Redbox 2012 Annual Report Download - page 15

amounts of money from us or substantial restrictions on our business activities, and the results, including the
magnitude, of lawsuits, actions, settlements, decisions and investigations may remain unknown for substantial
periods of time. The cost to defend, settle or otherwise finalize lawsuits, regulatory actions, investigations,
arbitrations, mediations or other legal proceedings may be significant and such proceedings may divert
management’s time. For example, in recent years we have been involved in consumer class action lawsuits, a
securities class action and derivative lawsuit, and studio litigation, as well as other litigation in the ordinary
course of business. In addition, there may be adverse publicity associated with any such developments that could
decrease consumer acceptance of our products and services. As a result, litigation, arbitration, mediation,
regulatory actions or investigations involving us or our affiliates may adversely affect our business, financial
condition and results of operations.
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 copyright law, access to kiosks in public places, consumer privacy and protection, data protection and
information security, taxes, vehicle safety, charitable fundraising, the transfer of money or things of value, coins,
currency controls, weights and measures, payment cards and other payment instruments, food and beverages,
sweepstakes, and contests. 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
content library 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
businesses. 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.
If we cannot manage our growth effectively, we could experience a material adverse effect on our business,
financial condition and results of operations.
We have experienced substantial growth in our business, particularly due to the rapid expansion of Redbox.
Although we believe that the total addressable market for DVD kiosks is large, we cannot be certain about its
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