TiVo 2006 Annual Report Download - page 11

Table of Contents
We will have the continuing right to sell certain types of advertising in connection with our service offered through Cox. We will also have a right to sell
certain types of advertising on other Cox DVR set-top boxes enabled with the advertising management system. As part of the agreement, Cox is receiving a
non-exclusive, non-transferable license to specific TiVo intellectual property to deploy the TiVo service software solution and advertising management
system, including certain trademark branding rights. Cox will also reimburse us for the cost of certain third-party license fees. In addition, Cox may be
entitled to certain most favored customer terms if we enter into future agreements with multi-channel video distributors whose commitment to deploy our
DVRs and advertising software is less than Cox's commitment. Cox has the right to terminate the agreement in the event we are the subject of certain change
of control transactions involving any of certain specified companies. In the fiscal year ended January 31, 2007, we had not yet begun to recognize revenues or
expenses under this agreement.
Hardware Manufacturers. Several consumer electronics manufacturers, including Toshiba, Humax, and Pioneer, have manufactured and distributed
TiVo-enabled standalone DVRs during the last three years. Each manufacturer was responsible for the manufacturing and distribution of its branded DVRs
and DVD recorders. We are solely responsible for the activation of the TiVo service on these DVRs or DVD recorders if the purchaser of the unit decides to
purchase a subscription to the TiVo service. A TiVo-enabled DVR without a subscription to the TiVo service has almost no functionality beyond the ability to
pause, rewind, and fast-forward through up to thirty minutes of live television. In the case of DVD recorders manufactured by Toshiba and Pioneer, we are
also responsible for providing a version of the TiVo service, called TiVo Basic, for no additional fee that provides three days worth of program guide data, but
otherwise limited recording capability. We also engage contract manufacturers to build TiVo-enabled standalone DVRs. We distribute these DVRs, selling
them both directly to consumers and to major retailers. The table below shows the breakdown of DVRs compatible with the TiVo service that were
manufactured during the fiscal years ended January 31, 2007, 2006, and 2005. The table below does not include TiVo-enabled DVRs integrated with satellite
set-top boxes of DIRECTV which are manufactured by DIRECTV and its manufacturers.
Fiscal Year Ended January 31,
TiVo-Enabled DVRs Manufactured by: 2007 2006 2005
Hardware Manufacturers 1% 12% 64%
Contract Manufacturers for TiVo 99% 88% 34%
Licensing and Engineering Professional Services Customers 0% 0% 2%
Total Manufactured TiVo-enabled DVRs 100% 100% 100%
TGC, Inc. On August 9, 2004, we acquired a minority interest in TGC, Inc. ("TGC"), a newly formed independent entity. In exchange for our interest
in TGC, we granted TGC a license to certain aspects of our technology for use in The People's Republic of China (China), Singapore, Hong Kong, Macau and
The Republic of China (Taiwan). Through TGC, we have gained access to high quality engineering resources for the design and development of additional
digital video recorder platforms. TGC engages in design, development, and licensing activities related to digital video recorder platforms and technology. In
fiscal year 2007, TGC performed design and development activities related to a potential TiVo product for the U.S. market. In December 2005 TGC launched
a DVR product that includes TiVo technology and branding in Taiwan. In mid-2006, TGC launched a DVR product that includes TiVo technology and
branding in China. We expect that TGC will pursue additional opportunities to market TiVo technology in Singapore, Hong Kong, and Macau. TGC's
technology license from TiVo is exclusive for the first five years and non-exclusive to TGC for a perpetual period afterwards. Subject to certain terms and
conditions, this license grants TGC limited access to portions of TiVo's source code and provides for both parties to exchange improvements to that code
during the first five years. We will be entitled to royalty payments from TGC in limited circumstances. In addition, TGC has agreed not to market, without our
prior consent, any DVR products or DVR services that do not support the TiVo service outside of China, Singapore, Hong Kong, Macau and Taiwan. In the
United States, TGC may offer DVR products that support the U.S. TiVo service to TiVo, authorized TiVo licensees, or with TiVo's prior approval, retail
distributors.
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