Redbox 2015 Annual Report Download - page 21

In addition, we rely on third-party service providers for substantial support and service efforts that we currently do not provide
directly. In particular, we contract with third-party providers to arrange for pick-up, processing and depositing of coins, as well
as to provide limited servicing of our kiosks. We generally contract with a single transportation provider and coin processor to
service a particular region. We do not currently have, nor do we expect to have in the foreseeable future, the internal capability
to provide back-up coin processing service in the event of a sudden disruption in service from a commercial coin processor.
Any failure by us to maintain our existing coin processing relationships or to establish new relationships on a timely basis or on
acceptable terms could harm our business, financial condition and results of operations.
There are risks associated with conducting our business and sourcing goods internationally.
We currently have Coinstar operations in Canada, the United Kingdom and Ireland. We expect to continue our deployment of
kiosks internationally. Accordingly, political uncertainties, economic changes, exchange rate fluctuations, restrictions on the
repatriation of funds, adverse changes in legal requirements, including tax, tariff and trade regulations, difficulties with foreign
distributors, operating challenges and other difficulties in managing an organization outside the U.S., could seriously harm the
development of our business and ability to operate profitably. For example, in January 2015, we made the decision to shut
down our Redbox operations in Canada as the business was not meeting the company's performance expectations. Further, as
we do more business in an increasing number of countries, our business becomes more exposed to the impact of the political
and economic uncertainties, including government oversight, of foreign jurisdictions.
We purchase products from vendors that obtain a significant percentage of such products from foreign manufacturers. As a
result, we are subject to changes in governmental policies, exchange rate fluctuations, various product quality standards, the
imposition of tariffs, import and export controls, transportation delays and interruptions and political and economic disruptions
which could disrupt the supply and timely delivery of products manufactured abroad. In addition, we could be affected by labor
strikes in the sea shipping, trucking and railroad industries. A reduction or interruption in supplies or a significant increase in
the price of one or more supplies could have a material adverse effect on our business.
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,
secondhand dealers, vehicle safety, charitable fundraising, the transfer of money or things of value, coins, currency controls,
weights and measures, payment cards and other payment instruments, 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 the U.S. government was to pass laws or adopt regulations to
phase out certain coins, as previously happened with the penny in Canada, it could have a material and adverse effect on our
Coinstar business.
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.
In many jurisdictions, ecoATM is subject to secondhand dealer laws that regulate the purchase of used goods, such as the
phones it purchases from consumers at kiosks. Such laws contain requirements, or laws may be amended or enacted to create
requirements, with which we cannot comply, thus requiring us to cease operations in certain jurisdictions. Moreover, a few
legislatures have in the past enacted laws which directly restrict or prohibit businesses like ecoATM, and potentially Coinstar
Exchange, from operating. If additional similar laws are enacted at either the state or local level, or if existing laws are held to
apply to our businesses, our ability to operate may be adversely impacted, thereby damaging our business and results of
operations.
Also, 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.
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