TiVo 2006 Annual Report Download - page 102

Table of Contents
19. COMCAST AGREEMENT
On March 15, 2005, the Company entered into a non-exclusive licensing and marketing agreement with Comcast STB Software DVR, LLC, a wholly-
owned subsidiary of Comcast Corporation, and Comcast Corporation, as guarantor of Comcast STB's obligations under the agreement. Pursuant to this
agreement, the Company agreed to develop a TiVo-branded software solution for deployment on Comcast's DVR platforms, which would enable any TiVo-
specific DVR and networking features requested by Comcast, such as WishList® searches, Season Pass recordings, home media features, and TiVoToGo
transfers. In addition, the Company agreed to develop a TiVo Interactive Advertising Management System for deployment on Comcast platforms to enable
the provision of local and national advertising to Comcast subscribers.
Comcast will pay a recurring monthly fee per Comcast subscriber who receives the TiVo service through Comcast. Comcast will also pay the Company
fees for engineering services for the development and integration of the TiVo service software solution (subject to adjustment under certain circumstances)
and the TiVo Interactive Advertising Management System.
The initial term of this agreement is for seven years from completion of the TiVo service software solution, with Comcast permitted to renew for
additional 1-year terms for up to a total of 8 additional years as long as certain deployment thresholds have been achieved. During the term of the agreement,
TiVo will provide Comcast with certain customer and maintenance support and will provide certain additional development work. TiVo will have the
continuing right to sell certain types of advertising in connection with the TiVo service offered through Comcast. TiVo will also have a limited right to sell
certain types of advertising on other Comcast DVR set-top boxes enabled with the TiVo Interactive Advertising Management System, subject to Comcast's
option to terminate such right in exchange for certain advertising-related payments.
On March 28, 2006, the Company executed the First Amendment to the Licensing and Marketing Agreement, effective as of March 27, 2006, between
TiVo Inc. and Comcast STB Software DVR, LLC and Comcast Corporation. The First Amendment to the Licensing and Marketing Agreement extends the
acceptance deadline for the TiVo Interactive Advertising Management System from the second anniversary of the Effective Date of the Agreement to
February 15, 2008, unless the parties agree on a later date. Concurrently, the Company also finalized the scope of the engineering services to be delivered with
respect to the initial statement of work for the TiVo Interactive Advertising Management System. Effective October 23, 2006, the Company entered into the
Second Amendment to the Licensing and Marketing Agreement, between TiVo Inc. and Comcast STB Software DVR, LLC and Comcast Corporation. The
Second Amendment to the Licensing and Marketing Agreement extends the acceptance deadline for the TiVo Experience from the second anniversary of the
Effective Date of the Agreement to June 30, 2007 or such later date as maybe agreed upon by the parties. The Second Amendment also allows the parties to
extend the date for acceptance of the TiVo Interactive Advertising Management System to such later date as maybe agreed upon by the parties.
Under the licensing and marketing agreement, Comcast paid TiVo an upfront fee that the Company recorded as deferred revenue. This upfront fee,
subsequent milestone payments, and related costs were initially deferred as the final statement of work was not complete. Development costs were $4.6
million, as of January 31, 2006, and were classified on the consolidated balance sheet under prepaid expense and other, current. During the fiscal year ended
January 31, 2007, the Company recognized $16.2 million in costs and revenues, including the $4.6 million deferred costs as of January 31, 2006. Currently, it
is not possible to separate the various elements within the arrangement due to a lack of fair value for undelivered elements in the contract. Consequently, the
Company recognizes revenues and costs based on a zero profit model, which results in the recognition of equal amounts of revenues and costs.
Development and deployment of the TiVo service software solution is expected to launch in its initial market in the near future. Development and
deployment of the TiVo Interactive Advertising Management System is targeted to begin after the second anniversary of this agreement, but by no later than
February 15, 2008, unless a later date is agreed upon by the parties. In the event
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