TiVo 2005 Annual Report Download - page 18

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Table of Contents
Consumer Electronics Competitors. We compete against several types of products with basic or enhanced electronic program guide (EPG) based 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 as well.
• 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 and other PC
manufacturers such as Apple Computer may offer similar functionality in the future.
Licensing Competitors. 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, which 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, compete with other advertising
media such as print, radio, television and Video on Demand 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 support or embrace the TiVo technology due to a belief that our
technology's ability to fast-forward through commercials will reduce the effectiveness of general television advertising.
We depend on a limited number of third parties to manufacture, distribute, and supply critical components and services for the DVRs that
enable the TiVo service. We may be unable to operate our business if these parties do not perform their obligations.
The TiVo service is enabled through the use of a DVR made available by us through a third-party contract manufacturer and a limited number of other
third parties. In addition, we rely on sole suppliers for a number of key components for the DVRs. We also rely on third parties with whom we outsource
supply-chain activities related to inventory warehousing, order fulfillment, distribution, and other direct sales logistics. We do not control the time and
resources that these third parties devote to our business. We cannot be sure that these parties will perform their obligations as expected or that any revenue,
cost savings, or other benefits will be derived from the efforts of these parties. If any of these parties breaches or terminates their agreement with us or
otherwise fails to perform their obligations in a timely manner, we may be delayed or prevented from commercializing our products and services. Because our
relationships with these parties are non-exclusive, they may also support products and services that compete directly with us, or offer similar or greater
support to our competitors. Any of these events could require us to undertake unforeseen additional responsibilities or devote additional resources to
commercialize our products and services. This outcome would harm our ability to compete effectively and achieve increased market acceptance and brand
recognition.
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