TiVo 2015 Annual Report Download - page 78

Table of Contents
otherwise selling price is determined based on third
- party evidence ("TPE"). If neither VSOE nor TPE exist, the Company uses its best estimate of selling
price ("BESP") to allocate the arrangement consideration. The allocation of arrangement consideration may impact the amount and timing of revenue
recorded in the Consolidated Statements of Operations during a given period.
The Company accounts for cash consideration (such as sales incentives) that it gives to its customers or resellers as a reduction of revenue, rather
than as an operating expense unless the Company receives a benefit that is separate from the customer
’ s purchase from the Company and for which it can
reasonably estimate the fair value.
Amounts for fees collected relating to arrangements where revenue cannot be recognized are reflected on the Company ’ s balance sheet as
deferred revenue and recognized when the applicable revenue recognition criteria are satisfied.
CE and Service Provider Licensing
The Company licenses its proprietary IPG and Analog Content Protection ("ACP") technologies to consumer electronics (“
CE ” ) manufacturers,
integrated circuit makers, service providers and others. For agreements where license fees are based on the number of units shipped or number of
subscribers, the Company generally recognizes revenue from licensing technology on a per
- unit shipped model with CE manufacturers or a per - subscriber
model with service providers. The Company ’ s recognition of revenues from per - unit license fees is based on units reported shipped by the manufacturer.
CE manufacturers normally report their unit shipments to the Company in the quarter immediately following that of actual shipment by the manufacturer.
The Company's significant experience and established relationships with certain ACP technology licensing customers enables us to reasonably estimate
current period volume for purposes of recognizing revenue. Accordingly, revenue from these customers is recognized in the period the customer is
estimated to have shipped the units. Revenues from per - subscriber fees are recognized in the period the services are provided by a licensee, as reported to
the Company by the licensee. Revenues from annual or other license fees are recognized based on the specific terms of the license. For instance, major CE
IPG licensees have entered into agreements for which they have the right to ship an unlimited number of units over a specified term for a flat fee. The
Company records the fees associated with these arrangements on a straight
- line basis over the specified term. At times, the Company enters into IPG patent
license agreements in which it provides a licensee a release for past infringement as well as the right to ship an unlimited number of units over a future
period for a flat fee. In this type of arrangement, the Company generally uses BESP to allocate the consideration between the release for past infringement
and the go - forward patent license. In determining BESP of the past infringement component and the go - forward license agreement, the Company considers
such factors as the number of units shipped in the past and in what territories these units where shipped, the number of units expected to be shipped in the
future and in what territories these units are expected to be shipped, as well as the licensing rate the Company generally receives for units shipped in these
territories. As the revenue recognition criteria for the past infringement is generally satisfied on the execution of the agreement, the amount of consideration
allocated to the past infringement is generally recognized in the period the agreement is executed and the consideration allocated to the go
- forward license
agreement would be recognized ratably over the future license term. In addition, the Company enters into agreements in which the licensee pays the
Company a one - time fee for a perpetual license to its ACP technology. Provided that collectability is reasonably assured, the Company records revenue
related to these agreements when the agreement is executed as the Company has no significant continuing obligation and the amounts are fixed and
determinable.
The Company also generates advertising revenue through its IPGs and other platforms. Advertising revenue is recognized when the related
advertisement is provided. All advertising revenue is recorded net of agency commissions and revenue shares with service providers and CE
manufacturers.
Metadata Licensing
The Company licenses its Metadata to service providers, CE manufacturers and online portals among others. The Company generally receives a
monthly or quarterly fee from its licensees for the right to use the Metadata, receive regular updates to the Metadata and integrate the Metadata into their
own service. The Company recognizes revenue on a straight
- line basis over the period the licensee has the right to receive the Metadata service.
Discontinued Operations
- DivX and MainConcept
The Company generally licensed its DivX and MainConcept codecs for a per unit fee or an annual fee. The Company
’ s recognition of revenue
from per - unit license fees is based on units reported shipped by the manufacturer. CE manufacturers normally reported their unit shipments to the Company
in the quarter immediately following that of actual shipment by the manufacturer. Revenues from annual or other license fees were recognized based on the
specific terms of the
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