You should read the following discussion and analysis in conjunction with the consolidated financial statements and the accompanying notes included in this report and our most recent annual report on Form 10-K filed on April 3, 2009, the sections entitled "Risk Factors" in Item 1A of our most recent annual report on Form 10-K and Part II, Item 1A of this quarterly report, as well as other cautionary statements and risks described elsewhere in this report and our most recent annual report on Form 10-K filed on April 3,2009, before deciding to purchase, sell or hold our common stock.

Company Overview

We are a leading provider of technology and services for digital video recorders. The subscription-based TiVo service redefines home entertainment by providing consumers with an easy way to record, watch, and control television and receive videos, pictures, and movies from cable, broadcast, and broadband sources. We offer features such as Season Pass™ recordings, WishList® searches, TiVoToGo™ transfers, access to broadband video content (including premium content delivered from Amazon's Video on Demand service, Netflix, and potentially, in the future Blockbuster), TiVo KidZone, and TiVo Online Scheduling. As of April 30, 2009, there were approximately 3.2 million subscriptions to the TiVo service. We distribute the TiVo DVR through consumer electronics retailers and through our on-line store at TiVo.com. Additionally, we provide the TiVo service through agreements with leading satellite

and cable television service providers such as DIRECTV, Comcast, Cablevision Mexico, and potentially, in the future Cox, as well as broadcasters such as Seven (Australia) and in the future Television New Zealand (TVNZ) (New Zealand). We also provide innovative marketing solutions for the television industry, including a unique platform for advertisers and audience research measurement.

Executive Overview

During the three months ended April 30, 2009, our net revenues decreased $5.9 million from the same prior year period. We recorded a net loss of $4.1 million for the three months ended April 30, 2009, as compared to a net income of $3.6 million in the same prior year period. During the three months ended April 30, 2009, we continued to experience a decrease in our TiVo-Owned subscription base as compared to the same prior year period. Our TiVo-Owned subscription gross additions for the quarter ended April 30, 2009 were 37,000, down 23% from 48,000 in the same prior year period. The loss of TiVo-Owned subscriptions was 67,000 subscriptions, leading to net subscription losses of 30,000 TiVo-Owned subscriptions during the quarter ended April 30, 2009. The continued decrease in TiVo-Owned subscription gross additions was primarily due to increased competition and adverse global economic conditions leading to a slow down in the sales of consumer electronic products and TiVo-enabled DVRs in particular.

For this fiscal year ending January 31, 2010, we expect to incur lower consumer hardware rebate expenses as we terminated our rebate programs on August 30, 2008 and do not have plans to engage in further rebate programs this year; however, we anticipate our hardware gross margin loss will increase, as we will have a lower benefit from the release of previously reserved inventory during this fiscal year, as compared to the fiscal year ended January 31, 2009. For the fiscal year ended January 31, 2009 we incurred $469,000 of rebate costs and recognized $4.9 million benefit from the utilization of previously reserved inventories.

In this fiscal year ending January 31, 2010, we expect to continue our efforts to increase our subscription base by adding 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 below and our mass distribution deals with Comcast, Cox, and Seven (Australia) are still in the early phases of development and/or deployment. We anticipate service revenue in the fiscal year ending January 31, 2010 to be lower than in fiscal year 2009 as revenues from new TiVo-Owned subscriptions, advertising sales, audience research measurement sales, and from mass distribution partnerships including Comcast, Cox, Seven (Australia), and others are expected to be more than offset by the continued decline of product lifetime subscription related revenues as such revenues become fully recognized and continued subscription losses in our TiVo-Owned and MSOs/Broadcasters' subscriptions.

The TiVo service on Comcast is available in its initial market, Comcast's New England Division, which includes metro Boston, Southeast Massachusetts, New Hampshire, and Connecticut, with the rollout process expected to continue to additional markets beginning with Comcast's Chicago market. Trials, related to the TiVo service on Cox, are underway and we expect market launch to occur this fiscal year.

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, Seven (Australia), 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.

                                                                                          Three Months Ended
                                                   April 30,     Jan 31,     Oct 31,     July 31,     April 30,     Jan 31,     Oct 31,     July 31,
(Subscriptions in thousands)                         2009         2009        2008         2008         2008         2008        2007         2007
TiVo-Owned Subscription Gross Additions:                  37          59          44           36            48         109          69           41
Subscription Net Additions/(Losses):
TiVo-Owned                                               (30 )        (4 )       (28 )        (42 )         (17 )        33           4          (19 )
MSOs/Broadcasters                                       (109 )      (121 )      (135 )       (136 )        (128 )      (155 )      (134 )       (126 )

Total Subscription Net Additions/(Losses)               (139 )      (125 )      (163 )       (178 )        (145 )      (122 )      (130 )       (145 )
Cumulative Subscriptions:
TiVo-Owned                                             1,624       1,654       1,658        1,686         1,728       1,745       1,712        1,708
MSOs/Broadcasters                                      1,572       1,681       1,802        1,937         2,073       2,201       2,355        2,489

