# TiVo Inc says it is "obligated" to honour the lifetime service agreement



## rwtomkins (Jul 14, 2003)

I went to the TiVo Inc corporate website today to get the company's address. While I was there I thought I'd take a quick look at the company's latest 10K to see if there was anything in it about lifetime service agreements.

The 10K is what we would call the annual report and accounts. It contains a section on "risk factors" in which companies are required to disclose all factors that could negatively affect the business.

On p26 of the 10K (filed on 31 March 2010) appears the following section:



> *The product lifetime subscriptions to the TiVo service that we currently are obligated to service commit us to providing services for an indefinite period. The revenue we generate from these subscriptions may be insufficient to cover future costs and will negatively impact our TiVo-Owned Average Revenue per Subscription.*
> 
> We offer a product lifetime subscription option to the TiVo service that commits us to provide the TiVo service for as long as the DVR is in service. We received the product lifetime subscription fee for the TiVo service in advance and amortize it as subscription revenue over 60 months for product lifetime subscriptions which is our current estimate of the service life of the DVR. If these product lifetime subscriptions use the DVR for longer than anticipated, we will incur costs such as telecommunications and customer support costs without a corresponding subscription revenue stream and therefore will be required to fund ongoing costs of service from other sources, such as advertising revenue. Additionally, if these product lifetime subscriptions use the DVR for longer than the period in which we recognize revenue, our average revenue per subscription ("ARPU") for our TiVo-Owned subscriptions will be negatively impacted as we continue to count these customers as subscriptions without corresponding subscription revenue thus lowering our average revenues across our TiVo-Owned subscription base. As of January 31, 2010, we had approximately 279,000 product lifetime subscriptions that had exceeded the 60 month period we use to recognize product lifetime subscription revenues and had made contact with the TiVo service within the prior six-month period. This represents approximately 45% of our cumulative lifetime subscriptions as compared to 34% in fiscal year ended January 31, 2009. We will continue to monitor the useful life of a TiVo-enabled DVR and the impact of higher churn, increased competition, and compatibility of our existing TiVo units with high-definition programming. Future results will allow us to determine if our useful life is shorter or longer than currently estimated, in which case we may revise the estimated life and we would recognize revenues from this source over a shorter or longer period.


I found it interesting and I thought you might too.


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## jay_man2 (Sep 15, 2003)

What did you find so interesting about it?


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## Automan (Oct 29, 2000)

jay_man2 said:


> What did you find so interesting about it?


Because in the UK they are not honouring it and are pulling the plug on the Tivo Service on June 1st 2011.

Automan.


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## sculptor (Jan 7, 2003)

Does this mean they didn't expect the tivo box to last longer than 5 years?

I had to upgrade the drive after about 7 years.


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## TCM2007 (Dec 25, 2006)

They expected for accounts purposes to last an average of five years.

This simply recordes for accounting reasons that there is an open ended comitment created by lifetimes of a cost with no revenues.

The numbers are interesting. Shows how tiny the UK is!


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## cyril (Sep 5, 2001)

They probably consider any box to be end of life 10 years after manufacture, which is probably about 2011 for the last ever uk series one.


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## mikerr (Jun 2, 2005)

TCM2007 said:


> The numbers are interesting. Shows how tiny the UK is!


in the past maybe - just 35,000 Thomson S1 boxes. Be honest - the man in the street hasn't really heard of tivo in the UK.

The VM deal will make the UK a more sizeable proportion of total TiVo subscribers 
VM has 3 million boxes and *has stated they'll have TiVo software on every one (inc non-PVRs).*

Will TiVo count them all as subscribers, or just the PVR version currently available?


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## TCM2007 (Dec 25, 2006)

Nearer 40k at one point:

http://archive.tivocommunity.com/tivo-vb/showthread.php?postid=1042096#post1042096

But still tiny.


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## spitfires (Dec 19, 2006)

TCM2007 said:


> But still tiny.


Good point. If "279,000" is "45%" that makes the number of US lifers = 620,000. Say a 50/50 split (in the absence of any other numbers) between lifers and monthly subs, that makes the US market 1,240,000.

