TiVo 2011 Annual Report Download - page 20

Table of Contents
our revenues would decline and our business would be harmed as a result.
We face intense competition from a number of sources, which may impair our revenues, increase our subscription acquisition costs, and hinder
our ability to generate new subscriptions.
The DVR and advanced television solutions market is rapidly evolving, and we face significant competition. Moreover, the market for in-home
entertainment is intensely competitive and subject to rapid technological change. As a result of this intense competition, we could incur increased subscription
acquisition costs that could adversely affect our ability to reach or sustain profitability in the future. If new technologies render the DVR market obsolete, we
may be unable to generate sufficient revenue to cover our expenses and obligations.
We believe that the principal competitive factors in the DVR and advanced television solutions market are brand recognition and awareness,
functionality, ease of use, availability, and pricing. We currently see two primary categories of DVR competitors and advanced television solutions
competitors: DVRs and advanced television solutions (e.g. VOD based services on set-top boxes which stream content remotely) offered by
telecommunications, cable and satellite operators and DVRs and other advanced television solutions (e.g. VOD based services on set-top boxes or other
consumer electronic devices (TV, BluRay player, etc.) which stream content remotely) offered by consumer electronics and software companies. For more
information on our competitors, see our discussion on competition in Item 1. “Business” in our annual report on Form 10-K incorporated by reference herein.
Licensing Competitors. Our revenues depend both upon our ability to successfully negotiate agreements with our consumer electronics and service
provider customers and, in turn, upon our customers' successful commercialization of their underlying products. We face competition from companies such as
Microsoft, DIRECTV, DISH, Pace, Motorola, Cisco, NDS (who recently announced it was being acquired by Cisco), Arris, and Rovi, each of which have
created competing digital video recording technologies. Such companies may offer more economically attractive agreements to service providers and
manufacturers of DVRs.
We face a number of competitive challenges in the sale and marketing of the TiVo service and products that enable the TiVo service.
Our success depends upon the successful retail marketing of the TiVo service and related DVRs, which began in the third quarter of calendar year 1999.
We compete with other consumer electronics products and home entertainment services for consumer spending. DVRs and the TiVo service compete
in markets that are crowded with other consumer electronics products and home entertainment services. The competition for consumer spending is intense,
and many consumers on limited budgets may choose other products and services over ours. DVRs compete for consumer spending with products such as
DVD players, satellite television systems, personal computers, video game consoles, and other dedicated video streaming devices (such as Roku, AppleTV,
and Boxee). The TiVo service competes with home entertainment services such as cable and satellite television, movie rentals, pay-per-view, Video on
Demand, and mail-order DVD services. Such competition may impair our business, financial condition and results of operations.
Many of these products or services have established markets, broad user bases, and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing devices and services have substantially greater brand recognition, market presence, distribution channels,
advertising and marketing budgets and promotional activities, and other strategic partners. Faced with this competition, we may be unable to effectively
differentiate our DVRs and the TiVo service from other consumer electronics devices or entertainment services and our business, financial condition, and
results of operations could be harmed.
Consumers may not be willing to pay for our products and services or we may be forced to discount our products and services. Many of our customers
already pay monthly fees for cable or satellite television. We must convince these consumers to pay an additional subscription fee to receive the TiVo service.
Consumers may perceive the TiVo service and related DVR as too expensive. In order to continue to grow our subscription base, we have lowered the price of
our DVRs in the past and raised our subscription pricing and alternatively we may choose to raise our DVR pricing and lower our subscription pricing in the
future. As a result of lower hardware pricing and higher subscription pricing, the profitability of such newly acquired customers was shifted outward in time
as we need to first recoup the expenses incurred in connection with the sale of a heavily subsidized DVR. For competitive and financial reasons, we may need
to change the pricing of our DVRs and our service fees again in the future. The availability of competing services that do not require subscription fees or that
are enabled by low or no cost DVRs will harm our ability to effectively attract and retain subscriptions, including at a financially attractive level, in such an
event our business would be harmed.
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