Total Cumulative Subscriptions                         3,196       3,335       3,460        3,623         3,801       3,946       4,067        4,197
Fully Amortized Active Lifetime Subscriptions            215         225         236          194           163         175         190          180
% of TiVo-Owned Cumulative Subscriptions paying
recurring fees                                            59 %        59 %        60 %         60 %          61 %        61 %        60 %         59 %

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 subscriptions declined by 30,000 subscriptions slightly decreasing the TiVo-Owned installed subscription base to approximately 1.6 million subscriptions for the quarter ended April 30, 2009. We believe this decrease in total TiVo-Owned subscriptions was largely due to the continued decrease in subscription gross additions resulting from increased competition from DVRs distributed by cable and satellite providers as well as the impact of global economic conditions on sales of consumer electronic products. As a result of this competition and current economic conditions, we are cautious about our sales in the near term and we may experience further net losses in our TiVo-Owned subscription base.

As of April 30, 2009, approximately 215,000 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 32% of our cumulative lifetime subscriptions as compared to 24% for the same prior year period. We continue to incur minimal costs of service for these subscriptions without recognizing corresponding subscription revenues. We expect the number of fully amortized lifetime subscriptions will further increase during the fiscal year ending January 31, 2010.

Our MSOs/Broadcasters installed subscription base decreased by 109,000 subscriptions to approximately 1.6 million subscriptions as of April 30, 2009, as compared to the same prior year period. This decrease is due to DIRECTV's promotion of a competing DVR and 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 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 in 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:

                                                                                       Three Months Ended
                                                April 30,     Jan 31,     Oct 31,     July 31,     April 30,     Jan 31,     Oct 31,     July 31,
(Subscriptions in thousands)                      2009         2009        2008         2008         2008         2008        2007         2007
Average TiVo-Owned subscriptions                    1,639       1,656       1,675        1,712         1,737       1,727       1,708        1,719
TiVo-Owned subscription cancellations                 (67 )       (63 )       (72 )        (78 )         (65 )       (76 )       (65 )        (60 )

TiVo-Owned churn rate per month                      -1.4 %      -1.3 %      -1.4 %       -1.5 %        -1.3 %      -1.5 %      -1.3 %       -1.2 %

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 quarter ended April 30, 2009, as compared to 1.3% in the same prior year period and we expect churn to increase further in future periods as a result of increasing inactivations from product lifetime subscriptions, competition from other providers, the weak 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 CableCARD™ 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 TiVo-Owned acquisition costs for a given period divided by TiVo-Owned subscription gross additions for the same period. We define total acquisition costs as sales and marketing, subscription acquisition costs less net TiVo-Owned related hardware revenues (defined as TiVo-Owned related gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus TiVo-Owned related 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 typically incur limited or no acquisition costs for these new subscriptions, and so we also do not include MSOs/Broadcasters' sales and marketing, subscription acquisition costs, hardware revenues, or cost of hardware revenues in our calculation of TiVo-Owned SAC. 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.

                                                                                                   Three Months Ended
                                                Apr 30,          Jan 31,         Oct 31,         Jul 31,         Apr 30,          Jan 31,         Oct 31,         Jul 31,
Subscription Acquisition Costs                    2009            2009            2008            2008             2008            2008            2007            2007
                                                                                               (In thousands, except SAC)
Sales and marketing, subscription
acquisition costs                              $      982       $   1,690       $   2,301       $     888       $    1,159       $   7,195       $   9,050       $   9,015
Hardware revenues                                  (6,376 )       (10,712 )       (12,777 )       (11,699 )         (5,945 )       (16,066 )       (17,240 )        (6,199 )
Less: MSOs/Broadcasters-related hardware
revenues                                              (27 )           362           3,339           4,934              698              -               -               -
Cost of hardware revenues                          10,576          15,764          16,339          15,274           10,365          23,929          29,144          28,239
Less: MSOs/Broadcasters-related cost of
hardware revenues                                      (6 )          (385 )        (3,100 )        (4,524 )           (581 )            -               -               -

Total Acquisition Costs                             5,149           6,719           6,102           4,873            5,696          15,058          20,954          31,055

TiVo-Owned Subscription Gross Additions                37              59              44              36               48             109              69              41
Subscription Acquisition Costs (SAC)           $      139       $     114       $     139       $     135       $      119       $     138       $     304       $     757


                                                                                                   Twelve Months Ended
                                               April 30,         Jan 31,         Oct 31,        July 31,        April 30,         Jan 31,         Oct 31,        July 31,
Subscription Acquisition Costs                    2009            2009            2008            2008             2008            2008            2007            2007
                                                                                               (In thousands, except SAC)
Sales and marketing, subscription
acquisition costs                              $    5,861       $   6,038       $  11,543       $  18,292       $   26,419       $  31,050       $  33,770       $  29,736
Hardware revenues                                 (41,564 )       (41,133 )       (46,487 )       (50,950 )        (45,450 )       (41,798 )       (45,622 )       (41,858 )
Less: MSOs/Broadcasters-related hardware
revenues                                            8,608           9,333           8,971           5,632              698              -               -               -
Cost of hardware revenues                          57,953          57,742          65,907          78,712           91,677          92,052         111,760         114,606
Less: MSOs/Broadcasters-related cost of
hardware revenues                                  (8,015 )        (8,590 )        (8,205 )        (5,105 )           (581 )            -               -               -

