Redbox 2010 Annual Report Download - page 22

• the level of product and price competition;
• fluctuations in interest rates, which affects our debt service obligations;
• the timing of, and our ability to develop and successfully commercialize, new or enhanced products
and services;
• activities of and acquisitions or announcements by competitors; and
• the impact from any impairment of inventory, goodwill, fixed assets or intangibles related to our
acquisitions.
In addition, we have historically experienced seasonality in our revenue from our DVD Services segment. The
summer months have historically been high rental months for our DVD Services segment followed by lower
revenue in September and October, due in part to the beginning of the school year and the introduction of the
new television season. In addition, the studio licensing agreements we entered into during 2010 with Warner,
Universal Studios and 20th Century Fox provide that DVD titles will be available 28 days after the DVD becomes
available for purchase at retail outlets. These delayed rental windows have resulted in the shifting of the
availability of certain titles relative to historic patterns, most notably certain titles have shifted from the fourth
quarter holiday season into the first quarter of the following year. However, despite this shift, for 2011 we
continue to expect our lowest quarterly revenue and earnings in the first quarter and our highest quarterly
revenue and earnings in the second and third quarters. Our Coin Services segment generally experiences its
highest revenue in the second half of the year due to increased retailer foot traffic and holiday shopping in the
fourth quarter and an increase in consumers’ desire for disposable income in the summer months.
We depend upon third-party manufacturers, suppliers and service providers for key components and
substantial support for our machines and equipment.
We conduct limited manufacturing operations and depend on outside parties to manufacture key components of
our machines and equipment. We intend to continue to expand our installed base of machines and equipment.
Such expansion may be limited by the manufacturing capacity of our third-party manufacturers and suppliers.
Third-party manufacturers may not be able to meet our manufacturing needs in a satisfactory and timely manner.
If there is an unanticipated increase in demand for DVD or coin-counting kiosks, we may be unable to meet such
demand due to manufacturing constraints.
Some key hardware components used in the DVD and coin-counting kiosks are obtained from a limited number
of suppliers. We may be unable to continue to obtain an adequate supply of these components from our suppliers
in a timely manner or, if necessary, from alternative sources. If we are unable to obtain sufficient quantities of
components from our current suppliers or locate alternative sources of supply on a timely basis, we may
experience delays in installing or maintaining DVD or coin-counting kiosks, either of which could seriously
harm our business, financial condition and results of operations.
In addition, we rely on third-party service providers for substantial support and service efforts that we currently
do not provide directly. In particular, we contract with third-party providers to arrange for pick-up, processing
and depositing of coins, as well as to provide limited servicing of our machines. We generally contract with a
single transportation provider and coin processor to service a particular region. We do not currently have, nor do
we expect to have in the foreseeable future, the internal capability to provide back-up coin processing service in
the event of a sudden disruption in service from a commercial coin processor. Any failure by us to maintain our
existing coin processing relationships or to establish new relationships on a timely basis or on acceptable terms
could harm our business, financial condition and results of operations.
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