TiVo 2007 Annual Report Download - page 11

Table of Contents
which rights extend only to Comcast Corporation, its affiliates, and certain of its vendors and suppliers with respect to Comcast products and services. Such
non-exclusive, non-transferable license to the Company's intellectual property will, under certain circumstances, continue after the termination of this
agreement. In addition, Comcast is entitled to certain most favored customer terms as compared with other multi-channel video distributors who license
certain TiVo technology. Pursuant to the terms of this agreement, Comcast has the right to terminate the agreement in the event the Company is the subject of
certain change of control transactions involving any of certain specified companies. The TiVo service software solution has launched in its initial market.
Comcast accepted the TiVo advertising management system on March 31, 2008. Deployment of the advertising management system is expected in the future
though no date has been set.
DIRECTV. DIRECTV is the largest provider of satellite television in the U.S. We have had a longstanding relationship with DIRECTV from 1999 to
the present to provide the TiVo service to its customer base. As of January 31, 2008, we have approximately 2.2 million subscriptions through this
relationship. In the fiscal year ended January 31, 2008, we reported $28.3 million of DIRECTV-related revenues, which include subscription revenues,
DIRECTV-related advertising revenues, and revenues from engineering services provided to DIRECTV. This represents 10% of our total net revenues.
DIRECTV currently pays us a recurring monthly per-household fee for access to the technology needed to offer its customers the TiVo service. We
incur limited recurring expenses. We also recognize revenue from DIRECTV for engineering services work on integrated DIRECTV satellite receivers with
TiVo service and the related service infrastructure. We are continuing to provide DIRECTV with engineering services related to currently installed hardware
and updates and feature enhancements for existing platforms and customers.
Additionally, DIRECTV distributes features that enable advanced automatic recording capabilities and the delivery of promotional video to DIRECTV
receivers with TiVo service. Subject to certain restrictions and exceptions, both DIRECTV and TiVo may sell advertising and audience research measurement
data, with each party retaining all their respective revenues generated from such sales.
DIRECTV has launched a competing DVR by NDS to compete with DIRECTV receivers with TiVo service. The new DIRECTV DVRs include
software by both DIRECTV and NDS and are not manufactured under license from TiVo. DIRECTV has stated that its core initiatives and new customer
acquisition efforts will focus on its new DVR from NDS and has begun to add high definition programming in a format that is not compatible with the
existing TiVo-enabled high definition DVRs previously distributed by DIRECTV. As a result, we have seen a reduction in the number of DIRECTV receivers
with TiVo service subscriptions, a trend that we expect to continue.
On April 7, 2006, we entered into the Seventh Amendment of our Development Agreement, dated as of February 15, 2002, with DIRECTV, Inc. Under
this amendment, which amends the expiration date of the Development Agreement from February 15, 2007, to February 15, 2010, we will continue to provide
maintenance and support for DIRECTV receivers with TiVo service through the expiration date of the Development Agreement. However, DIRECTV
currently no longer has the right to continue to distribute DIRECTV receivers with TiVo service. Further, we agreed that neither party would assert its patents
against the other party with respect to each company's products and services deployed prior to the expiration of the agreement, subject to limited exceptions.
DIRECTV will continue to pay us a monthly fee for each household using DIRECTV receivers with TiVo service similar to the amount paid by DIRECTV
for households with DIRECTV receivers with TiVo service deployed since February 15, 2002, subject to a monthly minimum payment by DIRECTV. Each
year we defer a portion of these fees as a non-refundable credit to fund mutually agreed annual development, maintenance, and support services. During the
fiscal year ended January 31, 2008 DIRECTV had available $2.8 million in deferred fees, related to the period of February 1, 2006 through January 31, 2007.
These fees were available to DIRECTV to use for development work during the fiscal year ended January 31, 2008. As specified in connection with our
Eighth Amendment of our Development Agreement entered into as of July 25, 2007, DIRECTV utilized $1.7 million for development work, to enhance their
subscriber's TiVo user experience, the remaining $1.1 million which remained unused on January 31, 2008 was recognized as service revenues. On April 7,
2006, we also entered into the First Amendment of our Amended and Restated Services Agreement, dated as of March 31, 2005, with DIRECTV. This
amendment extends the term of the Services Agreement until February 15, 2010, and provides DIRECTV with the ability to obtain additional technical
support and training for its use of advertising-related software tools with DIRECTV receivers with TiVo service.
Cox. On August 22, 2006, we entered into a non-exclusive licensing and distribution agreement with Cox Communications otherwise referred to as
Cox). Pursuant to the agreement, we have agreed to develop a TiVo-branded software solution for deployment on Cox's DVR platforms, which would enable
Cox to offer our DVR and advertising software to its customers and advertising clients respectively. In addition, we have agreed to develop an advertising
management system for deployment on Cox platforms to enable the provision of local and national advertising to Cox subscribers.
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