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Discussion Starter · #1 ·
Many people responding to D&M's purchase of RTV on Slashdot are saying that the lifetime subs are a liability instead of an asset. What do you think? Are lifetime subs an asset? Anyone remember the "on-screen" ads which RTV pushed onto the units? I wonder if D&M considers access to these machines worth their cost for pushing ads? Any thoughts?


Cheers
 

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I would say they're a liability to D&M because there's no income there. Monthly subs generate monthly revenue for the company. They LOVE monthly subs.
 

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are lifetime subs going to put any money in D&M's pocket? no, therefore it is not an asset.


does it cost D&M money to feed guide data to those lifetime units? yes, so it's a liability (they have to pay TMS every year for guide data rights). i think someone said 3¢ per customer per month to TMS plus costs of dial-up connections, but we don't know for sure.
 

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They're not liabilities - providing the guide data is cheap. We're a confined customer base - they can push ads, we must view them upon pausing. D+M - pause ad away!!
 

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Quote:
Originally posted by RandyL712
They're not liabilities...
i'll reenforce my previous statement. i think lifetime subscriptions are liabilities. there is no incoming cashflow from lifetime subscriptions themselves if you commit to keep them going (unless they get paid by other companies for displaying pause ads). there is only the expenses of TMS guide data, keeping a web server running, and paying earthlink for 200-minutes-per-month dial-up fees.


lifetime customers, on the other hand, are a different story. they can end up buying new DNNA-designed replaytv products because they already like the service they are getting, therefore it's important to keep current replaytv users happy.


also, let me make a point here that i don't entirely approve of pause ads. maybe, if it replaces the "press EXIT to return to live TV" dark blue banner, which is hella ugly.
 

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Lifetime subscribers are both a liability and an asset.


The liability is having to provide support and guide service for them without any on-going revenue.


The asset is that current replay users are potential future Denon/Marantz branded ReplayTV buyers. And it's MUCH easier to sell to existing customers than new customers.


So, since it appears D&M are planning on continuing to sell "ReplayTV" as a DVR/service, it'd be the ultimate in stupidity to blow off the existing customer base hoping to save some ongoing costs involved in providing guide data and SW updates to 4/5xxx users (especially, since most of the cost of providing the guide data will have to continue to provide guide data to new users).


As for the CA/Internet Sharing issue... D&M will have to get sued before we see what happens. The current lawsuit is against 'SonicBlue', after all.


CA should survive any court challenge. Internet sharing might have to be modified to survive. I hope it continues, since it's very handy to get shows that I missed for some reason.
 

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Totally agree with JimWCB on this one. As a 4500 lifetime sub, I probably am a liability in that D&M won't see any additional revenue for my consumption of guide info (although that incremental load is really small for network based PVRs). However, I will be at the front of the line for an additional unit if they appear to continue the spirit of this product (particularly in home streaming/sharing). As many on this forum will attest, this product REALLY starts to shine when you get two, three, or four of these things.. :D


Daniel
 

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I'm considering getting a third 5040 unit. If they had dumped my lifetime

activation on my existing two units, there's little chance I'd get a third unit.


As it stands, from the information I've seen so far, I'm grateful D&M bought

out Replay and there's plenty of goodwill generated towards their products.


I might be a small liability, but I doubt it's very noticeable. If they had

to maintain special servers and special contract just to service me, then

maybe, but as it stands, all the infrastructure and all the contracts need

to exist to service the monthly folks. The difference between supporting

0 dialup and 0 guide users and (hypothetical) 10,000 users is pretty

significant, but the difference between supporting 5,000 monthlies split

between ethernet and dialup, and 10,000 users is much less. Most of

the contracts charge you less per user as your numbers increase, so it

isn't a linear equation, and the biggest hump is the initial few.


The existing user base isn't quantified as an asset from an accounting

standpoint, but we are definitely an asset for the company. I don't

think MSFT sees their huge installed base as a liability even though

they still need to spend money on bug fixing and improvements and

they already got the money from me. Yeah I'm a liability on paper, but

it's nice to have a monopoly.


I'd argue that lifetime customers as a whole are probably a better group

to market to since we had the free cash flow to pony up $250 up front

per unit. That's not to say monthlies don't have money, just as a entire

group, the lifetimes probably have more free cash flow to spend on

bleeding edge stuff.


So yeah, we're probably a small liability on paper, but worth far more

as future repeat customers.
 

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If I was an advertiser for a pause ad, I would pay per viewer, no matter how many viewers were lifetime and how many were monthly. Maybe lifers would be less of an asset to D&M, but they could certainly bring some money in.
 

