TiVo 2013 Annual Report Download - page 46

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Table of Contents
balance sheets until later when related revenues from service fees are received and are first recognized as technology revenues by us until
the previously deferred costs of development are fully expensed. This recognition of service fees as technology revenues will have the effect
of lowering ARPU for certain of our MSO subscriptions until such costs of development are fully expensed. Additionally, the ARPU for
subscriptions generated from different MSOs may vary significantly as a result of these factors and other factors such as the size of such
MSO's subscription base and the existence of financial guarantees and exclusivity commitments from certain MSOs and how subscriptions
are defined in each such agreement.
We calculate ARPU per month for TiVo-Owned subscriptions by subtracting MSOs'-related service revenues (which includes MSOs
subscription service revenues and MSOs’-related advertising and audience research revenues) from our total reported net service revenues
and dividing the result by the number of months in the period. We then divide the resulting average service revenue by Average TiVo-Owned
subscriptions for the period, calculated as described above for churn rate. The following table shows this calculation:

   

Total Service revenues $138,835 $133,725 $131,341
Less: MSOs’-related service revenues (37,006)(25,694)(17,047)
TiVo-Owned-related service revenues 101,829 108,031 114,294
Average TiVo-Owned revenues per month 8,486 9,003 9,525
Average TiVo-Owned per month subscriptions 987 1,062 1,174
TiVo-Owned ARPU per month $8.60 $8.48 $8.11
The increase in TiVo-Owned ARPU per month for the fiscal year ended January 31, 2014 as compared to the same prior year period was
due to an increase in our audience research measure revenues associated with our acquisition of TRA.
We calculate ARPU per month for MSOs’ subscriptions by first subtracting TiVo-Owned-related service revenues (which includes TiVo-
Owned subscription service revenues and TiVo-Owned related advertising revenues) from our total reported service revenues. Then we
divide average revenues per month for MSOs’-related service revenues by the average MSOs’ subscriptions for the period. The following
table shows this calculation:

   

Total Service revenues $138,835 $133,725 $131,341
Less: TiVo-Owned-related service revenues (101,829)(108,031)(114,294)
MSOs’-related service revenues 37,006 25,694 17,047
Average MSOs' revenues per month 3,084 2,141 1,421
Average MSOs’ per month subscriptions 2,656 1,651 849
MSOs’ ARPU per month $ 1.16 $ 1.30 $ 1.67
The MSOs’ related service revenues for the fiscal year ended January 31, 2014 decreased $0.14 per subscription to $1.16 per
subscription, as compared $1.30 for the same prior year period. This decrease in MSOs' ARPU per month is due to the increased number of
average MSO monthly subscriptions combined with the fact that subscription additions from some newly launched deployment agreements,
including Virgin, which is a significant driver of our MSO subscription growth, do not necessarily correspond to an increase in service
revenues as the cost of development for certain MSO customers has been deferred on our consolidated balance sheet and such MSO service
fees are being first recognized as technology revenues until the previously deferred costs of development related to such MSO customers are
fully expensed. This recognition of service fees as Technology revenues has the effect of lowering MSO ARPU per month until such costs of
development are fully expensed, which for Virgin occurred during the last quarter of the fiscal year ended January 31, 2014. Additionally, our
MSO ARPU per month is impacted by the fact that DIRECTV's fixed minimum fee commitment (which extends through the term of our
agreement with DIRECTV which expires on February 15, 2015 unless extended until February 15, 2018 by DIRECTV) is being spread over
a declining DIRECTV subscription base.
44