Rosetta Stone 2012 Annual Report Download - page 11

Table of Contents
 will be successful or profitable, or if it is profitable, that it will provide an adequate return on capital expended. If Rosetta Stone Version 4
 and/or  are not successful, our business, financial results and reputation may be harmed. We anticipate having to make investments in
new products in the future, such as a children's product, and we may incur significant expenses without achieving the anticipated benefits of our
investment or preserving our brand and reputation. Investments in new products and technology are speculative, the development cycle for products
may exceed planned estimates and commercial success depends on many factors, including innovativeness, developer support, and effective distribution
and marketing. Customers may not perceive our latest offerings as providing significant new value and may reduce their purchases of our offerings,
unfavorably impacting revenue. We may not achieve significant revenue from new product and service investments for a number of years, if at all.


We introduced our English remediation solution, , in South Korea and Japan over the past two years. This solution targets more advanced
English learners in Asia, and provides learners with foundational phonetic skills needed to properly hear and produce distinctions that are present in
English, but absent in Asian languages. This online solution carries some lower price points than our full Rosetta Stone Version 4  language-
learning solution and may cannibalize sales of our Version 4 solution in Asia. We have devoted significant capital, personnel and management attention
to develop and launch the English remediation offering, including related research and development expenses, and incurring marketing expenses relating
to the launch. This product has presented new management and marketing challenges. Consumer demand for  in South Korea and Japan has not
been as high as we projected. We cannot assure you that the English remediation solution will be successful or profitable, or if it is profitable, that it will
provide an adequate return on capital expended.


We generate substantially all of our revenue from our language-learning solutions, and we expect that we will continue to depend upon language-
learning solutions for substantially all of our revenue in the foreseeable future. Because we are dependent on our language-learning solutions, factors
such as changes in consumer preferences for these products may have a disproportionately greater impact on us than if we offered multiple product
categories. If consumer interest in our language-learning software products declines, or if consumer interest in learning foreign languages in general
declines, we would likely experience a significant loss of sales. Some of the potential developments that could negatively affect interest in and demand
for language-learning software products include:
•a decline in international travel; and
•changes in U.S. or international laws or policies making it more difficult for foreign persons to visit or take up residence in the United
States.


Demand for our language-learning software products and related services, and for consumer products and services in general, is subject to rapidly
changing consumer demand and trends in consumer preferences. Therefore, our success depends upon our ability to:
•identify, anticipate, understand and respond to these trends in a timely manner;
10