TiVo 2008 Annual Report Download - page 24

Table of Contents
If we are unable to introduce new products or services, or if our new products and services are unsuccessful, the growth in our subscription
base and revenues may suffer.
To attract and retain subscriptions and generate revenues, we must continue to maintain and add to our functionality and content and introduce products
and services which embody new technologies and, in some instances, new industry standards. This challenge will require hardware and software
improvements, as well as maintaining and adding new collaborations with programmers, advertisers, network operators, hardware manufacturers, and other
strategic partners. These activities require significant time and resources and may require us to develop and promote new ways of generating revenue with
established companies in the television industry. These companies include television advertisers, cable and satellite network operators, electronic commerce
companies, and consumer electronics manufacturers. In each of these examples, a small number of large companies dominate a major portion of the market
and may be reluctant to work with us to develop new products and services for digital video recorders as well as maintain our current functionality. If we are
unable to maintain and further develop and improve the TiVo service or maintain and expand our operations in a cost-effective or timely manner, our ability
to attract and retain customers and generate revenue will suffer.
We face competitive risks in the provision of an entertainment offering involving the distribution of digital content through broadband,
including from broadband devices connected directly to the TV or through a PC connected to the TV.
Over the past two years we launched joint entertainment offerings with the Amazon Video on Demand (formerly Unbox) service, Netflix, CinemaNow,
and Jaman for the distribution of digital content directly to broadband-connected TiVo DVRs. Our offerings with Amazon Video On Demand, Netflix,
CinemaNow, and Jaman involve no significant long-term commitments. We face competitive, technological, and business risks in our on-going provision of
an entertainment offering involving the distribution of digital content through broadband to consumer televisions with Amazon, Netflix, and others, including
availability of premium content and speed and quality of the delivery, including the availability of high definition content in the future, of such content to
TiVo DVRs. For instance, we face increased competition from a growing number of broadband-enabled devices from providers such as Roku and Vudu
which provide broadband delivered digital content directly to a consumer's television connected to such a device. Additionally, we face competition from
online content providers and other PC software providers who deliver digital content directly to a consumer's personal computer, which in some cases may
then be viewed on a consumer's television. If we are unable to provide a competitive entertainment offering with Amazon Video On Demand, Netflix,
Blockbuster, and our other partners, on our own, or an equivalent offering with another third party, the attractiveness of the TiVo service to new subscribers
could be harmed as consumers increasingly look for new ways to receive and view digital content and our ability to retain and attract subscribers could be
harmed.
Our ability to retain our current customers may continue to decrease in the future which could increase our TiVo-Owned subscription
monthly churn rate and could cause our revenues to suffer.
We believe factors such as increased competition in the DVR marketplace, changing television technologies such as the increasing penetration of high
definition, the use of switched digital technology to deliver encrypted digital television signals, and the failure of cable operators in the future to transmit both
an analog and digital transmission thus impacting our Series2 DVRs, increased price sensitivity in the consumer base, any deterioration in the quality of our
service, and product lifetime subscriptions no longer using our service may cause our TiVo-Owned subscription monthly churn rate to increase. If we are
unable to retain our subscriptions by limiting the factors that we believe increase subscription churn, our ability to grow our subscription base could suffer and
our revenues could be harmed.
If we fail to manage the growth and complexity of our activities, it could disrupt our business and impair our ability to generate revenues.
The growth in our subscription base and increasing complexity of our sources of other revenue have placed, and will continue to place, a significant
strain on our management, operational and financial resources and systems. Specific risks we face as our business expands include:
Any inability of our systems to accommodate our expected subscription growth, or any inability of our TiVo.com website to handle expected customer
traffic, may cause service interruptions or delay our introduction of new services and limit our ability to sell the TiVo service and TiVo-enabled DVRs. We
internally developed many of the systems we use to provide the TiVo service and perform other processing functions. The ability of these systems to scale as
we add new subscriptions is unproven. We must continually improve these systems to accommodate subscription growth and to add features and functionality
to the TiVo service. Our inability to add software and hardware or to upgrade our technology, systems or network infrastructure could adversely affect our
business, cause service interruptions or delay the introduction of new services. Our inability to manage customer traffic and sales volume through our
TiVo.com website could limit our ability to sell the TiVo service and TiVo-enabled DVRs in the future. If our website were to become unavailable for a
significant amount of time, our ability to provide certain features of the TiVo service and our ability to service customers and sell the TiVo service and TiVo-
enabled DVRs would be harmed.
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