TiVo 2011 Annual Report Download - page 8

If we fail to properly estimate, manage, and perform the development and engineering services for our television service provider customers, we could incur
additional unexpected expenses and losses which could reduce or even eliminate any profit from these deployment arrangements, in which case our business
would be harmed.”
Our Industry
Widespread Adoption of Advanced Television Services. TiVo revolutionized television viewing when it introduced the DVR over ten years ago,
allowing consumers to enjoy an on-demand experience. Since then, DVR adoption has grown rapidly and consumers have come to expect a great deal of
flexibility and convenience in their consumption of entertainment. Our DVR products proved that the television entertainment experience could be
significantly improved by removing the limitations of linear, appointment based viewing.
The emergence of Video on Demand and broadband video is once again revolutionizing the way people consume video entertainment. The rapid growth
of broadband video means a virtually infinite world of content choices now exists along with much greater convenience in how and when that content is
viewed. The rapid proliferation of content requires a solution to effectively suggest, search, navigate, and access the growing volume of broadcast, cable, and
broadband video content choices including television shows, movies, user generated videos, music, and other personal content including photos and home
videos - whether that content was recorded via a DVR or delivered via broadband. In addition, proliferation of new consumption devices like tablets and
entertainment-oriented smartphones creates additional demand for solutions that enable viewing when and where convenient for the user across multiple
screens.
Advanced Television Technology as a Competitive Asset. Nearly all of the major television service providers in the United States including Comcast,
DIRECTV, DISH (formerly “EchoStar”), Time-Warner Cable, and others, are offering DVR technology to their customers. In addition, some are developing
strategies to address (albeit in very diverse ways) the proliferation of broadband video and alternate devices. Some of these companies have indicated they
consider such services a competitive tool to help differentiate their pay television services by offering their customers more programming features. We believe
that the combination of our award winning, easy to use interface and famous brand, hosted services, and customized advanced television solutions will drive
higher consumer satisfaction and revenue for those operators who deploy our product offerings enabling them to more effectively attract and retain consumers
to their own offerings.
The Changing Television Advertising & Audience Measurement Industry. The decline of linear television viewing, which is now only approximately
40% of viewing on the TiVo Premiere platform, along with the proliferation of additional content choices is requiring television advertisers to evaluate new
and different ways to reach consumers and measure their interactions with content and advertising. The DVR and other new consumer electronic devices
which access broadband video have given viewers the freedom to view content when they want; and this time shifting has made it more difficult for
advertisers to be assured that their commercials will be viewed by audiences at the regularly scheduled time the program is aired by network or local
television stations. DVRs, in particular, allow viewers the freedom to fast forward through all or a portion of commercial advertising incorporated into
television and other programs, which means that advertisers are not assured that their commercials will be viewed at all. TiVo offers other programming
options, such as video delivered by broadband to the television, which may result in further audience fragmentation.
In addition, subject to its privacy policy and applicable laws, TiVo collects data that allows it to anonymously (except in cases where end-users have
specifically opted-in to be identified such as the participants in our consumer panels) measure the viewing of television programs and commercials in a
manner that TiVo believes is significantly more accurate and insightful than the traditional approach to television measurement practiced by companies like
Nielsen Media. This traditional approach is gradually being replaced by alternate forms of measurement which TiVo is uniquely positioned to provide. TiVo
uses second-by-second viewing data from a large national sample of our set-top boxes to create highly detailed statistics which are not subject to the
limitations of Nielsen's minute by minute approach and program-based ratings and should therefore become more and more valuable to television advertisers
and programmers.
Our Strategy
We believe we have created a unique set of technologies, products, and services that meet the needs of consumers, television service providers, and the
advertising community. Our goal is to change the way consumers access and watch linear television, on-demand television, and broadband video by offering a
best in class user experience and to generate revenue through the licensing of our branded services and technology to television viewing households
worldwide.
Provide Compelling, Easy-to-Use Consumer Offering . Our advanced television solutions have an easy,
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