TiVo 2008 Annual Report Download - page 29

Table of Contents
If there is increased use of switched digital video technologies to transmit television programs by cable operators (also known as switched
digital) in the future, the desirability and competitiveness of our current products could be reduced in which case our business would be harmed.
We rely on conditional access security cards supplied by cable operators called CableCARDs for certain types of our DVRs to receive encrypted digital
television signals without a cable operator supplied set-top box. These DVRs presently are limited to using CableCARDs to access digital cable, High
Definition, and premium cable channels like HBO that are delivered in a linear fashion where all programs are broadcast to all subscribers all the time. Certain
cable operators are beginning to test and deploy switched digital video technologies to transmit television programs in a non-linear fashion (switched digital)
only to subscribers who request to watch a particular program. Although cable operators have started to deploy a solution to enable our customers to receive
channels delivered with switched technologies (known as the Tuning Adapter), if this technology is not successful or in not adopted by our customers (due to
cost, complexity, or functionality), then the increased use of switched technologies and the continued inability of our products to receive switched cable
programming without a Tuning Adapter may reduce the desirability and competitiveness of our products and services and adversely affect sales of our TiVo-
Owned subscriptions in which case our business would be harmed.
Uncertainty and adverse changes in the economy could have an adverse impact on our business and operating results.
Uncertainty or adverse changes in the economy could lead to a significant decline in discretionary consumer spending, which, in turn, could result in a
decline in the demand for the TiVo service and TiVo-enabled DVRs. As a result of the recent national and global economic downturn, overall consumer
spending has declined. Retailers in North America appear to be taking a more conservative stance in ordering electronics inventory and consumers as well
appear to be taking a more conservative stance in discretionary purchases, including TiVo DVRs and service subscriptions. Any decrease in demand for our
products, particularly during the critical holiday selling season, could have an adverse impact on our operating results and financial condition. Uncertainty and
adverse changes in the economy could also increase the risk of losses on our investments, increase costs associated with developing and producing our
products, increase our churn rate per month, increase the cost and decrease the availability of potential sources of financing, and increase our exposure to
losses from bad debts, any of which could have an adverse impact on our financial condition and operating results.
Our business could be adversely impacted in the event of a natural disaster.
Our corporate headquarters is located in Alviso, California which is where the overwhelming majority of our employees work. Our primary servers are
located nearby in San Jose, California. Alviso and San Jose lay near the San Andreas Fault, among other known and unknown faults, a major source of
earthquake activity in California. In the event of an earthquake or similar natural disaster, our ability to continue operations could be adversely affected and
our business could be harmed.
Legislation, laws or regulations relating to environmental issues, employment matters, and unclaimed property may adversely impact our
business in the future.
It is possible that future proposed environmental regulations on consumer electronic devices, such as DVRs and set-top boxes, may regulate and
increase the production, manufacture, use, and disposal costs incurred by us and our customers. For example, the Energy Independence and Security Act of
2007 directs the Department of Energy to prescribe labeling or other disclosure requirements for the energy use of stand-alone digital video recorder boxes.
This and future energy regulations could potentially make it more costly for us to design, manufacture, and sell our DVRs to our customers thus harming the
growth of our business.
Additionally, as our business grows and we expand our employed and contracted work force, employment laws and regulations will have an increasing
impact on our ability to manage and grow our work-force. Regulations and laws relating to the status of contractors, classification and related benefits for
exempt and non-exempt employees all may adversely impact our business if we are unable to properly manage and comply with federal, state, and local laws.
Furthermore, as part of our regular business activities now, and in the past, we engage in the issuance of gift subscriptions and the marketing of rebate
offers related to the sale of our products and services. It is possible that money received by us for the sale of gift subscriptions or related to our past rebate
offers could be subject to state and federal escheat, or unclaimed property, laws in the future. If this were the case, our business could be adversely impacted.
If we fail to comply with the laws and regulations relating to the collection of sales tax and payment of income taxes in the various States in
which we do business, we could be exposed to unexpected costs, expenses, penalties, and fees as a result of our noncompliance in which case our
business could be harmed.
As our business grows and expands, we have started to do business in an increasing number of states nationally. By engaging in business activities in
these states, we become subject to their various laws and regulations, including requirements to collect sales tax from our sales within those states and the
payment of income taxes on revenue
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