes, stamp duties or other similar charges as a matter of British Virgin Islands law.

      There is no income tax treaty or convention currently in effect between the United States and the British Virgin Islands. If we were to be classified as a passive foreign investment company under applicable United States tax regulations, for the prior, current, or subsequent taxable years, stockholders who are U.S. taxpayers could be subject to adverse tax consequences.

Securities Authorized for Issuance Under Equity Compensation Plans

      The following table presents information about our equity compensation plans as of December 31, 2003:

Equity Compensation Plan Information