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Is everyone forgetting that life timers bring advertisement to D&M also. This brings new customers and more revenue.

I have many family members and friends that are now interested in these since I got one and they see how great it is. If you consider me a liability and remove the liability (me) then you also remove all future revenue from my advertising because there is no way I would let someone I know buy something when I just got screwed!


Out of Replaytv 100000 subscribers I bet close to 75% of them are lifetime subscribers. So lets say D&M says see ya. Well they just dropped 75% of free advertising and potential future revenue! Who is the idiot that would make that decision when they have already been having a hard time getting new customers.


D&M will support everyone, we all know it, so why discuss it. It would be a horrible mistake for them to not support life timers and they know this.


Oh and I bet our assets over power any liability! Bettings lines are open!
 

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As I wrote a few weeks ago, on an accounting basis, the lifetime subs are a balance sheet liability, but a positive force on revenue. The liability is the promise to provide the service -- a company must reflect the fact that they "owe" the service to customers.


However, Sonic Blue was not allowed to recognize $250 worth of revenue each time someone paid for a lifetime sub. Accounting rules require that you recognize the revenue only when you incur the costs associated with that revenue. Thus, the $250 of revenue has to be spread out equally over the esimated "lifetime" of the subscription (I'd guess less than 5 years).


Thus, D&M will be able to recognize a significant portion of the lifetime subscription revenue. No real cash flow will be coming in, but it is revenue for the P&L.
 

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If you look at lifetime subs from the eyes of the corporate pencil pusher, then they are a liability. One of the reasons many businesses get in trouble is that the accounting mentality alone too often rules in companies.


The pencil pusher will look for a direct corrolation between what goes out and what comes in such as " cost of goods sold" compared to "sales".


The good business person will look at the abstract and long term benefits of spending money that does not show a direct corrolation to income. A good example of that would be when a company buys out another and decides to save money on payroll by "running off" higher paid competent personel and hiring lower paid less competent (many times incompetent) personel in their place. In this case a reduction in payroll expense is seen immediately. The drop in revenue and/or productivity over the next few years, however, is always attributed to some other factors rather than the pencil pusher's actions.


As others have said in this string, current replay customers are valuable to the new owners because they provide word of mouth advertising, are potential buyers for future replay upgrades (ie:tivo's new program) and other D&M products. The monetary benefit of word of mouth is one of the hardest things for accounting types to put a value on.
 

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Of course a lot of the time new management is just getting rid of dead head, over the hill, hanging on for retirement employees. Of course these employees are very bitter because they were only really worth half what they were being paid and as such can not find a similar paying new job. :)
 

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Discussion Starter · #14 ·
Yeah... old people suck... Only new, young people should be allowed to stay working. Euthanize away!


Cheers


P.S. It is only a modest proposal...
 

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You guys are acting like SB took the $250 and spent it and D & M gets nothing. I think ICO-Jones is correct about the accounting rules. SB got $250 and the 1st year they "credit" $50, etc, etc.
 

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Quote:
Originally posted by adone36
You guys are acting like SB took the $250 and spent it and D & M gets nothing. I think ICO-Jones is correct about the accounting rules. SB got $250 and the 1st year they "credit" $50, etc, etc.
How you recognize revenue is not the same thing as how you spend/spent

the cash. Revenue recognition rules are there so people reading your

financial reports have an accurate picture of your business. They do *not*

dictate how you spend the cash. We already know SB has more liabilities

than assets so the cash is gone.
 

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Even if SonicBlue has deferred revenue on their bablance sheet from subscriptions, I don't see how that would transfer to D&M in an asset purchase. And they clearly will not be transferring cash to D&M.
 

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Quote:
Originally posted by Amazingly Smooth Yeah... old people suck... Only new, young people should be allowed to stay working. Euthanize away!
Hey, that's an idea... when folks turn 30 we can have a big show with people floating round and round before they are killed.


Of couse some people may not want to join the Carousel , so we'll need a police force to grab them.


"Fish, plankton, sea greens... protein from the sea!"

Box


Robert
 

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Quote:
Originally posted by acourvil
Even if SonicBlue has deferred revenue on their bablance sheet from subscriptions, I don't see how that would transfer to D&M in an asset purchase. And they clearly will not be transferring cash to D&M.
In fact, I think I read that D&M assumed $5M of their debt.


This talk about whether lifers are liabities or assets is pretty meaningless.


For example, someone who borrows $100K to get a college education may have a liability by the numbers, but may have gained a much more valuable asset in exchange. It all depends on how it is used.


If D&M uses lifers the right way, we'll be a great benefit. If not, a debilitating liability. They've been successful enough to earn the benefit of the doubt from me for now.


Tim
 
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