TiVo 2008 Annual Report Download - page 13

Download and view the complete annual report

Please find page 13 of the 2008 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 110

  • 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

Table of Contents
Manufacturing and Supply Chain
We outsource the manufacturing of our products to third-party manufacturers. This outsourcing extends from prototyping to volume manufacturing and
includes activities such as material procurement, final assembly, test, quality control, and shipment to distribution centers. Today the majority of our products
are assembled in Mexico. Our primary distribution center is operated on an outsourced basis in Texas.
The components that make up our products are purchased from various vendors, including key suppliers such as Broadcom, which supplies system
controllers. Some of our components, including system controllers, chassis, remote controls, and certain discrete components are currently supplied by sole
source suppliers.
We often require substantial lead time to purchase components and manufacture anticipated quantities of DVRs that enable the TiVo service. This long
lead time requires us to make component purchasing and inventory decisions well in advance of our peak selling periods. We offer our individual end-users
who purchase from TiVo.com a 30-day money back guarantee. We typically do not offer a right of return or significant extended payment terms to our
retailers.
Seasonality
Sales of our DVRs and subscriptions to the TiVo service are affected by seasonality. Thus, we generate a significant number of our annual DVR sales
and new subscriptions during and immediately after the holiday shopping season with associated increases in revenue. We also incur significant increases in
expenses in the second half of the year related to hardware costs, revenue share and other payments to channel, and sales and marketing, subscription
acquisition costs in anticipation of the holiday shopping season. There is less seasonality associated with our MSOs/Broadcasters, which includes
relationships with companies such as DIRECTV and Comcast.
Competition
We believe that the principal competitive factors in the DVR market are brand recognition and awareness, functionality, ease of use, availability, and
pricing. We currently see two primary categories of DVR competitors: DVRs offered by satellite, cable, and telecommunications operators and DVRs offered
by consumer electronics and software companies.
Satellite, Cable, and Telecommunications DVR Competitors. We compete against cable and satellite set-top boxes that integrate DVR functionality.
These products often combine digital and analog receptions with DVR functionality; some versions offer dual turner and/or high definition capabilities.
• Satellite: Dish (formerly EchoStar) offers a range of DVR models, including standard definition and high definition models, most of which offer
dual tuner capabilities. Certain models can output signals to multiple TVs within the household. Additionally, Dish has spent a significant amount
of capital advertising and promoting its DVR as "better than TiVo." Further, Dish offered its DVR at lower monthly service fees than TiVo and
most other television providers. DIRECTV has introduced a DVR technology including both standard definition and high definition broadcasts.
• Cable: Cable operators have made DVR technology available on set-top boxes such as from Scientific-Atlanta (owned by Cisco) and Motorola.
Other competition in the cable DVR market comes from other software providers including TV Guide, Microsoft, Aptiv, Digital, and Digeo. U.S.
cable operators are currently deploying server-based Video on Demand (VOD) technology from SeaChange, Concurrent, and others, which could
potentially evolve into competition. Additionally, we are aware of at least one U.S. cable operator, Cablevision, Inc., which stated a desire to test
server-based DVR technology, in the future if legally permissible. To the extent that cable operators offer regular television programming as part
of their server-based VOD offerings and DVR technology, consumers have an alternate means of watching time-shifted shows besides DVRs.
• Telecommunications: Telecommunications operators have deployed DVR technology in connection with the provision of television services to
consumers either in partnership with other television providers, such as Verizon's FIOS service, AT&T's U-verse service or through partnerships
with DIRECTV (Qwest, Verizon, AT&T).
Consumer Electronics Competitors. We compete against several types of products with basic time-slot based recordings or enhanced electronic
program guide (EPG) based DVR functionality offered by consumer electronics companies. These products record a television signal output from a cable,
satellite, or antenna, including internationally through digital over-the-air standards such as DVB-T.
10