TiVo 2009 Annual Report Download - page 12

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Table of Contents
Additionally, DIRECTV distributes TiVo advertising features on DIRECTV receivers with TiVo service. Subject to certain restrictions and exceptions,
both DIRECTV and TiVo may sell this advertising and collect audience research measurement data, with each party retaining all their respective revenues
generated from such sales.
DIRECTV currently does not have the right to continue to distribute DIRECTV receivers with TiVo service to new customers. Additionally, DIRECTV
has added high definition programming in a format that is not compatible with the currently deployed population of TiVo-enabled high definition DVRs
previously distributed by DIRECTV and is currently supporting a competing DVR platform. As a result, we have seen a reduction in the number of
DIRECTV receivers with TiVo service subscriptions, a trend that we expect to continue until our new product for DIRECTV becomes available as further
described below.
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, upon deployment of the HD 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 HD DIRECTV DVRs with TiVo 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. DIRECTV
also has certain additional annual obligations to market and promote the new HD DIRECTV DVR featuring the TiVo Service once it has launched.
Best Buy. Best Buy is one of the largest nationwide retailers of consumer electronics in the United States. We have had a long standing relationship
with Best Buy since 1999 to sell our TiVo DVRs to consumers.
On July 7, 2009, we entered into the Master Marketing and Development Agreement (the "Marketing Agreement"), with Best Buy Stores, L.P., which
amends and supplements our existing Vendor Agreement, as amended, dated as of March 3, 2002 (the "Vendor Agreement"), with Best Buy Purchasing,
L.L.C. During the term of the Marketing Agreement, Best Buy has agreed to make a significant increased annual marketing commitment to promote and
market TiVo DVRs in the Best Buy retail channel commencing with the launch of our new TiVo Premiere box. In return TiVo has agreed to provide Best Buy
with an on-going promotional presence on the TiVo service as well as continued revenue share payments in connection with the number of TiVo service
subscriptions acquired from Best Buy sales of TiVo DVRs during the term of the Marketing Agreement.
Also as part of the Marketing Agreement, we have agreed to work together with Best Buy to investigate a number of future development initiatives
around integrating existing and future Best Buy digital services on the TiVo DVRs and the TiVo service. Additionally, we have agreed to investigate with
Best Buy the development of an interactive television application for potential deployment on future broad-band enabled consumer electronics devices such as
televisions and Blu-Ray recorders. The Marketing Agreement has an initial term of five (5) years, but may be terminated sooner by either party subject to
certain conditions.
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