TiVo 2006 Annual Report Download - page 48

Table of Contents
product lifetime subscription for general sale, under which consumers could purchase a subscription that is valid for the lifetime of a particular DVR. We
count these as subscriptions until both of the following conditions are met: (i) the four-year period we use to recognize lifetime subscription revenues ends,
and (ii) the related DVR has not made contact to the TiVo service within the prior six-month period. Lifetime subscriptions past the four-year mark which
have not called into the TiVo service for six months are not counted in this total. We are not aware of any uniform standards for defining subscriptions and
caution that our presentation may not be consistent with that of other companies. During the first quarter of fiscal year 2007, we discontinued general sale of
the product lifetime service option.
TiVo-Owned subscription net additions increased by 235,000 subscriptions, bringing the TiVo-Owned installed subscription base to 1.7 million
subscriptions for the fiscal year ended January 31, 2007. TiVo-Owned subscription net additions for the fiscal year ended January 31, 2007 decreased by
115,000 compared to the same prior fiscal year period we believe, largely due to an increase in churn resulting from a larger subscription base and because of
increased competition from DVRs distributed by cable and satellite providers, including DIRECTV's non-TiVo products, and the increasing importance of
high definition television. The percent of cumulative TiVo-Owned subscriptions on a monthly or prepay plan increased, by 7% to 58% during the quarter
ended January 31, 2007, as compared to the same prior-year period. DIRECTV installed subscription base decreased by 155,000 subscriptions to 2.7 million
subscriptions as of January 31, 2007 as compared to the same prior year period. This decrease is due to DIRECTV's promotion of a competing DVR service
from NDS.
As of January 31, 2007, approximately 165,000 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, such TiVo product lifetime subscriptions represent
approximately 23% of our cumulative lifetime subscriptions as compared to 13% for the fiscal year ended January 31, 2006. We continue to incur costs of
services for these subscriptions without recognizing corresponding subscription revenues.
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 such as high definition
television recording capabilities, for our primary product offerings, 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.
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