TiVo 2009 Annual Report Download - page 105

Table of Contents
During the twelve months ended January 31, 2010, 2009 and 2008, the Company recognized $16.7 million, $14.2 million, and $12.2 million,
respectively in technology revenues and $10.1 million, $9.1 million, and $13.0 million, respectively in cost of technology revenues, related to the initial
development under the original agreement and related to additional engineering work under a SOW entered into on August 27, 2007 for the development of
additional releases of the TiVo-branded, TiVo-service enabling software for the Comcast DVR platforms and to enable such software on other Comcast DVR
platforms, including Cisco DVRs. The Company was recognizing revenues and costs for the initial development of TiVo service software and TiVo
Interactive Advertising Management System based on a zero profit model, which resulted in the recognition of equal amounts of revenues and costs. The
majority of the initial development work was completed in June 2007. The engineering work performed under the August 2007 SOW is considered a separate
arrangement and revenue from this engineering work is recognized using the percentage-of-completion method subsequent to signing the agreement on
August 27, 2007.
22. DEVELOPMENT AGREEMENT AND SERVICES AGREEMENT WITH DIRECTV, INC.
On September 3, 2008, the Company extended its current agreement with DIRECTV for the development, marketing, and distribution of a new HD
DIRECTV DVR featuring the TiVo ® service. Under the terms of this non-exclusive arrangement, TiVo is developing a version of the TiVo service for
DIRECTV's broadband-enabled HD DVR which TiVo is working with DIRECTV with the intention to deploy this product to consumers later this year.
DIRECTV also has certain additional annual obligations to market and promote the new HD DIRECTV DVR featuring the TiVo Service once it has
launched. DIRECTV, upon the deployment of high definition DIRECTV DVRs with TiVo service, is entitled to recoup, over time, a portion of certain
development fees through a reduction in certain subscription fees. The new agreement also extends the mutual covenant not to sue with respect to each
company's products and services throughout the term of the new agreement.
Under this new agreement, DIRECTV will pay a substantially higher monthly fee for households using the new high definition DIRECTV DVRs with
TiVo (when and if the new version of the TiVo service is deployed) than the fees for previously deployed DIRECTV DVRs with TiVo service. DIRECTV
will continue to pay the current monthly fee for all households using only the previously deployed DIRECTV DVRs with TiVo service. The fees paid by
DIRECTV are subject to monthly minimum payments that escalate during the term of the agreement starting in 2010 and those minimum payments are
substantially higher than in the prior agreement. The Company will continue to defer a portion of these fees as a non-refundable credit to fund mutually
agreed development, with excess development work to be funded by DIRECTV. Due to uncertainties over the ultimate profit margin on the development
work, the Company recognizes revenues and costs for the development of the TiVo service for DIRECTV's broadband-enabled HD DVR based on a zero
profit model, which results in the recognition of equal amounts of revenues and costs. During the twelve months ended January 31, 2010, the Company
recognized $9.0 million in technology revenues and $9.0 million in cost of technology revenues related to the development of the TiVo service for
DIRECTV's broadband-enabled HD DVR.
23. RESIGNATION OF BOARD MEMBER
On August 30, 2007, the Company accepted the resignation of Michael Ramsay as a member of our Board of Directors. Mr. Ramsay has been named to
the post of Venture Partner at New Enterprises Associates, a Silicon Valley venture capital firm, which already has representation on the Company's Board.
Pursuant to the Transition and Consulting Agreement, effective August 30, 2007, Mr. Ramsay agreed to a noncompete provision and that he will be available
to provide services to the Company as a consultant focused on technology and other issues through approximately August 2009 when and if requested by the
Company. Mr. Ramsay's stock-based awards were modified to provide for accelerated and continued vesting and extended exercise periods. These
modifications were valued at $2.4 million using a Black-Scholes option valuation model. The $2.4 million charge consisted of $546,000 related to stock-based
awards that were not vested as of the modification date and $1,835,000 related to extending the exercisability date of stock-based awards that were vested as
of the modification date. As the terms of the Transition and Consulting Agreement did not create a substantive future service period, the entire non-cash
amount of $2.4 million was expensed immediately in the quarter ended October 31, 2007.
101