TiVo 2008 Annual Report Download - page 8

Table of Contents
Television Distributors See DVR Technology as a Competitive Asset. Nearly all of the major television distributors in the United States including
Comcast, DIRECTV, Dish (formerly EchoStar), Time-Warner Cable, and others, are offering DVR technology to their customers. These companies have
indicated they consider DVR technology a competitive tool to help differentiate their services by offering their customers more programming features. These
operators are looking for ways to more effectively attract and retain consumers to their own offerings and we believe that our unique user interface and
software can help increase customer satisfaction and reduce churn for television distributors in the United States and beyond. This is also a risk to our
business to the extent that these companies view TiVo as a competitive threat and economically harmful rather than a potential business partner.
DVR is Expanding Beyond the United States. Major television distributors and broadcasters outside of the United States are beginning to offer DVRs
to their customers. These companies are looking for ways to integrate television, DVR technology, and the ability to retrieve broadband content into one
device. Today, there have been approximately 44.6 million DVRs shipped globally and this number is expected to grow significantly according to eMarketer.
DVR is Changing the Television Advertising Industry. The proliferation of DVRs, and their ability to easily fast forward through television content, is
requiring television advertisers to evaluate new and different ways to reach out to consumers. The DVR in general and the TiVo service specifically have
given viewers the freedom to view video content when they want to view the content. Time shifting has made it more difficult for advertisers to be guaranteed
that their commercials will be viewed by audiences at the regularly scheduled time the program is aired by network or local television stations. DVRs allow
viewers the freedom to fast forward through all or a portion of commercial advertising incorporated into television and other programs, which means that
advertisers are not assured that their commercials will be viewed at all. TiVo offers other programming options, such as video delivered by broadband, which
may result in further audience fragmentation.
Broadband Video is Increasing Television Viewing Options. The growth in broadband video is providing television consumers with significantly more
video options. These increased viewing options are providing television consumers with more access to different forms of video content from providers other
than traditional cable and satellite television program packages. We expect DVR technology to be integral in providing television consumers with the ability
to access, organize, and view television from both broadband and traditional television sources.
Our Solution
We have created a unique set of technologies, products, and services that meet the needs of consumers, television distributors, and the advertising
community. Our goal is to change the way consumers receive and watch television, broadband video, and advertising and to generate revenues through the
deployment of our branded entertainment services and technology to television viewing households worldwide.
Compelling, Easy-to-Use Consumer DVR Offering. The TiVo service, combined with a TiVo-enabled DVR, has an easy, intuitive user interface and
many features that we believe dramatically improve a consumer's television viewing experience. Depending on the model, TiVo-enabled DVRs can support
analog cable, digital cable, satellite, over-the-air broadcast television, and streaming and downloaded broadband video content, including standard definition
and high definition television. The TiVo service enables consumers to watch TV on their own schedule by automatically finding and digitally recording their
favorite shows, all season long, even if the schedule changes, and can even skip reruns. The TiVo service allows consumers to find new shows to watch
through features that enable them to search for shows to record by subject, title, genre, actor, director, or channel. The TiVo service can also suggest shows
consumers may like based on shows they are recording. Consumers can also pause and rewind live and recorded television. Unlike with a VCR, consumers
can play back a show from its beginning while it is in the middle of being recorded, and consumers can play back a previously recorded show while recording
another show.
Increasingly Differentiated Features and Service. Our goal is to lead the market with innovations that expand the value and potential of our
subscription service. We plan to continue to invest in innovation to improve consumer choice, convenience, and control over their home entertainment and to
make the TiVo service more compelling for both current and potential customers. For example, we launched a service feature called TiVo Swivel Search,
which allows TiVo users to discover content based on common actors, directors or genres of television shows and movies, and updated the feature in fiscal
year 2009 to include additional content, including HD content. We provide consumers with access to new interactive applications which include the ability to
receive more content delivered to their TiVo-enabled DVRs over a broadband connection such as premium film and television content from Amazon Video
On Demand, Netflix, and in the future Blockbuster, and professionally produced program content from providers such as The New York Times, CNET, and
the NBA, as well as millions of songs through music subscription service Rhapsody. We expect that a significant portion of our future product development
efforts will be focused on broadband functionality as we believe that
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