Redbox 2008 Annual Report Download - page 36

Marketing
Our marketing expenses represent our cost of advertising, traditional marketing, on-line marketing and public
relation efforts in national and regional advertising and the major international markets in which we operate our
Money Transfer services. For example, we have been using advertising to introduce E-payment features on our
coin-counting machines and other E-payment product channels such as our stored value card offerings. This
directed marketing and advertising approach continues to drive increased trial and repeat use of both our coin
services offerings and E-payment products.
(In millions, except percentages) 2008 2007 $ Chng % Chng 2006 $ Chng % Chng
Year Ended December 31,
Marketing . ................. $19.3 $11.9 $7.4 62.2% $14.4 $(2.5) ⫺17.4%
as a% of Total Revenue ........ 2.1% 2.2% 2.7%
Marketing expenses increased in 2008 compared to 2007 primarily as a result of the consolidation of Redbox’s
results, and our acquisition of GroupEx in January 2008. The increase in marketing expenses for Redbox and
GroupEx were $6.8 million and $1.2 million, respectively, for 2008 compared to 2007. The increases were partially
offset primarily by a reduction in television ad spending in our Coin product line. Marketing expenses decreased in
2007 from 2006 primarily due to advertising mix in our different markets offset by an increase in spending resulting
from the acquisition of CMT in the second quarter of 2006.
Research and Development
Our research and development expenses consist primarily of development costs of our coin-counting machine
software, network applications, machine improvements and new product development. Research and development
expenses represent expenditures to support development and design of our complementary new product ideas and to
continue our ongoing efforts to enhance our existing products and services, primarily our coin-counting system.
(In millions, except percentages) 2008 2007 $ Chng % Chng 2006 $ Chng % Chng
Year Ended December 31,
Research and development ........ $4.8 $5.2 $(0.4) ⫺7.7% $5.2 $— 0.0%
as a% of Total Revenue .......... 0.5% 1.0% 1.0%
Research and development expenses have remained relatively consistent in 2008, 2007 and in 2006. We intend
to continue to invest at these levels in research and development in the coming years.
General and Administrative
Our general and administrative expenses consist primarily of administrative support for field operations,
customer service, systems and engineering support, computer network operations, finance, human resources,
occupancy expenses, legal expenses and insurance.
(In millions, except percentages) 2008 2007 $ Chng % Chng 2006 $ Chng % Chng
Year Ended December 31,
General and administrative ..... $95.2 $55.2 $40.0 72.5% $51.0 $4.2 8.2%
as a% of Total Revenue ........ 10.4% 10.1% 9.5%
As a percentage of revenue, general and administrative expenses were relatively flat in 2008 compared to 2007.
This is attributable, in part, to leverage we achieved in the DVD product line offset by de-leveraging in the
Entertainment product line. In absolute dollars, general and administrative expenses increased in 2008 compared to
2007 as a result of the consolidation of Redbox’s results and our acquisition of GroupEx in January 2008. General
and administrative expenses increased for Redbox and GroupEx by $35.3 million and $5.5 million, respectively, for
2008.
General and administrative expenses increased in 2007 from 2006 due to the acquisition of CMT in the second
quarter of 2006, an increase in stock-based compensation expense, an increase in rent expense due to additional
administrative office space, partially offset by administrative synergies achieved in the integration of our
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