TiVo 2006 Annual Report Download - page 26

Table of Contents
On March 7, 2007, we launched a joint entertainment offering with the Amazon Unbox service for the distribution of digital content directly to
broadband-connected TiVo DVRs. Our offering with Amazon Unbox involves no long-term commitments. We face competitive, technological, and financial
risks in our on-going provision of an entertainment offering involving the distribution of digital content with Amazon and others in the future, including
availability of premium content and speed and quality of the delivery of such content to TiVo DVRs. If we are unable to provide a competitive entertainment
offering with Amazon Unbox, on our own, or with another third party, the attractiveness of the TiVo service to new subscribers could be harmed and our
business could be adversely affected.
Our ability to retain our current customers may decrease in the future which could increase our TiVo-Owned subscription monthly churn rate
and could cause our revenues to suffer.
We believe factors such as increased competition in the DVR marketplace, changing television technologies such as the increasing penetration of high
definition and the use of switched technology to deliver encrypted digital television signals, increased price sensitivity in the consumer base, any deterioration
in the quality of our service, and product lifetime subscriptions no longer using our service may cause our TiVo-Owned subscription monthly churn rate to
increase. If we are unable to retain our subscriptions by limiting the factors that we believe increase subscription churn, our ability to grow our subscription
base could suffer and our revenues could be harmed.
If we fail to manage the growth and complexity of our activities, it could disrupt our business and impair our ability to generate revenues.
The growth in our subscription base and increasing complexity of our sources of other revenue have placed, and will continue to place, a significant
strain on our management, operational and financial resources and systems. Specific risks we face as our business expands include:
Any inability of our systems to accommodate our expected subscription growth, or any inability of our TiVo.com website to handle expected customer
traffic, may cause service interruptions or delay our introduction of new services and limit our ability to sell the TiVo service and TiVo-enabled DVRs. We
internally developed many of the systems we use to provide the TiVo service and perform other processing functions. The ability of these systems to scale as
we add new subscriptions is unproven. We must continually improve these systems to accommodate subscription growth and to add features and functionality
to the TiVo service. Our inability to add software and hardware or to upgrade our technology, systems or network infrastructure could adversely affect our
business, cause service interruptions or delay the introduction of new services. Our inability to manage customer traffic and sales volume through our
TiVo.com website could limit our ability to sell the TiVo service and TiVo-enabled DVRs in the future. If our website were to become unavailable for a
significant amount of time, our ability to provide certain features of the TiVo service and our ability to service customers and sell the TiVo service and TiVo-
enabled DVRs would be harmed.
We will need to provide acceptable customer support, and any inability to do so would harm our brand and ability to retain current subscriptions and
generate new subscriptions. Our ability to increase sales, retain current and future subscriptions and strengthen our brand will depend in part upon the quality
of our customer support operations. Some customers require significant support when installing the DVR and becoming acquainted with the features and
functionality of the TiVo service. We have limited experience with widespread deployment of our products and services to a diverse customer base, and we
may not have adequate personnel to provide the levels of support that our customers require. In addition, we have entered into agreements with third parties to
provide this support and will rely on them for a substantial portion of our customer support functions. Our failure to provide adequate customer support for the
TiVo service and DVR will damage our reputation in the digital video recorder and consumer electronics marketplace and strain our relationships with
customers and consumer electronics manufacturers. This could prevent us from gaining new or retaining existing subscriptions and could cause harm to our
reputation and brand.
We will need to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules
governing revenue and expense
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