TiVo 2006 Annual Report Download - page 10

Table of Contents
DIRECTV. DIRECTV is the largest provider of satellite television in the U.S. We have had a longstanding relationship with DIRECTV from 1999 to
the present to provide the TiVo service to its customer base. As of January 31, 2007, we have approximately 2.7 million subscriptions through this
relationship. In the fiscal year ended January 31, 2007, we reported $26.0 million of DIRECTV-related revenues, which include subscription revenues and
DIRECTV-related advertising revenues. This represents 10% of our total net revenues.
DIRECTV currently pays us a recurring monthly per-household fee for access to the technology needed to offer its customers the TiVo service. We
incur limited recurring expenses. We also recognize revenue from DIRECTV for engineering services work on integrated DIRECTV satellite receivers with
TiVo service and the related service infrastructure. We are continuing to provide DIRECTV with engineering services related to currently installed hardware
and updates and feature enhancements for existing platforms and customers.
Additionally, DIRECTV distributes features that enable advanced automatic recording capabilities and the delivery of promotional video to DIRECTV
receivers with TiVo service. Subject to certain restrictions and exceptions, both DIRECTV and TiVo may sell advertising and audience research measurement
data, with each party retaining all their respective revenues generated from such sales.
DIRECTV has launched a competing DVR by NDS to compete with DIRECTV receivers with TiVo service. The new DIRECTV DVRs include
software by NDS and are not manufactured under license from TiVo. DIRECTV has stated that its core initiatives and new customer acquisition efforts will
focus on its new DVR from NDS and has stated its intention to add high definition programming in a format that is not compatible with the existing TiVo-
enabled DVR distributed by DIRECTV. As a result, we have seen a reduction in the number of DIRECTV receivers with TiVo service subscriptions, a trend
that we expect to continue.
On April 7, 2006, we entered into the Seventh Amendment of our Development Agreement, dated as of February 15, 2002, with DIRECTV, Inc. Under
this amendment, which amends the expiration date of the Development Agreement from February 15, 2007, to February 15, 2010, we will continue to provide
maintenance and support for DIRECTV receivers with TiVo service through the expiration date of the Development Agreement. In addition, DIRECTV
received the right to continue to distribute DIRECTV receivers with TiVo service through February 15, 2007, and a related grace period as set forth in the
Development Agreement. Further, we agreed that neither party would assert its patents against the other party with respect to each company's products and
services deployed prior to the expiration of the agreement, subject to limited exceptions. DIRECTV will continue to pay us a monthly fee for each household
using DIRECTV receivers with TiVo service similar to the amount paid by DIRECTV for households with DIRECTV receivers with TiVo service deployed
since February 15, 2002, subject to a monthly minimum payment by DIRECTV. We reserve a portion of these fees as a non-refundable credit to fund
mutually agreed annual development, maintenance, and support services.
On April 7, 2006, we also entered into the First Amendment of our Amended and Restated Services Agreement, dated as of March 31, 2005, with
DIRECTV. This amendment extends the term of the Services Agreement until February 15, 2010, and provides DIRECTV with the ability to obtain additional
technical support and training for its use of advertising-related software tools with DIRECTV receivers with TiVo service.
Cox. On August 22, 2006, we entered into a non-exclusive licensing and distribution agreement with Cox Communications ("CoxCom, Inc." or "Cox").
Pursuant to the agreement, we have agreed to develop a TiVo-branded software solution for deployment on Cox's DVR platforms, which would enable Cox to
offer our DVR and advertising software to its customers and advertising clients respectively. In addition, we have agreed to develop an advertising
management system for deployment on Cox platforms to enable the provision of local and national advertising to Cox subscribers.
The initial term of our agreement is for five years from completion of the TiVo service software solution, but no longer than seven years after the
effective date of the agreement. During the term of the agreement, we will provide Cox with certain customer support and maintenance services.
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