TiVo 2005 Annual Report Download - page 23

Table of Contents
Consumers may not be willing to pay for our products and services. Many of our customers already pay monthly fees for cable or satellite television.
We must convince these consumers to pay an additional subscription fee to receive the TiVo service. Consumers may perceive the TiVo service and related
DVR as too expensive. In order to continue to grow our subscription base, we may need to reduce our costs and lower the price of our DVR. The availability
of competing services that do not require subscription fees or that are enabled by low or no cost DVRs will harm our ability to effectively attract and retain
subscriptions. In addition, DVRs that enable the TiVo service can be used to pause, rewind, and fast-forward through live shows without an active
subscription to the TiVo service. If a significant number of purchasers of the TiVo-enabled DVRs use these devices without subscribing to the TiVo service or
cancel their existing subscriptions, our revenue growth will decline and we may not achieve profitability.
Growth in our TiVo-Owned subscriptions and related revenues could be harmed by competitive offerings by DIRECTV and Comcast who also would be
able to offer the TiVo service. Our ability to grow our TiVo-Owned subscriptions and related revenues could be harmed by competition from our licensing
partners, such as DIRECTV and Comcast, who may be able to offer TiVo-branded DVR solutions to their customers at more attractive pricing then we may
be able to offer the TiVo service to our TiVo-Owned customers. Furthermore, if we are unable to differentiate the TiVo service from the TiVo-branded DVR
solutions offered by our licensing partners, customers who would have otherwise chosen the TiVo service may instead choose to purchase the TiVo-branded
DVR solution from our licensing partners. Additionally, to the extent that potential customers defer subscribing to the TiVo service in order to wait for future
announced, but not deployed, TiVo-branded DVR solutions from our licensing partners, such as Comcast, the growth of our TiVo-Owned subscriptions could
be reduced. If the growth in our TiVo-Owned subscriptions is reduced, our business could be harmed.
We compete with other consumer electronics products and home entertainment services for consumer spending. DVRs and the TiVo service compete in
markets that are crowded with other consumer electronics products and home entertainment services. The competition for consumer spending is intense, and
many consumers on limited budgets may choose other products and services over ours. DVRs compete for consumer spending with products such as DVD
players, satellite television systems, personal computers, and video game consoles. The TiVo service competes with home entertainment services such as
cable and satellite television, movie rentals, pay-per-view, and video on demand. See "We face intense competition from a number of sources, which may
impair our revenues, increase our subscription acquisition cost, and hinder our ability to generate new subscriptions."
Many of these products or services have established markets, broad user bases, and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing devices and services have substantially greater brand recognition, market presence, distribution channels,
advertising and marketing budgets and promotional, and other strategic partners. Faced with this competition, we may be unable to effectively differentiate
the DVR or the TiVo service from other consumer electronics devices or entertainment services.
We compete with digital cable and satellite DVRs. Cable and satellite service providers are accelerating deployment of integrated cable and satellite
receivers with DVRs that bundle basic DVR services with other digital services and do not require their customers to purchase hardware. If we are not able to
enter into agreements with these service providers to embed the TiVo service into their offerings, our ability to attract their subscribers to the TiVo service
would be limited and our business, financial condition and results of operations could be harmed.
It is expensive to establish a strong brand. We believe that establishing and strengthening the TiVo brand is critical to achieving widespread acceptance
of our products and services and to establishing key strategic relationships. The importance of brand recognition will increase as current and potential
competitors enter the digital video recorder market with competing products and services. Our ability to promote and position our brand depends largely on
the success of our marketing efforts and our ability to provide high quality services and customer support. These activities are expensive and we may not
generate a corresponding increase in subscriptions or revenues to justify these costs. If we fail to establish and maintain our brand, or if our brand value is
damaged or diluted, we may be unable to attract subscriptions and effectively compete in the digital video recorder market.
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