TiVo 2004 Annual Report Download - page 8

Table of Contents
Index to Financial Statements
TGC, Inc. On August 9, 2004, we acquired a minority interest in TGC, Inc. ("TGC"), a newly formed independent entity. In exchange for our interest
in TGC, we granted TGC a license to certain aspects of our technology for use in The People's Republic of China, Singapore, Hong Kong, Macau, and
Taiwan. Through TGC, our management expects to gain access to high quality, low-cost engineering resources for the design and development of reduced-
cost digital video recorder platforms. Management believes that this investment will enable our internal research and development team to focus on future
service-related enhancements and initiatives. Management expects TGC to engage in design, development, and licensing activities related to reduced-cost
digital video recorder platforms and technology. We and TGC have agreed to share certain costs and expenses relating to research and development.
Management also expects TGC will pursue opportunities to market TiVo technology in The People's Republic of China, Singapore, Hong Kong, Macau, and
Taiwan. TGC's technology license from TiVo is exclusive for the first five years and non-exclusive to TGC for a perpetual period afterwards. Subject to
certain terms and conditions, this license grants TGC limited access to portions of TiVo's source code and provides for both parties to exchange improvements
to that code during the first five years. We will be entitled to royalty payments from TGC in limited circumstances. In addition, TGC has agreed not to market,
without our prior consent, any DVR products or DVR services that do not support the TiVo service outside of the People's Republic of China, Singapore,
Hong Kong, Macau, and Taiwan. In the United States, TGC may offer DVR products that support the TiVo service only to TiVo, authorized TiVo licensees
or TiVo approved retail distributors.
Sales and Marketing
Consumer Offerings. We sell the TiVo service directly to consumers who have purchased a TiVo-enabled DVR. We sell the TiVo service either for a
monthly subscription rate of $12.95, or for a single payment of $299 for the lifetime of the DVR. TiVo-enabled DVRs are available from major retailers
across the United States, including Best Buy, Circuit City, Costco, Amazon.com, Tweeter, The Good Guys, and Target. We recognize revenues from the sale
of TiVo-branded DVRs manufactured for us. To drive sales while managing costs, we have shared marketing expenses with key retailers, and in some cases,
we have offered to share a portion of the subscription revenues.
Services to Television Distributors. We also sell our technology and services to television distributors, such as DIRECTV and Comcast, who then
market (or in the case of Comcast, plan to market in the future) the TiVo service to their subscribers either directly or, in the case of DIRECTV, also through
major retailers across the United States.
Services to the Advertising Industry. Our advertising and promotions offerings are sold through a dedicated team of salespeople and through
partnerships with third parties like Nielsen Media Research.
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