TiVo 2005 Annual Report Download - page 45

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Table of Contents
Fiscal Year Ended January 31,
2006 2005 2004
Subscription Acquisition Costs
Sales and marketing expenses $ 35,047 $ 37,367 $ 18,947
Rebates, revenue share, and other payments to channel 47,027 54,696 9,159
Hardware revenues (72,093) (111,275) (72,882)
Cost of hardware revenues 84,216 120,323 74,836
Total Acquisition Costs 94,197 101,111 30,060
TiVo-Owned Subscription Gross Additions 494 555 282
Subscription Acquisition Costs (SAC) $ 191 $ 182 $ 106
During the twelve months ended January 31, 2006, our total acquisition costs were $94.2 million, and SAC was $191. Comparatively, total acquisition
costs for the twelve months ended January 31, 2005 and 2004 were $101.1 million and $30.1 million, respectively and SAC was $182 and $106, respectively.
SAC increased by $9 or 5% for the twelve months ended January 31, 2006 compared to the prior-year period due primarily to increased expenses related to
rebates, revenue share, and other payments to channel.
As a result of the seasonal nature of our subscription growth, SAC varies significantly during the year. Management primarily reviews this metric on an
annual basis due to the timing difference between our recognition of promotional program expense and the subsequent addition of the related subscription
acquisition. For example, we have historically incurred increased sales and marketing expense during our third quarter in anticipation of new subscriptions
that may be added during the fourth quarter and in subsequent periods in addition to those added during the third quarter.
Average Revenue Per Subscription or ARPU. Management reviews this metric, and believes it may be useful to investors, in order to evaluate the
potential of our subscription base to generate revenues from a variety of sources, including subscription fees, advertising, and audience measurement research.
ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues, and as a result, you should not use ARPU as a
substitute for measures of financial performance calculated in accordance with GAAP. Management believes it is useful to consider this metric excluding the
costs associated with rebates, revenue share and other payments to channel because of the discretionary nature of these expenses and because management
believes these expenses are more appropriately monitored as part of SAC. We are not aware of any uniform standards for calculating ARPU and caution that
our presentation may not be consistent with that of other companies.
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