TiVo 2005 Annual Report Download - page 5

Download and view the complete annual report

Please find page 5 of the 2005 TiVo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 117

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

Table of Contents
PART I
ITEM 1. BUSINESS.
General Development of Business
TiVo is a leading provider of technology and services for digital video recorders ("DVR"). The subscription-based TiVo service improves home
entertainment by providing consumers with an easy way to record, watch, and control television with such features as Season Pass recordings, WishList®
searches, TiVoToGo recordings, and online scheduling. As of January 31, 2006, there were approximately 4.4 million subscriptions to the TiVo service. We
distribute the TiVo service through agreements with leading television service providers such as currently DIRECTV and in the future, Comcast, as well as
through consumer electronics retailers. We also provide innovative marketing solutions for the television industry, including a unique platform for advertisers
and audience research.
We currently derive revenues from three sources:
• Consumers. Our primary source of revenues is from consumers, who subscribe directly to the TiVo service and pay us monthly fees of up to
$19.95 per month. We also offer consumers the option to prepay for one to three years of TiVo service at prices ranging from $155.40 to $469. We
reach consumers in part through distribution relationships with major retailers and also through our on-line store at TiVo.com.
• Television service providers. We also work with DIRECTV, a satellite television provider, who largely pays us recurring monthly fees in order to
offer the TiVo service to its subscribers. We receive fees for licensing and professional services from this and other customers.
• Advertisers. We work directly with major television advertisers and agencies to offer a variety of solutions for the television advertising market.
These include short- and long-form video advertising, limited audience measurement and research, lead generation, and commerce. Some of our
key clients include General Motors, IRI, Nissan Motor Corp., ING, Earthlink, Visa, Novartis, Nautilus, and Warner Brothers.
We continue to be subject to a number of risks, including delays in product and service developments; competitive service offerings; lack of market
acceptance; and uncertainty of future profitability; dependence on third parties for manufacturing, marketing, and sales support; intellectual property claims
against us; and our ability to sustain or grow our subscription base. We conduct our operations through one reportable segment. We anticipate that our
business will continue to be seasonal and expect to generate a significant number of our annual new subscriptions during and immediately after the holiday
shopping season. To date, we have incurred significant losses and have had substantial negative cash flow. During the fiscal year ended January 31, 2006, we
generated cash flow from operations for the first time in our history and had net losses of $34.4 million. As of January 31, 2006, we had an accumulated
deficit of $691.5 million.
Industry Background
Consumer Demand is Driving Widespread Adoption of DVR Technology. We believe DVRs offer a compelling value proposition to consumers by
providing the means to effectively sort through, select from, and organize the growing volume of broadcast video content. DVR technology also gives
consumers the ability to easily fast forward, pause, and rewind recorded broadcast video content which should result in increased demand for DVR
technology.
Television Distributors See DVR Technology as a Competitive Asset. Nearly all of the major television distributors in the United States including
Comcast, DIRECTV, EchoStar, Time-Warner Cable, and others, are offering DVR technology to their customers and have indicated they consider DVR
technology a competitive tool. For example, major satellite companies have used TiVo and other DVR technologies when advertising against their cable
company competition. These operators are looking for ways to more effectively attract consumers to their own offerings.
DVR is Changing the Television Advertising Industry. The proliferation of DVRs, and their ability to easily skip through television content, is
requiring television advertisers to evaluate new and different ways to reach out to consumers.
2