You should read the following discussion and analysis in conjunction with the consolidated financial statements and the notes included elsewhere in this annual report and the section "Risk Factors" in Item 1A, as well as other cautionary statements and risks described elsewhere in this report, before deciding to purchase, sell or hold our common stock.

Executive Overview and Outlook of Financial Results

In the fiscal year ended January 31, 2009 TiVo recorded net income of $103.6 million, which included a receipt of $103.3 million, net of tax, in litigation proceeds and interest from EchoStar. The net income for the fiscal year ended January 31, 2009 reflects $104.6 million in litigation proceeds received from EchoStar. This amount was recorded as $(87.8) million in litigation proceeds within the operating expenses section of the consolidated statement of operations and $16.8 million in interest income. Additionally, we recorded $1.3 million in tax expense related to the receipt of these monies. There is no similar transaction recorded in the consolidated statement of operations for the fiscal year ended January 31, 2008. As of January 31, 2009, the Company had over $200 million in cash, cash equivalents, and short-term investments and no debt.

During the fiscal year ended January 31, 2009, our service revenues decreased by 11% or $23.1 million over the prior fiscal year due to a decrease of 91,000 TiVo-Owned subscriptions combined with an increase in the number of months over which we recognize product lifetime subscription revenues. Additionally, we continue to experience a decline in our MSOs/Broadcaster installed subscription base resulting in a decrease to our total cumulative subscription base. The loss of MSOs/Broadcaster subscriptions is a result of DIRECTV not currently deploying new TiVo boxes and our mass distribution deals with Comcast, Cox, and DIRECTV being still in development and/or the early phases of deployment.

Due to current economic conditions, on November 18, 2008, we reduced our operational expenses, primarily through a reduction in headcount of approximately 7% or 37 employees. We incurred pre-tax charges of approximately $1.0 million, for employee-related severance benefits and out-placement costs in the quarter and fiscal year ended January 31, 2009. We expect annual savings of approximately $5.1 million as a result of this reduction in headcount.

In this fiscal year ending January 31, 2010, we expect to continue our efforts to add new subscriptions through our mass distribution partnerships such as Comcast and through our TiVo-Owned direct and retail sales. However, we expect continued losses in our installed base of MSOs/Broadcasters subscriptions as DIRECTV will not deploy new TiVo boxes prior to the launch of the new HD platform described in the Significant Relationships section of Item 1. Business, and our mass distribution deals with Comcast, Cox, and Seven (Australia and in the future New Zealand) are still in development and/or the early phases of deployment.

Service revenues may well be lower in the fiscal year ending January 31, 2010 than in fiscal year 2009 as revenues from new TiVo-Owned subscriptions are expected to be more than offset by the continued decline of product lifetime subscription related revenues as such revenues become fully recognized. Additionally, mass distribution partnerships including Comcast, Cox, Seven (Australia and in the future New Zealand), and others are in the early phases of development or deployment and will be more than offset by our continued subscription losses from our DIRECTV subscriptions, as the HD DIRECTV DVR with TiVo service will not be available until calendar year 2010.

Key Business Metrics

Management periodically reviews certain key business metrics in order to evaluate our operations, allocate resources, and drive financial performance in our business. Management monitors these metrics together and not individually as it does not make business decisions based upon any single metric.

Subscriptions. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our relative position in the marketplace and to forecast future potential service revenues. Below is a table that details the change in our subscription base during the last three fiscal years. The TiVo-Owned lines refer to subscriptions sold directly or indirectly by TiVo to consumers who have TiVo-enabled DVRs and for which TiVo incurs acquisition costs. The MSOs/Broadcasters lines refer to subscriptions sold to consumers by MSOs/Broadcasters such as DIRECTV, Cablevision Mexico, and Comcast and for which TiVo expects to incur little or no acquisition costs. Additionally, we provide a breakdown of the percent of TiVo-Owned subscriptions for which consumers pay recurring fees, including on a monthly and a prepaid one, two, or three year basis, as opposed to a one-time prepaid product lifetime fee.