Total Acquisition Costs                            22,843          23,390          31,729          46,581           72,763          81,304          99,908         102,484

TiVo-Owned Subscription Gross Additions               176             187             237             262              267             276             330             362
Subscription Acquisition Costs (SAC)           $      130       $     125       $     134       $     178       $      273       $     295       $     303       $     283

As a result of the seasonal nature of our subscription growth, total acquisition costs vary significantly during the year. Management primarily reviews the SAC metric on an annual basis due to the timing difference between our recognition of promotional program expense and the subsequent addition of the related subscriptions. For example, we have historically experienced increased TiVo-Owned subscription gross additions during the fourth quarter, however, sales and marketing, subscription acquisition activities occur throughout the year. As such, we have also provided SAC on a rolling twelve month basis.

During the three months ended April 30, 2009, our total acquisition costs were $5.1 million, a decrease of $547,000 from the same prior year period. Sales and marketing, subscription acquisition costs decreased by $177,000 primarily as a result of a reduction in rewards program spending as compared to the same prior year period, as the rewards program has been discontinued. Additionally, our TiVo-Owned hardware gross margin loss decreased by $370,000. This decline in hardware gross margin loss is largely related to the mix of DVRs sold during the quarter ended April 30, 2009 as compared to the same prior year period. However, SAC increased $20 because we sold fewer standard definition DVRs and thus recognized less of a benefit from utilization of previously impaired standard inventory, as compared to the same prior year period. During the quarter ended April 30, 2009 we had a net benefit of $259,000 mainly from previously reserved inventory as compared to $1.6 million utilization in the same prior year period. We don't expect further decreases in SAC and could experience modest increases.

During the twelve months ended April 30, 2009 our total acquisition costs were $22.8 million, a decrease of $49.9 million from the same prior year period. The decrease in total acquisition costs was primarily related to a decrease in our hardware gross margin loss of $29.4 million, this hardware gross margin loss improvement was primarily related to the reduction of rebate costs as we have transitioned away from the use of consumer rebates on DVRs coupled with a $4.9 million benefit from the utilization of previously impaired inventory. Additionally, we decreased sales and marketing, subscription acquisition costs by $20.6 million as we focused on managing our total acquisition costs during fiscal years 2009 and 2010.

The decrease in SAC of $143, for the twelve months ended April 30, 2009 as compared to the same prior year period, was largely related to decreased total acquisition costs of $49.9 million. Additionally, during the twelve months ended April 30, 2008 hardware gross margin included a combined inventory and inventory purchase commitment charge of $4.8 million related to TiVo Series2 standard definition DVR inventory, and a gross margin loss of $1.0 million related to a barter transaction related to TiVo Series2 standard definition DVR inventory. The hardware gross margin for the twelve months ended April 30, 2009 included a benefit of $3.6 million as previously impaired Series2 standard definition DVR inventory were sold through.

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:

                                                                                                       Three Months Ended
                                                        April 30,       Jan 31,       Oct 31,       July 31,        April 30,       Jan 31,       Oct 31,       July 31,
TiVo-Owned Average Revenue per Subscription               2009            2009          2008          2008            2008            2008          2007          2007
                                                                                                  (In thousands, except ARPU)
Total service revenues                                      42,129        44,115        47,676         48,174           48,443        51,025        52,940         53,376
Less: MSOs/Broadcasters-related service revenues            (4,522 )      (5,137 )      (5,772 )       (5,781 )         (5,699 )      (7,133 )      (6,599 )       (6,553 )

TiVo-Owned-related service revenues                         37,607        38,978        41,904         42,393           42,744        43,892        46,341         46,823
Average TiVo-Owned revenues per month                       12,536        12,993        13,968         14,131           14,248        14,631        15,447         15,608
Average TiVo-Owned per month subscriptions                   1,639         1,656         1,675          1,712            1,737         1,727         1,708          1,719

TiVo-Owned ARPU per month                              $      7.65      $   7.85      $   8.34      $    8.25      $      8.20      $   8.47      $   9.04      $    9.08

The decrease in TiVo-Owned ARPU per month for the quarter ended April 30, 2009 was largely due to a decline in our TiVo-Owned service revenues of $5.1 million, as compared to the same prior year period. This decrease was primarily due to a higher number of product lifetime subscriptions that are fully amortized, as compared to the same prior year period coupled with lower product lifetime revenues as the amortization period we use to recognize product lifetime subscriptions is longer. 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.

. . .