TiVo 2005 Annual Report Download - page 22

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Table of Contents
Digital video recorders could be the subject of future regulation relating to copyright law or evolving industry standards and practices that
could adversely impact our business.
In the future, copyright statutes or case law could be changed to adversely impact our business by restricting the ability of consumers to temporally or
spatially shift copyrighted materials for their own personal use. Our business could be harmed as a result. In addition, we are aware that some media
companies may attempt to form organizations to develop standards and practices in the digital video recorder industry. These organizations or individual
media companies may attempt to require companies in the digital video recorder industry to obtain copyright or other licenses. Lawsuits or other actions taken
by these types of organizations or companies could make it more difficult for us to introduce new services, delay widespread consumer acceptance of our
products and services, restrict our use of some television content, increase our costs, and adversely affect our business.
We are dependent on our relationship with DIRECTV for a significant part of our overall subscription growth.
A significant part of our subscription growth results from our relationship with DIRECTV which will likely be lost in the future due to DIRECTV's
support of a competing DVR by NDS. DIRECTV, a company controlled by News Corp., has introduced an alternative DVR technology platform, created by
NDS, which is also majority-owned by News Corp. DIRECTV has stated that its core initiatives and new customer acquisition efforts will focus on its new
DVR from NDS. As a consequence, we expect that the number of DIRECTV customers with TiVo service will decline in the future resulting in the loss of
future high margin revenues from these DIRECTV customers with TiVo service.
It may be difficult for us or investors to evaluate trends and other factors that affect our business due to the relatively new and highly
competitive nature of the DVR services product category combined with our limited operating history.
DVR services are a relatively new product category for consumers, and it may be difficult to predict the future growth rate, if any, or size of the market
for our products and services. We may be unable to accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences
or competitive factors facing us. As a result, we may be unable to make accurate financial forecasts and adjust our spending in a timely manner to compensate
for any unexpected revenue shortfall. Such inability could cause our net losses in a given quarter to be greater than expected, which could cause the price of
our stock to decline. Furthermore, we were incorporated in August 1997, and we have been providing subscription services only since March 31, 1999. Prior
to that time, our operations consisted primarily of research and development efforts. As a result of our limited operating history, our historical financial and
operating information is of limited value in evaluating our future operating results. It may be difficult to predict accurately our future revenues, costs of
revenues, expenses, or results of operations. In addition, any evaluation of our business must be made in light of the risks and difficulties encountered by
companies offering products or services in new and rapidly evolving markets.
We face a number of challenges in the sale and marketing of the TiVo service and products that enable the TiVo service.
Our success depends upon the successful retail marketing of the TiVo service and related DVRs, which began in the third quarter of calendar year 1999.
Many consumers are not aware of the benefits of our products. DVR products and services represent a relatively new consumer electronics category.
Retailers, consumers, and potential partners may perceive little or no benefit from digital video recorder products and services. We have only been providing
the TiVo service since 1999. Many consumers are not aware of its benefits, and therefore may not value the TiVo service and products that enable the TiVo
service. We will need to devote a substantial amount of time and resources to educate consumers and promote our products in order to increase our
subscriptions. We cannot be sure that a broad base of consumers will ultimately subscribe to the TiVo service or purchase the products that enable the TiVo
service.
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