TiVo 2007 Annual Report Download - page 44

Table of Contents
We define a "subscription" as a contract referencing a TiVo-enabled DVR for which (i) a consumer has committed to pay for the TiVo service and
(ii) service is not canceled. We have from time-to-time offered a product lifetime subscription for general sale, under which consumers could purchase a
subscription that is valid for the lifetime of a particular DVR. We count these as subscriptions until both of the following conditions are met: (i) the period we
use to recognize product lifetime subscription revenues ends; and (ii) the related DVR has not made contact to the TiVo service within the prior six-month
period. Product lifetime subscriptions past this period which have not called into the TiVo service for six months are not counted in this total. During the
quarter ended April 30, 2006, we discontinued general sale of the product lifetime service option. During the quarter ended January 31, 2008, we began
offering product lifetime service subscriptions only to existing customers. Effective November 1, 2007, we have extended the period we use to recognize
product lifetime subscription revenues from 48 months to 54 months for product lifetime subscriptions acquired on or before October 31, 2007. Additionally,
we also increased the amortization period to 60 months for new product lifetime subscriptions acquired on or after November 1, 2007 which are offered on a
limited basis and primarily related to the TiVo HD DVR. Refer to Critical Accounting Estimates "Recognition Period for Product Lifetime Subscriptions
Revenues". We are not aware of any uniform standards for defining subscriptions and caution that our presentation may not be consistent with that of other
companies. Additionally, the subscription fees that some of our MSO/Broadcasters pay us may be based upon a specific contractual definition of a subscriber
or subscription which may not be consistent with how we define a subscription for our reporting purposes.
TiVo-Owned subscription net additions were 19,000 subscriptions slightly increasing the TiVo-Owned installed subscription base to 1.7 million
subscriptions for the fiscal year ended January 31, 2008. TiVo-Owned subscription net additions decreased by 216,000 subscriptions compared to the 235,000
TiVo-Owned subscriptions net additions for same prior fiscal year period. We believe this decrease was largely due to an increase in churn resulting from a
larger subscription base and lower gross additions because of increased competition from DVRs distributed by cable and satellite providers, including
DIRECTV's non-TiVo products. Additionally, for several months of the year we had no competitively priced mass market high definition DVR and have no
such product for satellite TV subscribers. The percent of cumulative TiVo-Owned subscriptions on a monthly or prepay plan increased, by 3% to 61% during
the year ended January 31, 2008, as compared to the prior-year period. MSOs/Broadcasters installed subscription base decreased by 518,000 subscriptions to
2.2 million subscriptions as of January 31, 2008 as compared to the same prior year period. This decrease is due to DIRECTV's promotion of a competing
DVR service and our other mass distribution deals being still in the early phases of deployment.
For the fiscal year ended January 31, 2007 while total TiVo-Owned subscriptions increased by 235,000 subscriptions net additions to 1.7 million
subscriptions from the year earlier, year-over-year TiVo-Owned net additions were down by 115,000 subscriptions relative to the net number of subscriptions
added in the same prior year period. We believe the decrease in year-over-year TiVo-Owned subscription net additions was a result of increased churn due
partly to our larger subscription base and due partly from increased competition from DVRs distributed by cable and satellite providers, including DIRECTV's
non-TiVo products, and the failure of TiVo to have a competitively priced mass market high definition DVR. The percent of cumulative TiVo-Owned
subscriptions on a monthly or prepay plan increased, by 7% to 58% during the quarter ended January 31, 2007, as compared to the same prior-year period.
DIRECTV installed subscription base decreased by 155,000 subscriptions to 2.7 million subscriptions as of January 31, 2007 as compared to the same prior
year period. This decrease is due to DIRECTV's promotion of a competing DVR service and having no TiVo product offerings for DIRECTV subscribers.
As of January 31, 2008, approximately 175,000 product lifetime subscriptions had exceeded the period we use to recognize product lifetime
subscription revenues, but had made contact to the TiVo service within the prior six months. Such TiVo product lifetime subscriptions represent
approximately 26% of our cumulative lifetime subscriptions as compared to 23% for the fiscal year ended January 31, 2007. We continue to incur costs of
services for these subscriptions without recognizing corresponding subscription revenues. There was a slight increase in fully amortized active lifetime
subscriptions as compared to the fiscal year ended January 31, 2007. The growth in the number of fully amortized active lifetime subscriptions was reduced,
as compared to prior years primarily due to the change in amortization period of product lifetime subscriptions and lifetime churn. Effective November 1,
2007, we extended the period we used to recognize product lifetime subscription revenues from 48 months to 54 months for the product lifetime subscriptions
acquired on or before October 31, 2007 and such change is being recognized on a prospective basis. Refer to Critical Accounting Estimates "Recognition
Period for Product Lifetime Subscriptions Revenues". There were no additions to the fully amortized active lifetime subscriptions during the quarter ended
January 31, 2008 since under the revised amortization period, product lifetime subscriptions that would have become fully amortized using the old
amortization period are not yet fully amortized subscriptions at January 31, 2008. We expect the number of fully amortized lifetime subscriptions
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