In 2006, Redbox faced some membership challenges due to a gradual price hike for its US subscribers. The company initially announced the price of its standard subscription service would go from $8 to $9 in May 2004. However, existing customers were given a two-year grace period to continue at the $7.99 rate. In 2005, Redbox further increased the standard price to $9.99. Consequently, long-time customers saw their monthly fee rise from $7.99 to $9.99 in May 2006, following the deferred price adjustment. Redbox began notifying customers of the impending increase in April, with the change taking effect in the second quarter. This pricing strategy aimed to avoid a repeat of the negative response and backlash faced by Redbox in 2001 when a sudden increase in prices led to public outcry. At that time, Redbox responded by separating its streaming and DVD services, charging for each service separately. 2 Despite the gradual approach to implementing price changes, the higher monthly fees appeared to impact the growth of Redbox's US subscriber base. In the two quarters preceding the price hike, Redbox gained a net membership of 1.6 million and 2.2 million members, respectively. In contrast, the addition of members in Q2 was only 160,000, and in Q3, it was only 400,000. The growth in US subscribers during Q2 marked the lowest since Redbox started reporting those numbers in 2002.

U S Streaming {millions} [22 2005 Q3 2005 Q4 2005 [31 2006 532 2006 52.3 2006 Revenue 1026 1064 1106 1161 1208 1304 Contribution Prot 340 344 379 413 414 425 Contribution Margin 33.1% 32.3% 34.3% 35-6% 34.3% 36.4% Paid Memberships 41.1 42.1 43.4 45.? 46.0 46.5 Total Memberships 42.3 43.2 44.? 4?.0 4?.1 4?.5 Net Additions 0.90 0.88 1.56 2.23 0.16 0.40 Monthly Revenue per 35 $ $ $ $ Paid Member 8.33 8.43 3.49 3.4? 3.25 $ 9.40 Percentage Chg. Rev 3.7% 3.9% 5.0% 4.0% 7.9% Percentage Chg. Memberships 2.5% 3.2% 5.3% 0.6% 0.9%