Redbox 2010 Annual Report Download - page 23

We are subject to substantial federal, state, local and foreign laws and government regulation specific to our
business.
Our business is subject to federal, state, local and foreign laws and government regulation, including those
relating to coins, vehicle safety, access to machines in public places, copyright law, charitable fundraising, the
transfer of money or things of value, currency controls, weights and measures, payment cards and other payment
instruments, sweepstakes, contests, consumer protection, consumer privacy, data protection and information
security. The application of existing laws and regulations, changes in laws or enactment of new laws and
regulations, that apply, or may in the future apply, to our current or future products or services, changes in
governmental authorities’ interpretation of the application of various government regulations to our business, or
the failure or inability to gain and retain required permits and approvals could materially and adversely affect our
business.
For example, if U.S. copyright law were altered to amend or eliminate the First Sale Doctrine, our business could
be adversely affected. Under U.S. copyright law, the First Sale Doctrine provides that once a copyright owner
sells a copy of his work, the copyright owner relinquishes all further rights to sell or otherwise dispose of that
copy. While the copyright owner retains the underlying copyright to the expression fixed in the work, the
copyright owner gives up his ability to control the fate of the work once sold. As such, once we purchase a DVD
in the market, we are permitted to re-sell it, rent it or otherwise dispose of it. Although the majority of our DVD
inventory is licensed directly from studios, and not purchased, if Congress or the courts were to change, or
substantially limit, this First Sale Doctrine, our ability to obtain certain purchased content and then rent it could
be adversely affected.
In addition, many jurisdictions require us to obtain certain licenses in connection with the operations of our DVD
Services, Coin Services, and Money Transfer Business. For example, we have obtained licenses in those states
and the District of Columbia which require licenses with regard to money transfer transactions. There can be no
assurance that we will be granted all necessary licenses or permits in the future, that current licenses or permits
will be renewed or that regulators will not revoke current licenses or permits. Given the unique nature of our
business and new products and services we may develop or acquire in the future, the application of various laws
and regulations to our business is uncertain. Further, as governmental and regulatory scrutiny and action with
regard to many aspects of our business increase, we expect that our costs of complying with the applicable legal
requirements may increase, perhaps substantially.
Failure to comply with these laws and regulations could result in, among other things, revocation of required
licenses or permits, loss of approved status, termination of contracts, administrative enforcement actions and
fines, class action lawsuits, cease and desist orders and civil and criminal liability. The occurrence of one or more
of these events, as well as the increased cost of compliance, could materially adversely affect our business,
financial condition and results of operations.
There are risks associated with conducting our business and sourcing goods internationally.
We currently have coin operations in Canada, the United Kingdom and Ireland. We expect to continue our
deployment of machines and equipment internationally. Accordingly, political uncertainties, economic changes,
exchange rate fluctuations, restrictions on the repatriation of funds, adverse changes in legal requirements,
including tax, tariff and trade regulations, difficulties with foreign distributors and other difficulties in managing
an organization outside the United States, could seriously harm the development of our business and ability to
operate profitably. Further, as we do more business in an increasing number of countries, our business becomes
more exposed to the impact of the political and economic uncertainties, including government oversight, of
foreign jurisdictions.
We purchase products from vendors that obtain a significant percentage of such products from foreign
manufacturers. As a result, we are subject to changes in governmental policies, exchange rate fluctuations,
various product quality standards, the imposition of tariffs, import and export controls, transportation delays and
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