TiVo 2004 Annual Report Download - page 36

Table of Contents
Index to Financial Statements
"VCR-like" controls with manual timeslot-based recordings, usually with no DVR service fee after the consumer purchases the enabling hardware. The TiVo
Basic service offered on select TiVo-enabled DVD recorders made by Toshiba and Pioneer is an example of basic DVR functionality. Enhanced DVR
functionality includes rich program guide data and enhanced scheduling and personalization features, and may or may not require a DVR service fee. The
TiVo service, required for most TiVo-enabled DVRs, and offered as an upgrade for select TiVo-enabled DVD recorders made by Toshiba and Pioneer, are
examples of enhanced DVR functionality.
The TiVo service, required for most TiVo-enabled DVRs, and offered as an upgrade for select TiVo-enabled DVD recorders made by Toshiba and
Pioneer, are examples of enhanced DVR functionality.
Consumer Electronics Competitors. We compete against several types of products with basic or enhanced DVR functionality offered by consumer
electronics companies. These products record an analog television signal output from a cable or satellite set-top box, analog cable feed, or antenna.
• Standalone DVRs and hard drive-equipped DVD recorders, TVs and Game Consoles: ReplayTV continues to offer standalone DVRs with
enhanced DVR functionality in limited retail distribution. Several consumer electronics companies, including Panasonic and Sony, produce DVD
recorders with hard drives. In addition, several consumer electronics companies, including RCA and Toshiba, offer TVs that can connect to
external hard drives to allow for recording of television programming. Some of these TVs offer CableCARD functionality, allowing the receipt of
encrypted digital cable programming without the need for a digital cable set-top box. In general, these hard-drive equipped DVD recorders and
TVs do not require DVR service fees and offer basic DVR functionality. In the future, companies such as Sony and Microsoft could incorporate
DVR technology into their video game consoles.
• Personal computers with DVR software: Microsoft's Windows XP Media Center Edition contains expanded digital media features including
enhanced DVR functionality. PC manufacturers including Dell and Hewlett Packard offer PCs running this Microsoft software.
Satellite and Cable DVR Competitors. We compete against cable and satellite set-top boxes that integrate basic or enhanced DVR functionality into
multi-channel receivers.
• Satellite: EchoStar offers a range of DVR models, including standard definition and high definition models, most of which offer dual tuner
capabilities. Certain models can output signals to multiple TVs within the household. Certain models now offer name-based recordings instead of
timeslot-base recordings. DIRECTV has announced plans to introduce a competing DVR service this year.
• Cable: Scientific-Atlanta sells Explorer 8000 integrated digital cable DVR set-top box to cable operators. Motorola sells the DCT6208 and
DCT6412 integrated digital cable DVR set-top boxes to cable operators. These products combine digital and analog cable reception with DVR
functionality; some versions offer dual tuner and/or high definition capabilities. In addition, Scientific-Atlanta and Motorola have announced
plans to build integrated cable DVRs for cable operator Charter Communications and others using Moxi Media Center software from Digeo. In
November 2004, Comcast and Microsoft announced that Comcast would deploy Microsoft TV Foundation Edition software to more than 1.0
million Comcast subscribers in Washington State. For subscribers with cable DVR set-top boxes, this Microsoft software supports dual tuner
enhanced DVR functionality.
U.S. cable operators are currently deploying server-based Video on Demand (VOD) technology from SeaChange, Concurrent, and others, which
could potentially evolve into competition. Server-based VOD relies on content servers located within the cable operator's central head-end that
stream video across the network to a digital cable set-top box within the consumer's home. Cable operators can use VOD to deliver movies,
television shows, and other content to consumers. Consumers can watch this programming on demand, with VCR-like pausing and rewinding
capabilities. Operators can charge consumers for access to VOD content on a per-transaction or monthly subscription basis, or can offer content
without charge. To the extent that cable operators offer regular television programming as part of their VOD offerings, consumers have an
alternate means of watching time-shifted shows besides DVRs.
Licensing Fees. Our licensing revenues depend both upon our ability to successfully negotiate licensing agreements with our consumer electronics and
service provider customers and, in turn, upon our customers' successful commercialization of their underlying products. In addition, we face competition from
companies such as Microsoft, Gemstar, OpenTV, NDS, D&M Holdings, Digeo, Ucentric, Gotuit, and 2Wire who have created competing digital video
recording technologies. Such companies may offer more economically attractive licensing agreements to service providers and manufacturers of DVRs.
Established Competition for Advertising Budgets. Digital video recorder services, in general, and TiVo, specifically, also compete with traditional
advertising media such as print, radio, and television for a share of advertisers' total advertising budgets. If advertisers do not perceive digital video recording
services, in general, and TiVo specifically, as an effective advertising medium, they may be reluctant to devote a significant portion of their advertising
budget to promotions on the TiVo service. In addition, advertisers may not
33