TiVo 2005 Annual Report Download - page 44

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Table of Contents
As of January 31, 2006, approximately 100,000 product lifetime subscriptions had exceeded the four-year period we use to recognize product lifetime
subscription revenues, but had made contact to the TiVo service within the prior six months. This represents approximately 13.3% of our cumulative lifetime
subscriptions as compared to 11.4% for the fiscal year ended January 31, 2005. We continue to incur costs of services for these subscriptions without
recognizing corresponding subscription revenues.
In the past, we offered some of our consumer electronics partners a version of the TiVo service with reduced functionality called TiVo Basic that does
not involve a fee to consumers. DVRs with the TiVo Basic service that have not upgraded to the TiVo service are not included in our subscription totals.
TiVo-Owned Churn Rate per Month. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our ability to
retain existing TiVo-Owned subscriptions (including both monthly and product lifetime subscriptions) by providing services that are competitive in the
market. Management believes factors such as service enhancements, service commitments, higher customer satisfaction, and improved customer support may
improve this metric. Conversely, management believes factors such as increased competition, lack of competitive service features, and increased price
sensitivity may cause our TiVo-Owned Churn Rate per month to increase.
We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned subscription cancellations in the period divided by the Average TiVo-
Owned subscriptions for the period (including both monthly and product lifetime subscriptions), which then is divided by the number of months in the period.
We calculate Average TiVo-Owned subscriptions for the period by adding the average TiVo-Owned subscriptions for each month and dividing by the number
of months in the period. We calculate the average TiVo-Owned subscriptions for each month by adding the beginning and ending subscriptions for the month
and dividing by two. We are not aware of any uniform standards for calculating churn and caution that our presentation may not be consistent with that of
other companies.
The following table presents our TiVo-Owned Churn Rate information:
Fiscal Year Ended January 31,
2006 2005 2004
in thousands, accept percentages
TiVo-Owned subscription cancellations (144) (69) (22)
Average TiVo-Owned subscriptions 1,269 819 486
Annual Churn Rate 11% 8% 5%
Number of Months 12 12 12
TiVo-Owned Churn Rate per month 0.9% 0.7% 0.4%
The TiVo-Owned Churn Rate per month was 0.9% for the fiscal year ended January 31, 2006, compared to 0.7% and 0.4% per month in for the fiscal
years ended January 31, 2005 and 2004, respectively. We also count as churn those product lifetime subscriptions that have both reached the end of the four-
year revenue recognition period and whose DVRs have not contacted the TiVo service within the prior six-months. The TiVo-Owned Churn rate per month of
0.9% for the fiscal year ended January 31, 2006, is comprised of 0.1% attributable to these product lifetime subscriptions and 0.8% from cancellation of
recurring subscriptions. Conversely, we do not count as churn product lifetime subscriptions that have not reached the end of the four-year revenue
recognition period, regardless of whether such subscriptions continue to contact the TiVo service. We anticipate our TiVo-Owned Churn Rate will increase in
future periods as a result of increased competition in the marketplace and increased churn from these product lifetime subscriptions.
Subscription Acquisition Cost or SAC. Management reviews this metric, and believes it may be useful to investors, in order to evaluate trends in the
efficiency of our marketing programs and subscription acquisition strategies. We define SAC as our total acquisition costs for a given period divided by TiVo-
Owned subscription gross additions for the same period. We define total acquisition costs as the sum of sales and marketing expenses, rebates, revenue share,
and other payments to channel, minus hardware gross margin (defined as hardware revenues less cost of hardware revenues). We do not include DIRECTV
subscription gross additions in our calculation of SAC because we incur limited or no acquisition costs for new DIRECTV subscriptions. We are not aware of
any uniform standards for calculating total acquisition costs or SAC and caution that our presentation may not be consistent with that of other companies.
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