                                                     Fiscal Year Ended January 31,
  (Subscriptions in thousands)                      2009           2008         2007
  TiVo-Owned Subscription Gross Additions:             187            276         429
  Subscription Net Additions/(Losses):
  TiVo-Owned                                           (91 )           19         235
  MSOs/Broadcasters                                   (520 )         (518 )      (155 )

  Total Subscription Net Additions/(Losses)           (611 )         (499 )        80
  Cumulative Subscriptions:
  TiVo-Owned                                         1,654          1,745       1,726
  MSOs/Broadcasters                                  1,681          2,201       2,718

  Total Cumulative Subscriptions                     3,335          3,946       4,444
  Fully Amortized Active Lifetime Subscriptions        225            175         165
  % of TiVo-Owned Cumulative                            59 %           61 %        58 %
  Subscriptions paying recurring fees

We define a "subscription" as a contract referencing a TiVo-enabled DVR for which (i) a consumer has committed to pay for the TiVo service and (ii) service is not canceled. We count product lifetime subscriptions in our subscription base until both of the following conditions are met: (i) the period we use to recognize product lifetime subscription revenues ends; and (ii) the related DVR has not made contact to the TiVo service within the prior six month period. Product lifetime subscriptions past this period which have not called into the TiVo service for six months are not counted in this total. Effective November 1, 2008, we extended the period we use to recognize product lifetime subscription revenues from 54 months to 60 months for all product lifetime subscriptions acquired on or before October 31, 2007. We now amortize all product lifetime subscriptions over a 60 month period. We are not aware of any uniform standards for defining subscriptions and caution that our presentation may not be consistent with that of other companies. Additionally, the subscription fees that some of our MSOs/Broadcasters pay us may be based upon a specific contractual definition of a subscriber or subscription which may not be consistent with how we define a subscription for our reporting purposes.

TiVo-Owned subscription net losses were 91,000 subscriptions decreasing the TiVo-Owned installed subscription base to approximately 1.7 million subscriptions for the fiscal year ended January 31, 2009 as compared to the fiscal year ended January 31, 2008. We believe the decrease in total TiVo-Owned subscriptions was largely due to the continued decrease in subscription gross additions because of increased competition from DVRs distributed by cable and satellite providers. As a result of this competition and current economic conditions and our efforts to manage our subscriber acquisition costs, we are cautious about our sales in the near term and may well experience further net losses in our TiVo-Owned subscription base. MSOs/Broadcasters installed subscription base decreased by 520,000 subscriptions to 1.7 million subscriptions as of January 31, 2009 as compared to the same prior year period. This decrease is due to DIRECTV's promotion of a competing DVR service and our other mass distribution deals being still in the early phases of development and/or deployment. We have agreed to work with DIRECTV to develop a version of the TiVo service for DIRECTV's broadband-enabled HD DVR platform which we expect to launch to consumers in calendar year 2010.

TiVo-Owned subscription net additions were 19,000 subscriptions slightly increasing the TiVo-Owned installed subscription base to 1.7 million subscriptions for the fiscal year ended January 31, 2008 as compared to the fiscal year ended January 31, 2007. TiVo-Owned subscription net additions decreased by 216,000, from 235,000 TiVo-Owned subscriptions net additions in the prior fiscal year period to 19,000 TiVo-Owned subscription net additions in the fiscal year ended January 31, 2009. We believe this decrease was largely due to lower gross additions because of increased competition from DVRs distributed by cable and satellite providers, including DIRECTV's non-TiVo products, as well as from a weaker economic environment and from an increase in churn resulting from a larger subscription base.

As of January 31, 2009, approximately 225,000 product lifetime subscriptions had exceeded the period we use to recognize product lifetime subscription revenues, but had made contact to the TiVo service within the prior six months. Such TiVo product lifetime subscriptions represent approximately 34% of our cumulative lifetime subscriptions as

