TiVo 2008 Annual Report Download - page 51

Table of Contents
Results of Operations
Net Revenues. Our net revenues for the fiscal years ended January 31, 2009, 2008, and 2007 as a percentage of total net revenues were as follows:
Fiscal Year Ended January 31,
2009 2008 2007
(In thousands, except percentages)
Service revenues $ 188,408 76% $ 211,496 78% $ 198,924 77%
Technology revenues 20,126 8% 19,382 7% 18,409 7%
Hardware revenues 41,133 16% 41,798 15% 41,588 16%
Net revenues $ 249,667 100% $ 272,676 100% $ 258,921 100%
Change from same prior year period -8% 5% 31%
Service Revenues. The decrease in Service revenues of $23.1 million in fiscal year 2009 from fiscal year 2008 was due to declines in both MSOs/
Broadcaster revenue and TiVo-owned service revenue. The decline of $5.0 million in MSOs/Broadcaster revenue is primarily because DIRECTV will not
offer new TiVo service subscriptions to its customers until the launch of the new High Definition platform and therefore, we continue to experience
cancellations of our existing DIRECTV subscription base. Also, unlike in fiscal year 2008, in the fiscal year ended January 31, 2009 we have not recognized
as revenue $2.3 million of previously deferred DIRECTV revenues which would have expired unused. We have an understanding with DIRECTV that these
deferred revenues will be used to fund the development of the TiVo service for DIRECTV's broadband-enabled HD DVR platform.
TiVo-owned service revenues decreased by $18.1 million primarily due to lower TiVo-Owned product lifetime service revenue, resulting from the
number of fully-amortized product lifetime subscriptions which are no longer generating revenue, increasing to 225,000 at January 31, 2009 from 175,000 at
January 31, 2008, combined with an increase in the amortization period we use to recognize revenues from the sale of our product lifetime service
subscriptions, as described in our Critical Accounting Estimates under "Recognition Period for Product Lifetime Subscriptions Revenues". Further
contributing to the decrease was a decline in the size of our cumulative subscription base.
The increase in Service revenues from fiscal year 2007 to 2008 was due to net additions of TiVo-Owned subscriptions, which were generally added at a
higher service plan rates during fiscal years 2008 and 2007. Additionally, we recognized $1.1 million of DIRECTV revenues deferred from the fiscal year
ended January 31, 2007. These fees were previously deferred for DIRECTV's use on development work to enhance their subscriber's TiVo user experience,
but expired unused on January 31, 2008. These increases were offset by MSOs/Broadcasters-related service revenues which decreased from the prior year by
approximately $4.8 million due primarily to churn in our DIRECTV subscription base, which is a trend we expect to continue. The increase in service revenue
was also partially offset by our decision to extend the period we use to recognize product lifetime subscriptions, as described in our Critical Accounting
Estimates under "Recognition Period for Product Lifetime Subscriptions Revenues". This change resulted in a reduction of service revenues of $2.5 million
for the quarter and fiscal year ended January 31, 2008.
Technology Revenues. Technology revenues for the fiscal year ended January 31, 2009 were 4% higher than the technology revenues in the prior fiscal
year largely due to new development work primarily related to our international projects combined with larger Comcast technology revenues.
Technology revenues for the fiscal year ended January 31, 2008 were slightly higher than the same prior year period largely due to new development
work primarily related to our international projects. However, these revenues were partially offset by lower Comcast technology revenues, as compared to the
same prior year period. In the fiscal year ended January 31, 2007, Comcast and TiVo signed the final statements of work resulting in the recognition of $4.6
million of the revenues for engineering services related to services performed in fiscal year 2006.
Hardware Revenues. Hardware revenues, net of allowance for sales returns and net of rebates for the fiscal year ended January 31, 2009 remained
relatively flat at $41.1 million, as compared to $41.8 million in the same prior year period. For the fiscal year ended January 31, 2009, we sold approximately
71,000 fewer TiVo DVR's than in the same prior year period. These DVRs had a higher average selling price due to the introduction of our TiVo HD DVR,
which was not available until the end of the quarter ended July 31, 2007. Additionally, our rebates and revenue share costs, which are netted against our
hardware revenues, declined during the year as we currently offer no rebates on our TiVo HD DVR and we terminated our other rebate programs on
August 30, 2008. Although our hardware revenues have improved we continue to offer revenue share and other hardware subsidies to certain retailers, while
our direct sales involve limited or no subsidies.
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