Redbox 2007 Annual Report Download - page 10

Competitive pressures could seriously harm our business, financial condition and results of operations.
Our coin-counting services faces competition from supermarkets, banks and other companies that purchase
and operate coin-counting equipment from companies such as ScanCoin AB, Cummins-Allison Corporation and
others. Our retailers may choose to replace our coin-counting machines with competitor machines and operate such
machines themselves or through a third party. In addition, retailers, some of which have significantly more
resources than we do, may decide to enter the coin-counting market. Some banks and other competitors already
provide coin-counting free of charge or for an amount that yields very low margins or that may not generate a profit
at all. An expansion of the coin-counting services provided by any of these competitors could materially and
adversely affect our business and results of operations.
Our entertainment services faces competition from a number of regional and local operators of entertainment
services equipment. Many of these competitors are engaged in expansion programs, and we experience intense
competition for locations. Our entertainment services equipment also competes with other vending machines, coin-
operated entertainment devices, and seasonal and bulk merchandise for sites within retail locations. We may be
unable to maintain current sites in retail locations or to obtain new sites in the future on attractive terms or at all. It is
possible that a well-financed vending machine manufacturer or other vending machine operator with existing
relationships with our retailers could compete with us in certain markets or capture additional market share at our
expense. In addition, retailers could decide to restructure or otherwise rethink the use of their locations or sites,
which could limit the amount of entertainment services we provide.
Our e-payment services, including our money transfer services, prepaid wireless and long distance accounts,
stored value cards, debit cards and payroll services, face competition from a variety of types of providers, including,
among others, national distributors of similar cards, other retailers who provide these services themselves, as well as
money transfer companies. Many of these providers are more established in selling their e-payment services than
we are and many invest more resources in providing such services to customers, such as InComm in the prepaid
wireless and long distance markets, Blackhawk Network in the stored value cards and debit card markets and
Western Union in the money transfer market. In addition, in order for us to provide many of our e-payment services,
we depend on relationships with third parties, such as national wireless carriers, national supermarket chains and
other retailers, money transfer agents and financial institutions. Accordingly, if we are unable to effectively market
our e-payment services or maintain and establish successful relationships with appropriate third parties, our
e-payment services will not be competitive.
In addition, the nature and extent of consolidation in markets where we install our machines and equipment,
particularly the supermarket and other retailing industries, could adversely affect our operations, including our
competitive position, as the number of our machine and equipment installations could be significantly reduced.
Litigation, arbitration, mediation, regulatory actions, investigations or other legal proceedings could result
in material rulings, decisions, settlements, fines, penalties or publicity that could adversely affect our busi-
ness, financial condition and results of operations.
Our business has in the past been, and may in the future continue to be, party to class actions, regulatory
actions, investigations, arbitration, mediation and other legal proceedings. The outcome of such proceedings is
often difficult to assess or quantify. Plaintiffs, regulatory bodies or other parties may seek very large or indeter-
minate amounts of money from us or substantial restrictions on our business activities, and the results, including the
magnitude, of lawsuits, actions, settlements, decisions and investigations may remain unknown for substantial
periods of time. The cost to defend, settle or otherwise finalize lawsuits, regulatory actions, investigations,
arbitrations, mediations or other legal proceedings may be significant and such proceedings may divert manage-
ment’s time. For example, we have been in dispute with a former supplier, ScanCoin AB, regarding certain contract
rights and obligations as well as ownership of certain of our patents and patent applications related to our coin-
counting business. We have incurred and expect to incur significant costs relating to this dispute, and cannot be sure
of when the dispute will be resolved, and if resolved, the magnitude of the effects the ultimate resolution will have
on our business. In addition, there may be adverse publicity associated with such developments that could decrease
customer acceptance of our products and services. As a result, litigation, arbitration, mediation, regulatory actions
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