TiVo 2006 Annual Report Download - page 23

Table of Contents
accurate financial forecasts and adjust our spending in a timely manner to compensate for any unexpected revenue shortfall. Such inability could cause our net
losses in a given quarter to be greater than expected, which could cause the price of our stock to decline. It may be difficult to predict accurately our future
revenues, costs of revenues, expenses, or results of operations. In addition, any evaluation of our business must be made in light of the risks and difficulties
encountered by companies offering products or services in new, rapidly evolving, and highly competitive markets.
We face a number of challenges in the sale and marketing of the TiVo service and products that enable the TiVo service.
Our success depends upon the successful retail marketing of the TiVo service and related DVRs, which began in the third quarter of calendar year 1999.
Many consumers are not aware of the benefits of our products. DVR products and services represent a relatively new consumer electronics category.
Retailers, consumers, and potential partners may perceive little or no benefit from digital video recorder products and services. We have only been providing
the TiVo service since 1999. Many consumers are not aware of its benefits, and therefore may not value the TiVo service and products that enable the TiVo
service. We will need to devote a substantial amount of time and resources to educate consumers and promote our products in order to increase our
subscriptions. We cannot be sure that a broad base of consumers will ultimately subscribe to the TiVo service or purchase the products that enable the TiVo
service.
Consumers may not be willing to pay for our products and services. Many of our customers already pay monthly fees for cable or satellite television.
We must convince these consumers to pay an additional subscription fee to receive the TiVo service. Consumers may perceive the TiVo service and related
DVR as too expensive. In order to continue to grow our subscription base, we may need to reduce our costs and lower the price of our DVR or service fees.
The availability of competing services that do not require subscription fees or that are enabled by low or no cost DVRs will harm our ability to effectively
attract and retain subscriptions.
Growth in our TiVo-Owned subscriptions and related revenues could be harmed by competitive offerings by Comcast and Cox who also would be able
to offer the TiVo service in the future. Our ability to grow our TiVo-Owned subscriptions and related revenues could be harmed by competition from our
licensing partners, such as Comcast and Cox, who may be able to offer TiVo-branded DVR solutions to their customers at more attractive pricing then we
may be able to offer the TiVo service to our TiVo-Owned customers. Furthermore, if we are unable to differentiate the TiVo service from the TiVo-branded
DVR solutions offered by our licensing partners, customers who would have otherwise chosen the TiVo service may instead choose to purchase the TiVo-
branded DVR solution from our licensing partners. Additionally, to the extent that potential customers defer subscribing to the TiVo service in order to wait
for announced, but not yet deployed, TiVo-branded DVR solutions from our licensing partners, such as Comcast and Cox, the growth of our TiVo-Owned
subscriptions could be reduced. If the growth in our TiVo-Owned subscriptions is reduced, our business could be harmed.
We compete with other consumer electronics products and home entertainment services for consumer spending. DVRs and the TiVo service compete in
markets that are crowded with other consumer electronics products and home entertainment services. The competition for consumer spending is intense, and
many consumers on limited budgets may choose other products and services over ours. DVRs compete for consumer spending with products such as DVD
players, satellite television systems, personal computers, and video game consoles. The TiVo service competes with home entertainment services such as
cable and satellite television, movie rentals, pay-per-view, video on demand, and mail-order DVD services. See also "We face intense competition from a
number of sources, which may impair our revenues, increase our subscription acquisition cost, and hinder our ability to generate new subscriptions."
Many of these products or services have established markets, broad user bases, and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing devices and services have substantially greater brand recognition, market presence, distribution channels,
advertising and marketing budgets and promotional, and other strategic partners. Faced with this competition, we may be unable to effectively differentiate
our DVRs and the TiVo service from other consumer electronics devices or entertainment services.
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