TiVo 2009 Annual Report Download - page 54

Table of Contents
The following table presents our TiVo-Owned Churn Rate per month information:
Fiscal Year Ended January 31,
2010 2009 2008
(In thousands, except percentages)
TiVo-Owned subscription cancellations (337) (278) (257)
Average TiVo-Owned subscriptions 1,577 1,695 1,721
Annual Churn Rate -21% -16% -15%
Number of Months 12 12 12
TiVo-Owned Churn Rate per month -1.8% -1.4% -1.2%
Included in our TiVo-Owned Churn Rate per month are those product lifetime subscriptions that have both reached the end of the revenue recognition
period and whose DVRs have not contacted the TiVo service within the prior six months. Conversely, we do not count as churn product lifetime subscriptions
that have not reached the end of the revenue recognition period, regardless of whether such subscriptions continue to contact the TiVo service. TiVo-Owned
Churn Rate per month was 1.8% for the fiscal year ended January 31, 2010, as compared to 1.4% for the same prior year period resulting from an increase in
churn among our subscribers with older single and dual tuner model DVRs. We expect churn to increase further in the fiscal year ending January 31, 2011 as
compared to the fiscal year ended January 31, 2010 as a result of a continued increase in inactive product lifetime subscriptions, competition from other
providers, and the growing importance of encrypted digital and high definition television recording capabilities which can only be accessed through either a
cable or satellite provided set top box or through a box which incorporates CableCARD technology (which is only available through cable and some
telecommunications providers) and a switched digital adapter if necessary.
Subscription Acquisition Cost or SAC. Management reviews this metric, and believes it may be useful to investors, in order to evaluate trends in the
efficiency of our marketing programs and subscription acquisition strategies. We define SAC as our total TiVo-Owned acquisition costs for a given period
divided by TiVo-Owned subscription gross additions for the same period. We define total acquisition costs as sales and marketing, subscription acquisition
costs less net TiVo-Owned related hardware revenues (defined as TiVo-Owned related gross hardware revenues less rebates, revenue share and market
development funds paid to retailers) plus TiVo-Owned related cost of hardware revenues. The sales and marketing, subscription acquisition costs line item
includes advertising expenses and promotion-related expenses directly related to subscription acquisition activities, but does not include expenses related to
advertising sales. We do not include third parties subscription gross additions, such as MSOs/Broadcasters' gross additions with TiVo subscriptions, in our
calculation of SAC because we typically incur limited or no acquisition costs for these new subscriptions, and so we also do not include MSOs/Broadcasters'
sales and marketing, subscription acquisition costs, hardware revenues, or cost of hardware revenues in our calculation of TiVo-Owned SAC. We are not
aware of any uniform standards for calculating total acquisition costs or SAC and caution that our presentation may not be consistent with that of other
companies.
Fiscal Year Ended January 31,
2010 2009 2008
(In thousand, except SAC)
Subscription Acquisition Costs
Sales and marketing, subscription acquisition costs $ 5,048 $ 6,038 $ 31,050
Hardware revenues (47,907) (41,133) (41,798)
Less: MSOs/Broadcasters-related hardware revenues 14,497 9,333 —
Cost of hardware revenues 65,909 57,742 92,052
Less: MSOs/Broadcasters-related cost of hardware revenues (13,706) (8,590) —
Total Acquisition Costs 23,841 23,390 81,304
TiVo-Owned Subscription Gross Additions 148 187 276
Subscription Acquisition Costs (SAC) $ 161 $ 125 $ 295
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