compared to 26% for the fiscal year ended January 31, 2008. We continue to incur minimal costs of service for these subscriptions without recognizing corresponding subscription revenues. Effective November 1, 2008, we extended the period we used to recognize product lifetime subscription revenues from 54 months to 60 months for the product lifetime subscriptions acquired on or before October 31, 2007 and such change is being recognized on a prospective basis. We now amortize all product lifetime subscriptions over a 60 month period. Refer to Critical Accounting Estimates "Recognition Period for Product Lifetime Subscriptions Revenues". There were no additions to the fully amortized active lifetime subscriptions during the quarter ended January 31, 2009 since under the revised amortization period, product lifetime subscriptions that would have become fully amortized using the previous amortization period are not yet fully amortized subscriptions at January 31, 2009. We expect the number of fully amortized lifetime subscriptions to increase during the fiscal year ending January 31, 2010, however we cannot predict whether the cumulative number of fully amortized active lifetime subscriptions will increase or decrease as this will depend on churn of already fully amortized lifetime subscriptions and churn of subscriptions that will become fully amortized during the fiscal year ending January 31, 2010.

TiVo-Owned Churn Rate per Month. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our ability to retain existing TiVo-Owned subscriptions (including both monthly and product lifetime subscriptions) by providing services that are competitive in the market. Management believes factors such as service enhancements, service commitments, higher customer satisfaction, and improved customer support may improve this metric. Conversely, management believes factors such as increased competition, lack of competitive service features such as high definition television recording capabilities for our low cost product offerings, current economic conditions, and increased price sensitivity may cause our TiVo-Owned Churn Rate per month to increase.

We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned subscription cancellations in the period divided by the Average TiVo-Owned subscriptions for the period (including both monthly and product lifetime subscriptions), which then is divided by the number of months in the period. We calculate Average TiVo-Owned subscriptions for the period by adding the average TiVo-Owned subscriptions for each month and dividing by the number of months in the period. We calculate the average TiVo-Owned subscriptions for each month by adding the beginning and ending subscriptions for the month and dividing by two. We are not aware of any uniform standards for calculating churn and caution that our presentation may not be consistent with that of other companies.

The following table presents our TiVo-Owned Churn Rate per month information:

                                                Fiscal Year Ended January 31,
                                              2009              2008         2007
                                               in thousands, except percentages
    TiVo-Owned subscription cancellations        (278 )           (257 )      (194 )
    Average TiVo-Owned subscriptions            1,695            1,721       1,584
    Annual Churn Rate                             -16 %            -15 %       -12 %
    Number of Months                               12               12          12
    TiVo-Owned Churn Rate per month              -1.4 %           -1.2 %      -1.0 %

Included in our TiVo-Owned Churn Rate per month are those product lifetime subscriptions that have both reached the end of the revenue recognition period and whose DVRs have not contacted the TiVo service within the prior six months. Conversely, we do not count as churn product lifetime subscriptions that have not reached the end of the revenue recognition period, regardless of whether such subscriptions continue to contact the TiVo service. TiVo-Owned Churn Rate per month increased to 1.4% for the fiscal year ended January 31, 2009 and will likely increase further in future periods as a result of increasing churn from product lifetime subscriptions, competition from other providers, a weakening economy, and the growing importance of encrypted digital and high definition television recording capabilities which can only be accessed through either cable or satellite provided set top box or through a box which incorporates CableCARDTM technology.

Subscription Acquisition Cost or SAC. Management reviews this metric, and believes it may be useful to investors, in order to evaluate trends in the efficiency of our marketing programs and subscription acquisition strategies. We define SAC as our total acquisition costs for a given period divided by TiVo-Owned subscription gross additions for the same period. In the first fiscal quarter of 2008, we revised our definition of total acquisition costs. We now define total acquisition costs as sales and marketing, subscription acquisition costs less net TiVo-Owned related hardware revenues (defined as gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus TiVo-Owned cost of hardware revenues. The sales and marketing, subscription acquisition costs line item includes advertising expenses and promotion-related expenses directly related to subscription acquisition activities, but does not include expenses related to advertising sales. We do not include third parties subscription gross additions, such as MSOs/Broadcasters' gross additions with TiVo subscriptions, in our calculation of SAC because we incur limited or no acquisition costs for these new subscriptions. We are not aware of any uniform standards for calculating total acquisition costs or SAC and caution that our presentation may not be consistent with that of other companies.