(Course not all of these are S1s but that's not the point.)

So our 40k represents a mere 3.1% of total sales. 

(And in reality will be less than that since the numbers in the report are _surviving_ Tivos not total sold.)

If we speculate there are 4k Tivos left in the UK then that's a trifling 0.3% of Tivos still running. Yep, I'd happily chop them off given the chance to double the total sales with a deal with VM! 

E.&O.E.

EDIT: and if (as it's looking from the totally unofficial poll) there's a 50/50 split between those that could "transition" to VMTiVo and those that can't, then you've actually angered a paltry 0.15% of the total customer base. Drop them in a heartbeat I'd day.


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## Trinitron (Jan 20, 2003)

spitfires said:


> Good point. If "279,000" is "45%" that makes the number of US lifers = 620,000. Say a 50/50 split (in the absence of any other numbers) between lifers and monthly subs, that makes the US market 1,240,000


But there are other numbers (and yours is a pretty good guess of TiVo owned subscriptions)!

From the Q3 2010 SEC filing:

```
Three Months Ended
(Subscriptions in thousands)	Oct 31, 2010
	
TiVo-Owned Subscription 
Gross Additions:                    35

Subscription Net Losses:	
TiVo-Owned			   (45)
MSOs/Broadcasters	           (67)
Total Subscription Net Losses	  (112)
	
Cumulative Subscriptions:	
TiVo-Owned	                  1321
MSOs/Broadcasters	           951
Total Cumulative Subscriptions	  2272
	
Fully Amortized 
Active Lifetime Subscriptions	   282
	
% of TiVo-Owned Cumulative	
Subscriptions paying 
recurring fees			    56%
```


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## dmeldrum (Jan 3, 2002)

TCM2007 said:


> Nearer 40k at one point:
> 
> But still tiny.


38k is the cumulative subscriber numbers, but does not mean that there were 38k active subscriptions at any time. Anyone selling their TiVo prior to getting a lifetime subscription would generate a second subscription.


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## mikerr (Jun 2, 2005)

> (Subscriptions in thousands)	Oct 31, 2010
> ...
> Total Cumulative Subscriptions 2272


So there are only 2.2 million tivo users (or less) _worldwide _?


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## steveroe (Oct 29, 2002)

> We offer a product lifetime subscription option to the TiVo service that commits us to provide the TiVo service for as long as the DVR is in service.


Which is a pretty different definition of lifetime service than we've been going by lately ("lifetime of the service")


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## Trinitron (Jan 20, 2003)

steveroe said:


> Which is a pretty different definition of lifetime service than we've been going by lately ("lifetime of the service")


Not really. It can just as easily be read as "we will not charge lifetime subscribers while there is a service to offer".


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## Trinitron (Jan 20, 2003)

mikerr said:


> So there are only 2.2 million tivo users (or less) _worldwide _?


Yep. It will be interesting to see how the numbers change over the next few quarters - will it tell us, for instance, how many UK subscribers there were at the end?


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## Steve_K (May 5, 2001)

rwtomkins said:


> . . .I found it interesting and I thought you might too.


yes, many thanks

got to be careful with 10k's though, they have to take a prudent view on liabilities and couldn't be used against them

But that 60 month figure certainly shows how ridiculous those lifetime subscrition was only worth £200/£10 = 20 months argments some have come up with here


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## spitfires (Dec 19, 2006)

Steve_K said:


> But that 60 month figure certainly shows how ridiculous those lifetime subscrition was only worth £200/£10 = 20 months argments some have come up with here


Not really - the 20 month argument is what a UK judge would use in assessing what benefit you've had from your use of the TiVo. Has nothing to do with how TiVo amortise the revenue.


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## spitfires (Dec 19, 2006)

mikerr said:


> So there are only 2.2 million tivo users (or less) _worldwide _?



Shows how important the VM deal is to TiVo (and thence how much TiVo aren't going to do anything to upset them!)

.


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## Automan (Oct 29, 2000)

spitfires said:


> Shows how important the VM deal is to TiVo (and thence how much TiVo aren't going to do anything to upset them!)


