TiVo 2004 Annual Report Download - page 41

Table of Contents
Index to Financial Statements
ours. DVRs compete for consumer spending with products such as DVD players, satellite television systems, personal computers, and video game consoles.
The TiVo service competes with home entertainment services such as cable and satellite television, movie rentals, pay-per-view, and video on demand. See
"We face intense competition from a number of sources, which may impair our revenues, increase our subscription acquisition costs, and hinder our ability to
generate new subscriptions."
Many of these products or services have established markets, broad user bases, and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing devices and services have substantially greater brand recognition, market presence, distribution channels,
advertising and marketing budgets and promotional, and other strategic partners. Faced with this competition, we may be unable to effectively differentiate
the DVR or the TiVo service from other consumer electronics devices or entertainment services.
We compete with digital cable and satellite DVRs. Cable and satellite service providers are accelerating deployment of integrated cable and satellite
receivers with DVRs that bundle basic DVR services with other digital services and do not require their customers to purchase hardware. If we are not able to
enter into agreements with these service providers to embed the TiVo service into their offerings, our ability to attract their subscribers to the TiVo service
would be limited and our business, financial condition and results of operations could be harmed.
It is expensive to establish a strong brand. We believe that establishing and strengthening the TiVo brand is critical to achieving widespread acceptance
of our products and services and to establishing key strategic relationships. The importance of brand recognition will increase as current and potential
competitors enter the digital video recorder market with competing products and services. Our ability to promote and position our brand depends largely on
the success of our marketing efforts and our ability to provide high quality services and customer support. These activities are expensive and we may not
generate a corresponding increase in subscriptions or revenues to justify these costs. If we fail to establish and maintain our brand, or if our brand value is
damaged or diluted, we may be unable to attract subscriptions and effectively compete in the digital video recorder market.
We rely on our customers and consumer electronics manufacturers to market and distribute our products and services. In addition to our own efforts,
our customers and consumer electronics manufacturers distribute DVRs that enable the TiVo service. We rely on their sales forces, marketing budgets and
brand images to promote and support DVRs and the TiVo service. We expect to continue to rely on our relationships with these companies to promote and
support DVRs and other devices that enable the TiVo service. The loss of one or more of these companies could require us to undertake more of these
activities on our own. As a result, we would spend significant resources to support DVRs and other devices that enable the TiVo service. We also expect to
rely on DIRECTV and other partners to provide marketing support for the TiVo service. The failure of one or more of these companies to provide anticipated
marketing support will require us to divert more of our limited resources to marketing the TiVo service. If we are unable to provide adequate marketing
support for DVRs and the TiVo service, our ability to attract subscriptions to the TiVo service will be limited.
If we are unable to create or maintain multiple revenue streams, we may not be able to cover our expenses and this could cause our revenues to
suffer.
Our long-term success depends on our ability to generate revenues from multiple revenue streams. Although our initial success depends on building a
significant customer base and generating subscription fees from the TiVo service, our long-term success will depend on securing additional revenue streams
such as:
• licensing;
• advertising;
• audience measurement research;
• revenues from programmers; and
• electronic commerce.
In order to derive substantial revenues from these activities, we will need to attract and retain a large and growing base of subscriptions to the TiVo
service. We also will need to work closely with television advertisers, cable and satellite network operators, electronic commerce companies, and consumer
electronics manufacturers to develop products and services in these areas. We may not be able to work effectively with these parties to develop products that
generate revenues that are sufficient to justify their costs. We also may be unable to work with or to continuing working with these parties to distribute video
and collect and distribute data or other information to provide these product or services. In addition, we are currently obligated to share a portion of these
revenues with several of our strategic partners. Any inability to attract and retain a large and growing group of subscriptions or ability to attract new strategic
partners or maintain and extend our relationships with our current strategic partners could seriously harm our ability to support new services and develop new
revenue streams.
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