TiVo 2004 Annual Report Download - page 24

Table of Contents
Index to Financial Statements
Average Revenue Per Subscription ("ARPU"). Management reviews this metric, and believes it might be useful to investors, in order to evaluate the
potential of our subscription base to generate revenues from a variety of sources, including subscription fees, advertising, and audience measurement research.
ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues, and as a result you should not use ARPU as a
substitute for measures of financial performance calculated in accordance with GAAP. Management believes it is useful to consider this metric excluding the
costs associated with rebates, revenue share and other payments to channel because of the discretionary nature of these expenses and because management
believes these expenses are more appropriately monitored as part of SAC. We are not aware of any uniform standards for calculating ARPU and caution that
our presentation may not be consistent with that of other companies.
We calculate ARPU per month for TiVo-Owned subscriptions by subtracting DIRECTV-related service revenues (which includes DIRECTV
subscription service revenues and DIRECTV-related advertising revenues) from our total reported service revenues and dividing by the number of months in
the period. We then divide by average TiVo-Owned subscriptions for the period, calculated as described above for churn rate. The following table shows this
calculation and reconciles ARPU for TiVo-Owned subscriptions to our reported service and technology revenues:
Fiscal Year Ended January 31,
2005
2004 2003
(In thousands)
Service and technology revenues $ 115,476 $ 77,357 $ 60,170
Less: Technology revenues (8,310) (15,797) (20,909)
Total Service revenues 107,166 61,560 39,261
Less: DIRECTV-related service revenues (21,071) (11,624) (12,557)
TiVo–Owned-related service revenues 86,095 49,936 26,704
Average TiVo–Owned revenues per month 7,175 4,161 2,225
Average TiVo–Owned per month subscriptions 819 486 299
TiVo–Owned ARPU per month $ 8.76 $ 8.57 $ 7.45
TiVo-Owned ARPU per month for the fiscal year ended January 31, 2005 increased from fiscal years 2004 and 2003, to $8.76 from $8.57 from $7.45,
respectively. The increase was largely a result of the shift in the mix of TiVo-Owned subscriptions from lifetime subscriptions to monthly subscriptions.
We calculate ARPU per month for DIRECTV subscriptions by first subtracting TiVo-Owned-related service revenues (which includes TiVo-Owned
subscription service revenues and TiVo-Owned related advertising revenues) from our total reported service revenues. Then we divide average revenues per
month for DIRECTV-related service revenues by average subscriptions for the period. The following table shows this calculation and reconciles ARPU for
DIRECTV subscriptions to service and technology revenues:
Fiscal Year Ended January 31,
2005
2004 2003
(In thousands)
Service and technology revenues $ 115,476 $ 77,357 $ 60,170
Less: Technology revenues (8,310) (15,797) (20,909)
Total Service revenues 107,166 61,560 39,261
Less: TiVo—Owned-related service revenues (86,095) (49,936) (26,704)
DIRECTV-related service revenues 21,071 11,624 12,557
Average DIRECTV revenues per month 1,756 969 1,046
Average DIRECTV subscriptions 1,154 377 173
DIRECTV ARPU per month $ 1.52 $ 2.57 $ 6.06
ARPU per month for DIRECTV subscriptions for the fiscal year ended January 31, 2005 decreased from prior fiscal years to $1.52 from $2.57 and
$6.06, respectively. We expect ARPU per month for DIRECTV subscriptions to decline further as new DIRECTV subscriptions generally involve limited or
no acquisition costs, lower recurring expenses, and lower subscription revenue.
Critical Accounting Estimates