TiVo 2011 Annual Report Download - page 98

Table of Contents
the quarter ended January 31, 2012. $160.3 million of future license royalties will be recorded as Technology revenues on a straight-line amortization basis
over the term of the agreement through July 30, 2018. Any incremental monthly fees per DVR subscriber payable if the AT&T's subscriber base exceeds
certain pre-determined levels will be recognized as Technology revenues when reported to TiVo by AT&T.
Revenue from the base license under the agreement has been or is expected to be recognized as follows:
Fiscal Year Ending January 31, Technology Revenues
(in thousands)
2012 $ 2,029
2013 $ 24,350
2014 $ 24,350
2015 $ 24,350
2016 $ 24,350
2017 $ 24,350
2018 $ 24,350
2019 $ 12,175
Total $ 160,304
As a result of the settlement and patent cross-licensing agreement, TiVo expensed an estimate of $14.5 million in contingent legal fees recorded under
general and administration expenses in its statement of operations in the quarter ended January 31, 2012. TiVo has paid $4.3 million in contingent legal fees
during the quarter ended January 31, 2012. The remaining estimate of $10.2 million is recorded under accrued liabilities on TiVo's balance sheets at January
31, 2012 and will be paid out in whole or in part based on a favorable resolution of the Microsoft and ITC legal matters. The amount of contingent legal fees
may change in the future if TiVo's estimate of future litigation costs related to ITC and Microsoft cases differs materially from its current estimates or if the
Microsoft and ITC legal matters are not resolved favorably to TiVo.
20. DEVELOPMENT AGREEMENT AND SERVICES AGREEMENT WITH DIRECTV INC.
On September 3, 2008, TiVo extended its current agreement with DIRECTV for the development, marketing, and distribution of a new HD DIRECTV
DVR featuring the TiVo ® service.
Under this agreement, DIRECTV will pay a substantially higher monthly fee for households using the new high definition DIRECTV DVRs with TiVo
which is being deployed by DIRECTV, than the fees for previously deployed DIRECTV DVRs with TiVo service. DIRECTV will continue to pay the
previous monthly fee for all households using only the previously deployed DIRECTV DVRs with TiVo service. The fees paid by DIRECTV are subject to
monthly minimum payments that escalate during the term of the agreement.
Due to uncertainties over the ultimate profit margin on the development work, TiVo recognizes revenues and costs for the development of the TiVo
service for DIRECTV’s broadband-enabled HD DVR based on a zero profit model, which results in the recognition of equal amounts of revenues and costs
not to exceed the amount that we have the contractual right to bill DIRECTV upon the meeting of certain milestones under TiVo's revenue recognition
policies. During the twelve months ended January 31, 2012, 2011, and 2010, TiVo recognized $6.6 million, $6.5 million, and $8.9 million in technology
revenues, respectively and $6.6 million, $6.5 million, and $8.9 million in cost of technology revenues, respectively related to the development of the TiVo
service for DIRECTV’s broadband-enabled HD DVR.
In accordance with TiVo's revenue recognition policies, we have deferred costs of approximately $1.3 million related to development work for
DIRECTV. These costs are recorded on TiVo's consolidated balance sheets under deferred cost of technology revenues, current at January 31, 2012. These
costs will be recognized when related revenues are recognized.
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