TiVo 2009 Annual Report Download - page 33

Table of Contents
Legislation, laws or regulations that govern the consumer electronics and television industry, the delivery of programming, access to television
signals, and the collection of viewing information from subscriptions could expose us to legal action if we fail to comply and could adversely impact
and/or could require us to change our business.
The delivery of television programming, access to television signals by consumer electronics devices, and the collection of viewing information from
subscriptions via the TiVo service and a DVR represent a relatively new category in the television and home entertainment industries. As such, it is difficult to
predict what laws or regulations will govern our business. Changes in the regulatory climate, the enactment of new legislation, or the expansion, contraction,
enforcement or interpretation of existing laws or regulations could expose us to additional costs and expenses and could adversely impact or require changes
to our business. For example, legislation regarding customer privacy or copyright could be enacted or expanded to apply to the TiVo service, which could
adversely affect our business. Laws or regulations could be interpreted to prevent or limit access to some or all television signals by certain consumer
electronics devices, or impose limits on the number of copies, the ability to transfer or move copies, or the length of time a consumer may retain copies of
some or all types of television programming. New or existing copyright laws could be applied to restrict the capture of television programming, which would
adversely affect our business. It is unknown whether existing laws and regulations will apply to the digital video recorder market. Therefore, it is difficult to
anticipate the impact of current or future laws and regulations on our business. We may have significant expenses associated with staying appraised of local,
state, federal, and international legislation and regulation of our business and in presenting TiVo's positions on proposed laws and regulations.
The Federal Communications Commission, or FCC, has broad jurisdiction over the telecommunications and cable industries. The FCC could
promulgate new regulations, or interpret existing regulations in a manner that would cause us to incur significant compliance costs or force us to alter or
eliminate certain features or functionality of the TiVo products or services which may adversely affect our business. For example, the FCC could determine
that certain of our products fail to comply with regulations concerning matters such as electrical interference, copy protection, digital tuners, or display of
television programming based on rating systems. The FCC could also impose limits on the number of copies, the ability to transfer or move copies, the length
of time a consumer may retain copies, or the ability to access some or all types of television programming.
If there is increased use of switched digital video technologies to transmit television programs by cable operators (also known as switched
digital) in the future, the desirability and competitiveness of our current products could be reduced in which case our business would be harmed.
We rely on conditional access security cards supplied by cable operators called CableCARDs for certain types of our DVRs to receive encrypted digital
television signals without a cable operator supplied set-top box. These DVRs presently are limited to using CableCARDs to access digital cable, high
definition, and premium cable channels like HBO that are delivered in a linear fashion where all programs are broadcast to all subscribers all the time. Certain
cable operators are beginning to test and deploy switched digital video technologies to transmit television programs in a non-linear fashion (switched digital)
only to subscribers who request to watch a particular program. Although cable operators have started to deploy a solution to enable our customers to receive
channels delivered with switched technologies (known as the "Tuning Adapter"), if this technology is not successful or in not adopted by our customers (due
to cost, complexity, or functionality), then the increased use of switched technologies and the continued inability of our products to receive switched cable
programming without a Tuning Adapter may reduce the desirability and competitiveness of our products and services and adversely affect sales of our TiVo-
Owned subscriptions in which case our business would be harmed.
Uncertainty and adverse changes in the economy could have an adverse impact on our business and operating results.
Uncertainty or adverse changes in the economy could lead to a significant decline in discretionary consumer spending, which, in turn, could result in a
decline in the demand for the TiVo service and TiVo-enabled DVRs. As a result of the recent national and global economic downturn, overall consumer
spending has declined. Retailers in North America appear to be taking a more conservative stance in ordering electronics inventory and consumers as well
appear to be taking a more conservative stance in discretionary purchases, including TiVo DVRs and service subscriptions. Any decrease in demand for our
products, particularly during the critical holiday selling season, could have an adverse impact on our operating results and financial condition. Uncertainty and
adverse changes in the economy could also increase the risk of losses on our investments, increase costs associated with developing and producing our
products, increase our churn rate per month, increase the cost and decrease the availability of potential sources of financing, and increase our exposure to
losses from bad debts, any of which could have an adverse impact on our financial condition and operating results.
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