                                                                  Fiscal Year Ended January 31,
                                                                2009           2008           2007
Subscription Acquisition Costs
Sales and marketing, subscription acquisition costs          $    6,038      $  31,050      $  20,767
Hardware revenues                                               (41,133 )      (41,798 )      (41,588 )
Less: MSOs/Broadcasters-related hardware revenues                 9,333             -              -
Cost of hardware revenues                                        57,742         92,052        112,505
Less: MSOs/Broadcasters-related cost of hardware revenues        (8,590 )           -              -

Total Acquisition Costs                                          23,390         81,304         91,684

TiVo-Owned Subscription Gross Additions                             187            276            429
Subscription Acquisition Costs (SAC)                         $      125      $     295      $     214

During the twelve months ended January 31, 2009, our total acquisition costs were $23.4 million and SAC was $125. Comparatively, total acquisition costs for the twelve months ended January 31, 2008 and 2007 were $81.3 million and $91.7 million, respectively and SAC was $295 and $214, respectively. The decrease in our total acquisition costs for the fiscal year ended January 31, 2009 as compared to the prior fiscal year is primarily a result of a reduction in our advertising efforts. Additionally, our TiVo-Owned hardware gross margin loss improved by $32.9 million, as compared to the prior fiscal year due to the mix of products sold during the year. A portion of this improvement in hardware gross margin loss is due to a benefit of $4.9 million resulting from the sales of previously impaired excess and obsolete inventory, combined with lower rebate expenses in the fiscal year ended January 31, 2009 as compared to the prior fiscal year. We don't expect further decreases in SAC and could experience modest increases.

SAC decreased by $170 or 57% for the fiscal year ended January 31, 2009 compared to the prior-year period primarily due to decreased sales and marketing, subscription acquisition cost spending to a lesser degree offset by a decreased number of gross subscription additions.

As a result of the seasonal nature of our subscription growth, SAC varies significantly during the year. Management primarily reviews this metric on an annual basis due to the timing difference between our recognition of promotional program expenses and the subsequent addition of the related subscription acquisition. For example, we have historically incurred increased sales and marketing expenses and hardware losses on sales to our retail customers during our third quarter in anticipation of new subscriptions that may be added during the fourth quarter and in subsequent periods in addition to those added during the third quarter.

Average Revenue Per Subscription or ARPU. Management reviews this metric, and believes it may be useful to investors, in order to evaluate the potential of our subscription base to generate revenues from a variety of sources, including subscription fees, advertising, and audience research measurement. ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues. As a result, you should not use ARPU as a substitute for measures of financial performance calculated in accordance with GAAP. Management believes it is useful to consider this metric excluding the costs associated with rebates, revenue share and other payments to channel because of the discretionary and varying nature of these expenses and because management believes these expenses, which are included in hardware revenues, net, are more appropriately monitored as part of SAC. We are not aware of any uniform standards for calculating ARPU and caution that our presentation may not be consistent with that of other companies.

We calculate ARPU per month for TiVo-Owned subscriptions by subtracting MSOs/Broadcaster-related service revenues (which includes MSOs/Broadcasters' subscription service revenues and MSOs/Broadcasters'-related advertising revenues) from our total reported net service revenues and dividing the result by the number of months in the period. We then divide by Average TiVo-Owned subscriptions for the period, calculated as described above for churn rate. The following table shows this calculation:

                                                            Fiscal Year Ended January 31,
TiVo-Owned Average Revenue per Subscription                2009          2008          2007
                                                             (In thousands, except ARPU)
Total Service revenues                                  $  188,408     $ 211,496     $ 198,924
Less: MSOs/Broadcasters'-related service revenues          (22,412 )     (27,440 )     (32,257 )

TiVo-Owned-related service revenues                        165,996       184,056       166,667
Average TiVo-Owned revenues per month                       13,833        15,338        13,889
Average TiVo-Owned per month subscriptions                   1,695         1,721         1,584

TiVo-Owned ARPU per month                               $     8.16     $    8.91     $    8.77

The decrease in TiVo-Owned ARPU per month for the fiscal year ended January 31, 2009 was largely related to the increase in amortization period of our product lifetime subscriptions. Effective November 1, 2008, we have extended the period we use to recognize product lifetime subscription revenues from 54 months to 60 months for all new and not fully amortized product lifetime subscriptions. We now amortize all product lifetime subscriptions over a 60 month period. Refer to Critical Accounting Estimates "Recognition Period for Product Lifetime Subscriptions Revenues." Due to this extended revenue recognition period and the reduction in our subscription rates in November 2008, we expect fiscal year 2010 TiVo-Owned ARPU per month to be lower. Additionally, impacting the decrease in our ARPU was an increase of approximately 50,000 TiVo-Owned product lifetime subscriptions that reached the end of the period we use to recognized product lifetime subscription revenue. These subscriptions are currently included in the Average TiVo-Owned per month subscriptions; however, there are no longer any corresponding revenues related to those subscriptions.

