TiVo 2011 Annual Report Download - page 24

Table of Contents
We depend on a limited number of third-parties to manufacture, distribute, and supply critical components, assemblies, and services for the
DVRs that enable the TiVo service. We may be unable to operate our business if these parties do not perform their obligations.
The TiVo service is enabled through the use of a DVR manufactured for us by a third-party contract manufacturer. In addition, we rely on sole suppliers
for a number of key components for the DVRs. We also rely on third-parties with whom we outsource supply-chain activities related to inventory
warehousing, order fulfillment, distribution, and other direct sales logistics. We cannot be sure that these parties will perform their obligations as expected or
that any revenue, cost savings, or other benefits will be derived from the efforts of these parties. If any of these parties breaches or terminates their agreement
with us or otherwise fails to perform their obligations in a timely manner, we may be delayed or prevented from commercializing our products and services.
Because our relationships with these parties are non-exclusive, they may also support products and services that compete directly with us, or offer similar or
greater support to our competitors. Any of these events could require us to undertake unforeseen additional responsibilities or devote additional resources to
commercialize our products and services. This outcome would harm our ability to compete effectively and achieve increased market acceptance and brand
recognition.
In addition, we face the following risks in relying on these third-parties:
If our manufacturing relationships are not successful, we may be unable to satisfy demand for our products and services. We manufacture DVRs that
enable the TiVo service through a third-party contract manufacturer. Delays, product shortages, and other problems could impair our retail distribution and
brand image and make it difficult for us to attract subscriptions. In addition, the loss of a manufacturer would require us to identify and contract with
alternative sources of manufacturing, which we may be unable to do or which could prove time-consuming and expensive.
We are dependent on sole suppliers for several key components and services. If these suppliers fail to perform their obligations, we may be unable to
find alternative suppliers or deliver our products and services to our customers on time. We currently rely on sole suppliers for a number of the key
components used in the TiVo-enabled DVRs and the TiVo service. For example, Broadcom is the sole supplier of the system controller for our DVR.
We do not currently have a long-term written supply agreement with Broadcom. Therefore, Broadcom may not be contractually obligated to supply us
with these key components on a long-term basis or at all.
We do have written supply agreements with several other sole suppliers for key components or services for our products such as Remote Solutions,
Askey, and Flextronics.
Tribune is the sole supplier of the program guide data for the TiVo service. Tribune Media Services, Inc., (“Tribune”), is the current sole supplier of
program guide data for the TiVo service. Our current Television Listings Data Agreement with Tribune originally became effective on May 14, 2007 and has
an initial term of five years and with TiVo having the right to renew the agreement for four additional years, which TiVo has elected to exercise. The
agreement provides each party with a termination right if the other party becomes controlled by certain third parties. Tribune Media Services, along with their
parent company, Tribune Co., filed Chapter 11 bankruptcy on December 8, 2008. As a result, Tribune or Tribune Media Services, Inc. could reject the
Television Listing Data Agreement and we would be left with only an unsecured claim in Tribune's bankruptcy. If Tribune breaches its obligation to provide
us with data, rejects the agreement or otherwise fails to perform its obligations under our agreement, we would be unable to provide certain aspects of the
TiVo service to our customers until we are able to incorporate an alternate source of guide data. While we have access to alternative sources of guide data,
there would be significant cost and delay involved in integrating such an alternative source of guide data. Depending upon the amount of notice we receive of
such a breach or rejection of our agreement, and the amount of development work required by us to incorporate an alternate source of guide data, we may be
subject to a period of time in which we are unable to provide the TiVo service to our customers and distribution partners. In such an event, our business would
be harmed.
If our arrangements with Broadcom or Tribune or with our third-party contract manufacturer were to terminate or expire without a replacement
arrangement in place, or if we or our manufacturers were unable to obtain sufficient quantities of these components or required program guide data from our
suppliers, our search for alternate suppliers could result in significant delays, added expense or disruption in product or service availability.
We depend upon third-parties to provide supply chain services related to inventory management, order fulfillment, and direct sales logistics. We rely
on third-party vendors to provide cost-effective and efficient supply chain services. Among other activities, these outsourced services relate to direct sales
logistics, including
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