Redbox 2011 Annual Report Download - page 21

Payment of increased fees to retailers or other third party service providers could negatively affect our
business results.
We face ongoing pricing pressure from our retailers to increase the service fees we pay to them on our products
and services or to make other financial concessions to win or retain their business. If we are unable to respond
effectively to ongoing pricing-related pressures, we may fail to win or retain certain accounts. Our fee
arrangements are based on our evaluation of unique factors with each retailer, such as total revenue, long-term,
non-cancelable contracts, installation of our kiosks in high-traffic, urban or rural locations and new product and
service commitments. Together with other factors, an increase in service fees paid, or other financial concessions
made, to our retailers could significantly increase our direct operating expenses in future periods and harm our
business. In addition, we accept payment for DVD and game rentals through debit and credit card transactions.
For these payments, we pay interchange and other fees, which have increased and may increase further over time.
Further, because Redbox processes millions of small dollar amount transactions, and interchange fees represent a
larger percentage of card processing costs compared to a typical retailer, we are relatively more susceptible to
any fee increase. When interchange or other fees increase, it generally raises our operating costs and lowers our
profit margins or requires that we charge our customers more for our products and services.
Events outside of our control, including the current economic environment, have negatively affected, and
could continue to negatively affect, consumers’ use of our products and services.
Our consumers’ use of many of our products and services is dependent on discretionary spending, which is
affected by, among other things, economic and political conditions, consumer confidence, interest and tax rates,
and financial and housing markets. With economic uncertainty still affecting potential consumers, we may be
impacted by more conservative purchasing tendencies with fewer non-essential products and services purchases
during the coming periods if the current economic environment continues. In addition, because our business
relies in part on consumers initially visiting retailers to purchase products and services that are not necessarily
our products and services, if consumers are visiting retailers less frequently and being more careful with their
money when they do, these tendencies may also negatively impact our business.
Further, our ability to obtain additional funding in the future, if and as needed, through equity issuances or loans,
or otherwise meet our current obligations to third parties, could be adversely affected if the economic
environment continues to be difficult. In addition, the ability of third parties to honor their obligations to us could
be negatively impacted, as retailers, suppliers and other parties deal with the difficult economic environment.
Finally, there may be consequences that will ultimately result from the current economic conditions that are not
yet known, and any one or more of these unknown consequences (as well as those currently being experienced)
could potentially have a material adverse effect on our financial condition, operating results and liquidity, as well
as our business generally.
Lack of consumer confidence, whether real or perceived, in our coin-counting kiosks could harm our
business.
The accuracy of the coin-counting functionality of our kiosks is important to consumers and our retailers. The
failure to maintain consumer confidence in our technology and systems could harm our business. Our inability to
collect the data from our coin-counting kiosks could lead to a delay in processing coins and crediting the
accounts of our retailers for vouchers that have already been redeemed. Any inaccuracy, loss or delay in
collecting or processing coin data could seriously harm our operations.
Our future operating results may fluctuate.
Our future operating results will depend significantly on our ability to continue to drive new and repeat use of
our Redbox and Coin kiosks, our ability to develop and commercialize new products and services, including
through New Ventures, and the costs incurred to do so, and our ability to successfully integrate newer lines of
business and acquisitions (including certain assets from NCR Corporation (“NCR”)) and other third-party
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