TiVo 2009 Annual Report Download - page 7

Table of Contents
PART I
ITEM 1. BUSINESS
General Development of Business
TiVo is a leading provider of advanced television technology and services that redefines home entertainment by providing consumers with an easy way
to manage, control, watch, and record live television and receive thousands of movies and television shows from cable, broadcast, and broadband sources in
one easy, intuitive user interface. These capabilities are made available through digital video recorders ("DVRs") and we have agreements to offer services for
non-DVR products in the future. We distribute the TiVo DVR through consumer electronics retailers and through our on-line store at TiVo.com. Additionally,
we have distribution agreements with Comcast, Cox, and satellite television providers, including DIRECTV, as well as international cable and broadcasting
companies such as Seven Networks in Australia and New Zealand and Virgin Media in the United Kingdom ("U.K."). We also provide innovative advertising
solutions for the media industry, including a unique platform for interactive advertising and audience measurement services.
We currently receive revenues from three main sources:
• Consumer Service. Our primary source of revenues is from consumers, who subscribe directly to the TiVo service and typically pay us monthly
fees of up to $12.95 per month. We also offer consumers the option to prepay for one or three years of TiVo service at prices ranging from $129
to $299, or purchase a product lifetime subscription for $399 ($299 for existing customers who have at least one other qualifying subscription).
We sell to consumers in part through distribution relationships with major retailers and direct through our on-line store at TiVo.com.
• Licensing of Technology to Television Service Providers. We also work with satellite and cable television providers, including DIRECTV and
Comcast, and in the future, Cox, Virgin Media, and RCN, who pay us recurring monthly fees in order to provide the TiVo service to their
subscribers. We receive fees for licensing and professional services from these and other customers as well.
• Media Services. We work directly with television advertisers, agencies, and networks to offer a variety of solutions for the television advertising
market. These include short- and long-form interactive video advertising, audience research measurement, lead generation, and commerce.
We continue to be subject to a number of risks, including delays in product and service developments; competitive service offerings; lack of market
acceptance; uncertainty of future profitability; dependence on third parties for manufacturing, marketing, and sales support, as well as third-party rollout
schedules, software development issues for third-party products which contain our technology; access to television programming including digital cable
signals in connection with CableCARDTM and switched digital technologies; intellectual property claims by and against us; dependence on our relationships
with third-party service providers such as Comcast and Seven/Hybrid TV (Australia and New Zealand) and others for MSO/Broadcaster subscription growth;
and our ability to sustain and grow our TiVo-Owned subscription base. We conduct our operations through one reportable segment. We anticipate that our
business will continue to be seasonal and expect to generate a significant number of our annual new TiVo-Owned subscriptions during and immediately after
the holiday shopping season. However, as a result of the recent national and global economic downturn and overall consumer spending decline, we are
cautious about our subscription growth in the near term. In fiscal year 2010 we incurred loss of $(23.9) million. However, we generated operating cash flows
of $8.4 million. As of January 31, 2010, we had an accumulated deficit of $(696.1) million.
Industry Trends
Consumer Demand is Driving Widespread Adoption of Advanced Television Services. TiVo revolutionalized television viewing when it introduced
the DVR over ten years ago. Since then, DVR adoption has grown rapidly and consumers have come to expect a great deal of flexibility and convenience in
the consumption of entertainment. Our DVR products proved that the entertainment experience could be significantly improved by removing the limitations
of linear, appointment based viewing. The compelling nature of that proposition led to significant DVR adoption in the U.S. and increasingly in major
international markets. Today, approximately 38 million U.S. households have DVRs, up from approximately 31 million a year earlier and this is expected to
increase to over 59 million by 2013, according to SNL Kagan and higher by other accounts.
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