Redbox 2011 Annual Report Download - page 22

relationships (such as our joint venture with Verizon Ventures IV LLC (“Verizon”), a wholly owned subsidiary
of Verizon Communications Inc.) into our operations. Our operating results have a history of fluctuating and may
continue to fluctuate based upon many factors, including:
• fluctuations in revenue generated by our Redbox and Coin businesses;
• fluctuations in operating expenses, such as the amortization of our content library, and transaction fees
and commissions we pay to our retailers;
• our ability to establish or maintain effective relationships with significant partners, retailers and
suppliers on acceptable terms, including partners with whom we are jointly managing a business of
which we are a minority owner (such as our joint venture with Verizon);
• the amount of service fees that we pay to our retailers;
• the transaction fees we charge consumers to use our services;
• fluctuations in consumer rental patterns, including the number of movies rented per visit, the type of
DVDs they want to rent and for how long, and the level of DVD migration between kiosks;
• the successful operation of our network;
• the commercial success of our retailers, which could be affected by such factors as general economic
conditions, severe weather or strikes;
• the successful use and integration of assets and businesses acquired or invested in, including those
acquired from NCR;
• the level of product and price competition;
• fluctuations in interest rates, which affects our debt service obligations;
• the timing and cost of, and our ability to develop and successfully commercialize, new or enhanced
products and services, including potential offerings made through joint ventures;
• 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 Redbox segment. The summer
months have historically been high rental months 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. However, we have
recently entered into licensing agreements with certain studios that contain delayed rental windows. This has
shifted 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. Despite this shift, for 2012, we
expect our highest quarterly revenue and earnings in the fourth quarter, however, any seasonal affects may be
minimized by the relative attractiveness of movie titles in a particular quarter or year. Our Coin 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 kiosks.
We conduct limited manufacturing operations and depend on outside parties to manufacture key components of
our kiosks. We intend to continue to expand our installed base of kiosks. 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 Redbox or coin-counting kiosks, we may be unable to meet such demand due to manufacturing
constraints.
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