TiVo 2011 Annual Report Download - page 31

Table of Contents
regulated by constantly evolving state and federal laws and regulations and violations of these laws and regulations could harm our business.
We engage in various advertising, marketing, and other promotional activities, such as offering gift subscriptions to consumers, which are subject to state
and federal laws and regulations. A constantly evolving network of state and federal laws is increasingly regulating these promotional activities. Additionally,
we enter into subscription service contracts directly with consumers which govern both our provision of and the consumers' payment for the TiVo service. For
example, consumers who activate new monthly subscriptions to the TiVo service may be required to commit to pay for the TiVo service for a minimum of
one year or be subject to an early termination fee if they terminate prior to the expiration of their commitment period. If the terms of our subscription service
contracts with consumers, such as our imposition of an early termination fee, or our previously offered rebate or gift subscription programs were to violate
state or federal laws or regulations, we could be subject to suit, penalties, and/or negative publicity in which case our business could be harmed.
We and the third-party vendors we work with will need to remain compliant with the Payment Card Industry requirements for security and
protection of customer credit card information and an inability to do so by us or our third-party vendors will adversely affect our business.
As a merchant who processes credit card payments from its customers, we are required to comply with the payment card industry requirements imposed
on us for the protection and security of our customers' credit card information. If we are unable to successfully remain compliant with the payment card
industry requirements imposed on us as a credit card merchant, our business could be harmed because we could be prevented in the future from transacting
customer subscription payments by means of a credit card.
We need to safeguard the security and privacy of our subscribers' confidential data and remain in compliance with laws that govern such data,
and any inability to do so may harm our reputation and brand and expose us to legal action.
The DVR collects and stores viewer preferences and other data that many of our customers consider confidential . Any compromise or breach of the
encryption and other security measures that we use to protect this data could harm our reputation and expose us to potential liability. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or developments could compromise or breach the systems we use to protect our
subscribers' confidential information. We may be required to make significant expenditures to protect against security breaches or to remedy problems caused
by any breaches. Additionally, the laws governing such data are constantly changing and evolving and we must comply with these laws or our business,
including our reputation, brand and financial results will be harmed.
Uncertainty in the marketplace regarding the use of data from subscriptions could reduce demand for the TiVo service and result in increased
expenses . Consumers may be concerned about the use of viewing information gathered by the TiVo service and the DVR. Currently, we gather anonymous
information about our customers' viewing choices while using the TiVo service, unless a customer affirmatively consents to the collection of personally
identifiable viewing information. This anonymous viewing information does not identify the individual customer. Privacy concerns, however, could create
uncertainty in the marketplace for digital video recording and for our products and services. Changes in our privacy policy could reduce demand for the TiVo
service, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or otherwise harm our reputation and business.
Legislation, laws or regulations relating to environmental issues, employment matters, and unclaimed property may adversely impact our
business in the future.
It is possible that future proposed environmental regulations on consumer electronic devices, such as DVRs and set-top boxes, may regulate and increase
the production, manufacture, use, and disposal costs incurred by us and our customers. For example, the Energy Independence and Security Act of 2007
directs the Department of Energy to prescribe labeling or other disclosure requirements for the energy use of standalone digital video recorder boxes. This and
future energy regulations could potentially make it more costly for us to design, manufacture, and sell our DVRs to our customers thus harming the growth of
our business.
Additionally, as our business grows and we expand our employed and contracted work force, employment laws and regulations will have an increasing
impact on our ability to manage and grow our work-force. Regulations and laws relating to the status of contractors, classification and related benefits for
exempt and non-exempt employees all may adversely impact our business if we are unable to properly manage and comply with federal, state, and local laws.
Furthermore, as part of our regular business activities now, and in the past, we engage in the issuance of gift
30