Redbox 2004 Annual Report Download - page 6

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2
Coin services
We estimate that at any one time, there is approximately $10.5 billion worth of coin sitting idle in households in the
United States. In 2004, consumers processed more than $2.1 billion worth of coin through our coin-counting machines.
We own and service all of our coin-counting machines, providing a “turn-key, headache-free” service to retailers. Our
machines are easy to use, highly accurate, durable, easy to service and capable of processing up to 600 coins per minute.
Consumers feed loose change into the machines, which count the change and then dispense vouchers or, in some cases, issue
e-payment products, at the consumer’s election. Each voucher lists the dollar value of coins counted, less our transaction fee,
which is typically 8.9% of the value of each transaction. Our patented, proprietary technology helps us to maintain high up-
time, remotely monitor performance and minimize the potential for losses associated with voucher fraud.
Since we pay a percentage of our transaction fees to our retail partners, our coin services benefit our retail partners by
providing an additional source of revenue. In addition, third party studies show that our coin services increase foot traffic in
our retail partners’ stores and that approximately 45% of our customers spend all or a part of the proceeds of their vouchers in
the store. Our leading coin services retail partners include The Kroger Co. and Albertson’s, Inc. supermarket chains.
Entertainment services
We estimate that the market for our entertainment services is approximately $1.1 billion in the United States. We
believe we are the leading owner and operator of skill-crane and bulk vending machines in the United States.
Our entertainment services machines consist primarily of skill-crane machines, bulk vending, kiddie rides and video
games, which are installed in more than 18,000 retail locations, totaling more than 171,000 pieces of equipment. The
majority of our entertainment services revenue is derived from skill-crane machines that dispense plush toys, novelties and
other items. For each play, customers maneuver the skill-crane into position and attempt to retrieve the desired item in the
machine’s enclosed display area before play is ended. We utilize appealing displays of quality merchandise, new product
introductions and other merchandising techniques to attract new and repeat customers. Our leading entertainment services
partners include Wal-Mart, Inc. and Denny’s Corporation.
Since we pay our retail partners a portion of the fee per play, our entertainment services machines, like our coin-
counting machines, provide an additional revenue stream for our retail partners. In addition, our entertainment services
machines add an element of entertainment for consumers. As with our coin services business, we own and service all of our
entertainment machines, providing a convenient service to retailers.
E-payment services
We estimate that the e-payment services market is approximately $1.3 billion in the United States. We offer e-payment
services, including loading prepaid wireless accounts, reloading prepaid MasterCard
®
cards and prepaid phone cards and
providing payroll card services. We believe these and other e-payment services represent a significant growth opportunity for
us. We offer various e-payment services through point-of-sale terminals, stand-alone e-payment kiosks and e-payment
enabled coin-counting machines in supermarkets, drugstores, universities, shopping malls and convenience stores. These
services provide an easy way for consumers to perform a variety of useful transactions without having to obtain a bank
account or credit card. Our key e-payment services partners include the Albertson’s, Inc. supermarket chain and the
Walgreens Co. and CVS Corporation drug stores.
We generate revenue for ourselves and pay our retail partners a fee through our commissions earned on the sales of e-
payment services. We have relationships with national wireless carriers, such as Sprint, Verizon, T-Mobile, Virgin Mobile
and Cingular/AT&T Wireless. As part of our strategy to increase our e-payment services business, we acquired two regional
e-payment businesses in 2004.
Competitive strengths
We believe our key competitive strengths are:
Market leadership. We are the market leader in the self-service coin-counting services market and we believe we are
the leader in the skill-crane and bulk vending markets. We own and operate the only multi-national fully automated network
of self-service coin-counting machines in the United States, Canada and the United Kingdom. To date, we have installed
more than 12,000 of our coin-counting machines in those countries, which account for approximately 85% of the installed
base in those markets. Currently, we estimate that 75% of the US population lives within five miles of one of our coin-
counting machines. We estimate that there is $10.5 billion worth of coin sitting idle in US households alone. Our coin-