TiVo 2013 Annual Report Download - page 23

Table of Contents


We have previously launched access to the entertainment offerings of Amazon Video on Demand service, Netflix, Hulu Plus, Pandora,
and others for the distribution of digital content directly to broadband-connected TiVo devices. Our offerings with Amazon Video On Demand,
Netflix, Hulu Plus, Pandora, and others typically involve no significant long-term commitments. We face competitive, technological, and
business risks in our ongoing provision of an entertainment offering involving the distribution of digital content through broadband to
consumer televisions with Amazon, Netflix, and others, including the availability of premium and high-definition content, as well as the
speed and quality of the delivery of such content to TiVo devices. For instance, we face increased competition from a growing number of
broadband-enabled devices from providers such as Roku, AppleTV, and Google that provide broadband delivered digital content directly to a
consumer's television connected to such a device. Additionally, we face competition from online content providers and other PC software
providers who deliver digital content directly to a consumer's personal computer, which in some cases may then be viewed on a consumer's
television. If we are unable to provide a competitive entertainment offering with Amazon Video On Demand, Netflix, Hulu Plus, Pandora,
and our other partners, on our own, or an equivalent offering with other third-parties, the attractiveness of the TiVo service to new subscribers
would be harmed as consumers increasingly look for new ways to receive and view digital content and our ability to retain and attract
subscribers would be harmed.


We believe factors such as increased competition in the DVR marketplace, failure by us to continue to innovate and deliver new features on
current deployed DVRs as well as deliver new DVR models in the future, changing television technologies such as the increasing
penetration of high definition, the use of switched digital technology to deliver encrypted digital television signals, and the failure of cable
operators in the future to transmit both an analog and digital transmission thus impacting our Series2 DVRs, 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 increase
subscription churn, our ability to grow our subscription base could suffer and our revenues would be harmed.



We offer a product lifetime subscription option to the TiVo service that commits us to provide the TiVo service for as long as the DVR is in
service. We receive product lifetime subscription fees for the TiVo service in advance and amortize these fees as subscription revenue over 66
months for product lifetime subscriptions which is our current estimate of the service life of the DVR. If these product lifetime subscriptions
use the DVR for longer than anticipated, we will incur costs such as telecommunications and customer support costs without a
corresponding subscription revenue stream and therefore will be required to fund ongoing costs of service from other sources, such as
advertising revenue. Additionally, if these product lifetime subscriptions use the DVR for longer than the period in which we recognize
revenue, our average revenue per subscription (ARPU) for our TiVo-Owned subscriptions will be negatively impacted as we continue to
count these customers as subscriptions without corresponding subscription revenue thus lowering our average revenues across our TiVo-
Owned subscription base. As of January 31, 2014, we had approximately 171,000 product lifetime subscriptions that had exceeded the 66
month period we use to recognize product lifetime subscription revenues and had made contact with the TiVo service within the prior six-
month period. We will continue to monitor the useful life of a TiVo-enabled DVR and the impact of higher churn, increased competition, and
compatibility of our existing TiVo units with high-definition programming. Future results will allow us to determine if our useful life is shorter
or longer than currently estimated, in which case we may revise the estimated life and we would recognize revenues from this source over a
shorter or longer period.
 .
DVR services, in general, and TiVo, specifically, compete with other advertising media such as print, radio, television, Internet, VOD, and
other emerging advertising platforms for a share of advertisers' total advertising budgets. If advertisers do not perceive digital video recording
services, in general, and TiVo specifically, as an effective advertising medium, they may be reluctant to advertise on the TiVo service. In
addition, advertisers may
22