TiVo 2009 Annual Report Download - page 53

Download and view the complete annual report

Please find page 53 of the 2009 TiVo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 159

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159

Table of Contents
We define a "subscription" as a contract referencing a TiVo-enabled DVR for which (i) a consumer has committed to pay for the TiVo service and
(ii) service is not canceled. We count product lifetime subscriptions in our subscription base until both of the following conditions are met: (i) the period we
use to recognize product lifetime subscription revenues ends; and (ii) the related DVR has not made contact to the TiVo service within the prior six month
period. Product lifetime subscriptions past this period which have not called into the TiVo service for six months are not counted in this total. Effective
November 1, 2008, we extended the period we use to recognize product lifetime subscription revenues from 54 months to 60 months for all product lifetime
subscriptions acquired on or before October 31, 2007. We now amortize all product lifetime subscriptions over a 60 month period. We are not aware of any
uniform standards for defining subscriptions and caution that our presentation may not be consistent with that of other companies. Additionally, the
subscription fees that some of our MSOs/Broadcasters pay us may be based upon a specific contractual definition of a subscriber or subscription which may
not be consistent with how we define a subscription for our reporting purposes.
TiVo-Owned subscriptions declined by 189,000 subscriptions decreasing the TiVo-Owned installed subscription base to approximately 1.5 million
subscriptions as of January 31, 2010 as compared to the fiscal year ended January 31, 2009. We believe this decrease in total TiVo-Owned subscriptions was
largely due to the continued decrease in subscription gross additions resulting from increased competition from DVRs distributed by cable and satellite. As a
result of this competition and current economic conditions, we may experience further net losses in our TiVo-Owned subscription base in the fiscal year
ending January 31, 2011 despite the introduction of our new TiVo Premier box.
MSOs/Broadcasters installed subscription base decreased by 541,000 subscriptions to 1.1 million subscriptions as of January 31, 2010 as compared to
the same prior year period. Additionally, during the quarter ended October 31, 2009, we were informed by DIRECTV that it had over-reported TiVo
subscriptions to us for approximately the past 18 months. Cumulatively, this error represented approximately 146,000 MSO/Broadcasters' subscription losses.
The remaining decrease in subscriptions is due to DIRECTV's promotion of a competing DVR while concurrently not marketing any DVR with TiVo service,
as well as the fact that our other mass distribution deals are still in the early phases of development and/or deployment. We have agreed to work with
DIRECTV to develop a version of the TiVo service for DIRECTV's broadband-enabled HD DVR platform which TiVo is working with DIRECTV with the
intention to deploy this product to consumers later this year. We expect current MSOs/Broadcasters trends to continue until more of our deployments
commence such as DIRECTV, Virgin, and others occur and Comcast moves into additional markets.
TiVo-Owned Churn Rate per Month. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our ability to
retain existing TiVo-Owned subscriptions (including both monthly and product lifetime subscriptions) by providing services that are competitive in the
market. Management believes factors such as service enhancements, service commitments, higher customer satisfaction, and improved customer support may
improve this metric. Conversely, management believes factors such as increased competition, lack of competitive service features such as high definition
television recording capabilities in our older model DVRs or access to certain digital television channels or MSO Video on Demand services, as well as,
increased price sensitivity may cause our TiVo-Owned Churn Rate per month to increase.
We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned subscription cancellations in the period divided by the Average TiVo-
Owned subscriptions for the period (including both monthly and product lifetime subscriptions), which then is divided by the number of months in the period.
We calculate Average TiVo-Owned subscriptions for the period by adding the average TiVo-Owned subscriptions for each month and dividing by the number
of months in the period. We calculate the average TiVo-Owned subscriptions for each month by adding the beginning and ending subscriptions for the month
and dividing by two. We are not aware of any uniform standards for calculating churn and caution that our presentation may not be consistent with that of
other companies.
49