The increase in TiVo-Owned ARPU per month for the fiscal year ended January 31, 2008 was largely due to our sales programs which yielded a higher service plan rates for new TiVo-Owned subscriptions. This increase was partially offset by an increase of 10,000 TiVo-Owned product lifetime subscriptions that reached the end of the period we use to recognized lifetime subscription revenue.

We calculate ARPU per month for MSOs/Broadcasters' 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/Broadcasters'-related service revenues by the average MSOs/Broadcasters' subscriptions for the period. The following table shows this calculation:

                                                           Fiscal Year Ended January 31,
MSOs/Broadcasters' Average Revenue per Subscription      2009           2008           2007
                                                            (In thousands, except ARPU)
Total Service revenues                                $  188,408     $  211,496     $  198,924
Less: TiVo-Owned-related service revenues               (165,996 )     (184,056 )     (166,667 )

MSOs/Broadcasters'-related service revenues               22,412         27,440         32,257
Average MSOs/Broadcasters' revenues per month              1,868          2,287          2,688
Average MSOs/Broadcasters' per month subscriptions         1,939          2,481          2,836

MSOs/Broadcasters' ARPU per month                     $     0.96     $     0.92     $     0.95

Included in the MSOs/Broadcasters'-related service revenues for the fiscal year ended January 31, 2008 is $1.1 million of DIRECTV revenue that was deferred in fiscal year 2007 for DIRECTV's use on development work during fiscal year 2008. DIRECTV's right to use these deferred fees expired on January 31, 2008, consequently we recognized these deferred fees as service revenue for the fiscal year ended January 31, 2008. Additionally, beginning in February 2007, DIRECTV began paying us a monthly fee for all DIRECTV households with DIRECTV receivers with TiVo service similar to the lower amount paid by DIRECTV for households with DIRECTV receivers with TiVo service deployed since March 15, 2002, subject to a monthly minimum payment by DIRECTV.

The slight increase in ARPU per month for fiscal year ended January 31, 2009 as compared to the prior fiscal year was largely related to increased MSOs/Broadcasters'-related advertising revenues coupled with a decline in the average MSOs/Broadcasters' per month subscriptions, as compared to the prior fiscal year.

Critical Accounting Estimates

Critical accounting estimates are those that reflect significant judgments and uncertainties, and may potentially result in materially different results under different assumptions and conditions. We base our discussion and analysis on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles as described in Item 8. Note 2. "Summary of Significant Accounting Policies" in the notes to our consolidated financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. The results of this analysis form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions. For a detailed discussion on the application of these and other accounting estimates, see Item 8. Note 2. "Summary of Significant Accounting Policies" in the notes to our consolidated financial statements.

Recognition Period for Product Lifetime Subscriptions Revenues. From time-to-time TiVo has offered for general sale a product lifetime subscription option for the life of the DVR for a one-time, prepaid payment. During the first quarter of fiscal year ended January 31, 2007, we discontinued general sale of the product lifetime service option. During the fourth quarter ended January 31, 2008 we began offering product lifetime service subscriptions only to existing customers. During the quarter ended April 30, 2008, we began offering product lifetime service subscriptions to all customers. We perform a quarterly quantitative analysis of the expected life of a product lifetime subscription which incorporates historical and future churn rates. Effective November 1, 2007, we extended the period we use to recognize product lifetime subscription revenues from 48 months to 54 months for product lifetime subscriptions acquired on or before October 31, 2007 and such change is being recognized on a prospective basis. This change resulted in a reduction of service revenues of $2.5 million for the quarter and fiscal year ended January 31, 2008. During the . . .