Of course if Tivo US had done another Deal with Sky UK they would have had a potential for another 10 million customers with very low install costs.

Automan.


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## cwaring (Feb 12, 2002)

Once bitten, twice shy?


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## TCM2007 (Dec 25, 2006)

mikerr said:


> So there are only 2.2 million tivo users (or less) _worldwide _?


Yes, it peaked some years ago. Subscriber numbers and profits have been falling (or rather losses increasing) for a while. It's one reason that deals like VM are so attractive; and that keeping the S1 data going an unaffordable luxury.


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## spitfires (Dec 19, 2006)

Automan said:


> Of course if Tivo US had done another Deal with Sky UK they would have had a potential for another 10 million customers with very low install costs.


Indeed, and despite getting burnt before, I expect they would have been amenable to a Sky deal.

Different business ethos though; BSkyB (like BT) want everything in-house and under direct control, Virgin (like Sainsbury) will outsource _everything_ but try and retain control by other methods.


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## mikerr (Jun 2, 2005)

TiVo currently have 2.2million subs - VM doubles that - it'll make the UK TiVo's "premier" (!) market.


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## Karnak (Jan 13, 2003)

If VM has ~4 million customers how many do you realistically think will get a TiVo in the next year or two?

I think saying it'll double TiVo's market is rather ambitious.


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## TCM2007 (Dec 25, 2006)

Once it's exhausted its stocks of V+ units, it's hard to see that all new installs won't be TiVo. They'll drop the £3 within a year.


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## Karnak (Jan 13, 2003)

I agree that it'll do well... I just think that 50% of virgin customers seems a little high.

I'm just saying that I doubt _that_ large a proportion have V++. I know there was some talk of bringing some sort of TiVo like UI to non DVR boxes on virgin but still....


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## mikerr (Jun 2, 2005)

It's been said a few times in various releases, but here's one:



> *Virgin Media*'s director of digital entertainment Cindy Rose:
> "we intend to *migrate our entire television customer base over to TiVo* as our standard product within a matter of years, and not many years."


http://paidcontent.co.uk/article/41...ias-cindy-rose-on-the-connected-tv-explosion/


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## spitfires (Dec 19, 2006)

^ Exactly, and because they are only rented, VM can swap out the existing (non TiVo) boxes at any time if they wish.

.


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## OzSat (Feb 15, 2001)

TCM2007 said:


> Once it's exhausted its stocks of V+ units, it's hard to see that all new installs won't be TiVo. They'll drop the £3 within a year.


I don't think it will be dropped - I guess its TiVo's own cut.

The £3 will be the difference between the TiVo extras working on a TiVo box - or being disabled on a TiVo install with no sub paid.


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## Steve_K (May 5, 2001)

TCM2007 said:


> Yes, it peaked some years ago. Subscriber numbers and profits have been falling (or rather losses increasing) for a while. It's one reason that deals like VM are so attractive; and that keeping the S1 data going an unaffordable luxury.


But strangely their share price has risen 30% over the last 6 months and more relevantly ourperformed the DOW and matched the NASDAQ. The USA tends to value high tech companies differently than we do over here but no one is rushing to dump TiVo shares just yet.

_link_


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## TCM2007 (Dec 25, 2006)

Lots of things can make that happen. Like rumours that Apple will buy them.


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## Jo.Cassady (Jul 21, 2002)

mikerr said:


> It's been said a few times in various releases, but here's one:
> 
> http://paidcontent.co.uk/article/41...ias-cindy-rose-on-the-connected-tv-explosion/


That's pretty exciting! Virgin Media FTW! I love you, Richard Branson <3


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## cwaring (Feb 12, 2002)

Jo.Cassady said:


> I love you, Richard Branson <3


I'm sure he's delighted, but he's still nothing to do with VM


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## Karnak (Jan 13, 2003)

I think he might still be a pretty hefty shareholder.

Aside from that, you're right, he has no involvement.


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## worm (Feb 10, 2005)

4.8% apparently, down from around 10% when the initial deal was done.

source


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