TiVo 2003 Annual Report Download - page 5

Table of Contents
show. Unlike with a VCR, consumers accomplish this without entering specialized codes, setting a timer, or using a videotape. Currently available TiVo-
enabled DVRs can store up to 140 hours of television programming, significantly more than the eight-hour capacity of most VCRs.
Pause, Rewind, and Fast-forward Functionality. Using a TiVo-enabled DVR, consumers can pause, rewind, and fast-forward live television. Unlike
with a VCR, consumers can playback a show from its beginning while it is in the middle of being recorded, and consumers can play back a previously
recorded show while recording another show. TiVo-enabled DVRs constantly record a buffer of up to 30 minutes of programming, so consumers who turn on
the TV in the middle of an interesting program can often replay it from the beginning.
Personalization and Suggestions. The TiVo service allows consumers to create preferences for recording of particular shows or categories of interest.
Using the "Thumbs Up" and "Thumbs Down" buttons on the TiVo remote control, consumers can express their preferences for shows. Based on the
consumer's stored individual preferences, the TiVo service recommends programming that the consumer is likely to enjoy. When storage space is available,
the TiVo service automatically records the suggested programming.
Specialized Content and Innovative Advertising. We distribute video content designed to entertain consumers while providing a promotional vehicle
for our advertising and promotion customers. For example, movie studios pay us to deliver previews of upcoming films, consumer product companies pay us
to market their products, and television networks pay us to promote upcoming programs. In the future, content providers could use the TiVo service to offer
consumers special programming and pay-per-view packages such as movies, sporting events, and television shows.
Our Strategy
Our goal is to generate significant recurring revenues through the deployment of our technology to television households worldwide. The key elements
of our strategy are:
Offer an Increasingly Valuable Service to Attract New Subscribers. Our goal is to lead the market with innovations that expand the value and
potential of TiVo's subscription services. We plan to continue to make TiVo an increasingly compelling home entertainment service for both current and
potential customers. For example, in April 2003, we launched a package of networked features that allow consumers to enjoy video and photos on their
televisions and music through their home stereos. We intend to deliver a new service release during the fiscal year ending January 31, 2005, called
"TiVoToGo". This feature will enable users to move their favorite programs stored on a TiVo-enabled DVR to a laptop for viewing on the road, or to any PC.
Increase Average Revenue Per User by Selling Advertising and Audience Measurement Services. As our subscription base has grown, we have been
able to offer robust advertising and audience measurement capabilities to programmers and advertisers. We plan to continue developing and enhancing these
offerings, which take advantage of the unique capabilities of the TiVo service. For example, we have recently completed promotional and audience
measurement work for Universal Pictures, General Motors, American Honda Motor Corp., Nissan Motor Corp. and the Coca Cola Company. In February
2004, we announced that we had signed an agreement with Nielsen Media Research to deliver information on DVR usage to the television industry.
Build a High Volume Subscriber Acquisition Channel Through Arrangements with Service Providers. We are pursuing relationships with satellite
and cable operators to embed the TiVo service into their offerings. Our relationship with DIRECTV is the first of these arrangements. We believe this strategy
will be successful because of the unique abilities of TiVo's technology and services to reduce subscriber churn, increase revenue from TiVo-enabled DVR
services, increase buy rates for programming packages and pay-per-view content, and attract new subscribers.
Integrate Our Technology to Accelerate Platform Deployment. Our strategy focuses on creating, developing, and deploying DVR standards in order to
promote mass deployment of devices capable of running the TiVo service. We work with leading consumer electronics manufacturers to introduce products
that incorporate our technology, including DVD players and recorders, satellite television receivers, and standalone DVRs. Consumers will be able to choose
from over a dozen TiVo-enabled products from industry leaders including Pioneer, Toshiba, DIRECTV, Hughes, Humax, Philips, RCA, and Samsung this
year.
Drive Down the Manufacturing Cost of a TiVo-Enabled DVR. We believe that the high cost of DVR hardware has been an obstacle to mass adoption.
As a result, we have made cost reduction a major focus of our engineering and development efforts. We believe these efforts will lead to a reduction in the
average retail price of DVRs for consumers and serve as an important catalyst for subscription growth.
4