Redbox 2011 Annual Report Download - page 18

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 or a reduction in related fees charged by any of these competitors or retailer
decisions to use floor space for other than coin-counting, could materially and adversely affect our business and
results of operations.
In addition, the nature and extent of consolidations and bankruptcies, which often occur during or as a result of
economic downturns, in markets where we install our kiosks, particularly the supermarket and other retailing
industries, could adversely affect our operations, including our competitive position, as the number of
installations and potential retail users of our kiosks could be significantly reduced. See the risk factor below
entitled, “—Events outside of our control, including the current economic environment, has negatively affected,
and could continue to negatively affect, consumers’ use of our products and services.”
Our business can be adversely affected by severe weather, natural disasters and other events beyond our
control, such as earthquakes, fires, power failures, telecommunication loss and terrorist attacks.
A catastrophic event that results in the destruction or disruption of any of our critical business or information
technology systems could harm our ability to conduct normal business operations and our operating results. For
example, our corporate headquarters and certain critical business operations are located in the Bellevue,
Washington area, which is near major earthquake faults. While we have taken steps to protect the security of
critical business processes and systems and have established certain back-up systems and disaster recovery
procedures, any disruptions, whether due to inadequate back-up or disaster recovery planning, failures of
information technology systems, interruptions in the communications network, or other factors, could seriously
harm our business, financial condition and results of operations.
In addition, our operational and financial performance is a direct reflection of consumer use of and the ability to
operate and service the DVD and coin-counting kiosks used in our business. Severe weather, natural disasters
and other events beyond our control can, for extended periods of time, significantly reduce consumer use of our
products and services as well as interrupt the ability of our employees and third-party providers to operate and
service our kiosks. In some cases, severe weather, natural disasters and other events beyond our control may
result in extensive damage to, or destruction of, our infrastructure and equipment, including loss of kiosks used to
provide our products and services, which losses may not be fully covered by insurance.
Defects, failures or security breaches in and inadequate upgrades of, or changes to, our operating systems
could harm our business.
The operation of our business depends on sophisticated software, hardware, computer networking and
communication services that may contain undetected errors or may be subject to failures or complications. These
errors, failures or complications may arise particularly when new, changed or enhanced products or services are
added. In the past, there have been limited delays and disruptions resulting from upgrading or improving these
operating systems. Future upgrades, improvements or changes that may be necessary to expand and maintain our
business could result in delays or disruptions or may not be timely or appropriately made, any of which could
seriously harm our operations.
Further, certain aspects of the operating systems relating to our business are provided by third parties, including
long-distance telecommunications. Accordingly, the effectiveness of these operating systems is, to a certain
degree, dependent on the actions and decisions of third parties over whom we may have limited control.
Failure to adequately comply with information security policies or to safeguard against breaches of such
policies could adversely affect our operations and could damage our business, reputation, financial
position and results of operations.
As our business expands to provide new products and services, we are increasing the amount of consumer data
that we collect, transfer and retain as part of our business. These activities are subject to laws and regulations, as
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