TiVo 2005 Annual Report Download - page 10

Table of Contents
Fiscal Year Ended
January 31,
TiVo-Enabled DVRs Manufactured by: 2006 2005 2004
Hardware Manufacturers 12% 64% 39%
Contract Manufacturers for TiVo 88% 34% 49%
Licensing and Engineering Professional Services Customers 0% 2% 12%
Total Manufactured TiVo-enabled DVRs 100% 100% 100%
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 The
Republic of China. Through TGC, we have gained access to high quality engineering resources for the design and development of additional digital video
recorder platforms. TGC engages in design, development, and licensing activities related to digital video recorder platforms and technology. In fiscal year
2005, TGC performed design and development activities related to a potential TiVo product for the U.S. market. In December 2005 TGC launched a DVR
product that includes TiVo technology and branding in The Republic of China. We expect that TGC will pursue opportunities to market TiVo technology in
The People's Republic of China, Singapore, Hong Kong, and Macau. 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 The Republic of China. In the United States, TGC may offer
DVR products that support the U.S. TiVo service to TiVo, authorized TiVo licensees or with TiVo's prior approval retail distributors.
Sales and Marketing
Consumer Offerings. We sell subscriptions to the TiVo service directly to consumers who have purchased a TiVo-enabled DVR. We sell TiVo service-
only subscriptions either for a monthly subscription rate of $12.95 (with discounts available to subscribers who have multiple subscriptions to the TiVo
service), or a pre-pay option of $155.40 for one-year, $299 for two-years or $399 for three-years of TiVo service. We have announced our intention to
eliminate the product lifetime service option. TiVo-enabled DVRs are available from major retailers across the United States, including Best Buy, Circuit
City, CompUSA, 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.
We also sell bundled offering of a TiVo-enabled DVR and a subscription to the TiVo service through our direct sales channel. Current pricing offered
through our direct channel is:
• The price for an 80-hr TiVo-enabled DVR and a one-year service commitment is $19.95 a month or $224 prepaid
• The price for an 80-hr TiVo-enabled DVR and a two-year service commitment is $18.95 a month or $369 prepaid
• The price for an 80-hr TiVo-enabled DVR and a three-year service commitment is $16.95 a month or $469 prepaid
Services to Television Service Providers. We also sell our technology and services to television service providers, 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. We also sell advertising and limited audience measurement research services, through a dedicated team of
salespeople and through partnerships with third parties like Nielsen Media Research.
Customer Service and Support
For our DIRECTV receivers with TiVo service, DIRECTV generally handles customer support. For our TiVo-Owned standalone DVRs, we provide
customer support through outsourced service providers as well as our internal customer service personnel.
Individual customers have access to an Internet-based repository for technical information and troubleshooting techniques. They also can obtain support
through other means such as the TiVo website, web forums, email, and telephone support.
We offer a manufacturer's warranty on our TiVo-Owned standalone DVRs of 90 days for labor and one year for parts. For our TiVo Package
subscriptions that include both a TiVo-Owned standalone DVR and a subscription to our service, we offer to extend such manufacturer's warranty for parts
only for the duration of the subscription which may last as long as three years. We contract with third parties to handle warranty repair.
Manufacturing and Supply Chain
We outsource the manufacturing of our products to third-party manufacturers. This outsourcing extends from prototyping to volume manufacturing and
includes activities such as material procurement, final assembly, test, quality control, and shipment to distribution centers. Today the majority of our products
are assembled in China and Mexico. Our primary distribution centers are operated on an outsourced basis in Texas and Nevada.
The components that make up our products are purchased from various vendors, including key suppliers such as Broadcom, which supplies
microprocessors, Amtek, which is a supplier of the chassis, and Remote Solutions, which supplies remote controls and bezels. Some of our components,
including microprocessors, chassis, remote controls, and certain discrete components are currently supplied by sole source suppliers.
Seasonality