Redbox 2014 Annual Report Download - page 15

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Our business also depends on our ability to obtain adequate content from movie studios and video game publishers.
We have entered into licensing agreements with certain studios to provide delivery of their DVDs by the “street date,” the first
date on which DVD releases are available to the general public for home entertainment purposes on either a rental or sell-
through basis. In addition, we have licensing arrangements with other studios that make DVDs available for rent 28 days after
the street date. If we are unable to maintain or renew our current relationships to obtain movie or video game content on
acceptable terms, our business, financial condition and results of operations may suffer.
Our inability to receive delivery of DVDs on the date of their initial release to the general public, or shortly thereafter,
for home entertainment viewing could adversely affect our Redbox business.
Traditionally, businesses that rented movies in physical formats, such as DVDs, had enjoyed a competitive advantage
over other movie distribution rental channels. After the initial theatrical release of a movie, the major studios generally had
made their movies available on physical formats for a 30- to 45-day release window before release to other movie distribution
rental channels, such as pay-per view, video-on-demand, premium television, basic cable, and network and syndicated
television.
However, movie studios are experimenting with this model, including shortening or discontinuing altogether, or
otherwise restricting, movie distribution windows, including making video-on-demand or other digital delivery methods
available prior to or simultaneous with the physical DVD release. For example, certain movie studios have made new release
titles available on video-on-demand or for online purchase on the same date as the DVD release, and certain movies have been
made available via premium video-on-demand while they are still in theaters. Further, some studios have implemented
restrictions on renting DVDs for weeks following the initial release of the same title for purchase. For example, Redbox has
entered into arrangements with certain studios that include delayed rental windows. Entering into these studio licensing
arrangements that contain a delayed rental window may decrease consumer satisfaction and consumer demand, and we may
lose consumers to our competitors that offer DVD titles without a delayed rental window. In addition, studios may seek to
impose longer delays, or studios that currently provide content on street date may seek similar delays. Any of these
developments could have a material adverse effect on our business, financial condition and results of operations.
If we do not manage our content library effectively, our business, financial condition and results of operations could be
materially and adversely affected.
A critical element of our Redbox business model is to optimize our library of DVD titles, formats, and copy depth to
achieve satisfactory availability rates to meet consumer demand while also maximizing margins. If we do not timely acquire
sufficient DVD titles, due to, for example, not correctly anticipating demand, intentionally acquiring fewer copies than needed
to fully satisfy demand or the lack of available titles, we may not appropriately satisfy consumer demand, which could decrease
consumer satisfaction and we could lose consumers to competitors. Conversely, if we attempt to mitigate this risk and acquire a
larger number of copies to achieve higher availability rates for select titles or a wider range of titles, our library utilization
would become less efficient and our margins for the Redbox business would be adversely affected. Our ability to accurately
predict consumer demand as well as market factors, such as our ability to obtain satisfactory distribution arrangements, may
impact our ability to timely acquire appropriate quantities of certain DVD titles. In addition, if we are unable to obtain or
maintain favorable terms from our suppliers with respect to such matters as timely movie access, copy depth, formats and
product destruction, among others, or if the price of DVDs increases or decreases generally or for certain titles, our library may
become unbalanced and our margins may be adversely affected.
Further, the delay in our ability to rent certain studios’ DVD titles pursuant to a delayed rental window may negatively
affect consumer satisfaction and demand, and we could lose consumers to our competitors because of the timing of our library.