Redbox 2007 Annual Report Download - page 6

Rico and in the United Kingdom. We estimate that at any one time, there is more than $10.5 billion worth of coin
sitting idle in households in the United States. In 2007, consumers processed more than $2.9 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 stored value cards or e-certificates, 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.
There is no transaction fee to the consumer when a stored value card or e-certificate is issued. 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 retailers, our coin services benefit our retailers by
providing an additional source of revenue. In addition, studies show that our coin services increase foot traffic in our
retailers’ stores and that approximately 46% of our customers spend all or a part of the proceeds of their vouchers in
the store. Our leading coin services retailers include The Kroger Co. and Supervalu, Inc. supermarket chains, and
our leading stored value cards or e-certificate offerings are Starbucks, Amazon.com and iTunes.
Entertainment services
We are the leading owner and operator of skill-crane and bulk vending machines in the United States. We
estimate that the market for our entertainment services is approximately $1.1 billion annually in the United States.
As with our coin services, we own and service all of our entertainment services machines, providing a
convenient and trouble-free service to retailers. Our entertainment services machines consist primarily of skill-
crane machines, bulk vending and kiddie rides, which are installed in more than 27,000 retail locations, totaling
more than 280,000 pieces of equipment as of December 31, 2007. 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 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 Stores, Inc. and Kmart, a subsidiary of Sears Holdings Corporation.
Since we pay our retailers a portion of the fee per play, our entertainment services machines, like our coin-
counting machines, provide an additional revenue stream for our retailers. In addition, our entertainment services
machines add an element of entertainment for consumers.
E-payment services
We offer e-payment services, including money transfer services, activating and reloading value on prepaid
wireless accounts, selling stored value cards, loading and reloading prepaid debit cards and prepaid phone cards,
prepaid phones and providing payroll card services such as balance inquiry and wage statement printing. As of
December 31, 2007, our money transfer services are provided in over 140 countries. We offer various e-payment
services through 17,500 point-of-sale terminals, 400 stand-alone e-payment kiosks and 10,700 e-payment-enabled
coin-counting machines in supermarkets, drugstores, universities, shopping malls, convenience stores and other
locations. As with our coin and entertainment services, our e-payment services provide an additional revenue
stream for our retailers as we pay a fee through 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 AT&T.
Recent Events
On January 1, 2008, we exercised our option to acquire a majority ownership interest in the voting equity of
Redbox Automated Retail, LLC (“Redbox”) under the terms of the LLC Interest Purchase Agreement dated
November 17, 2005. In conjunction with the option exercise and payment of $5.1 million, our ownership interest
increased from 47.3% to 51.0%. Since our original investment in Redbox, we have been accounting for our 47.3%
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