Business Trends

Our corporate structure includes separate Pay-Per-Transaction ("PPT") and Advanced Media and Information ("AMI") operating divisions and, accordingly, we report certain financial information by individual segment under this structure.

Our PPT Division focuses on managing our business operations that facilitate the delivery of home entertainment content products (DVDs, Blu-ray Discs, etc.) ("Units") and related rental and sales information for the content to home video specialty stores and other retailers, on a revenue sharing basis. We lease product from various suppliers, typically motion picture studios. Under our PPT System, retailers sublease that product from us and rent it to consumers. Retailers then share a portion of the revenue from each retail rental transaction with us and we share a portion of the revenue with the studio. Since we collect, process and analyze rental and sales information at the title level, we report that information to both the studio and the respective retailers.

Our PPT Division also includes our Traditional and Digital Direct Revenue Sharing ("DRS") services, which encompasses the collection, tracking, auditing and reporting of transaction and revenue data generated by DRS retailers, such as Blockbuster Entertainment, Movie Gallery and Netflix, to our respective DRS clients under established agreements on a fee for service basis.

Our AMI Division concentrates on the management and growth of our Essentials Suite™ of business information services. Our Essentials Suite™ software and services, offered primarily on a recurring subscription basis, provide unique data collection, management, analysis and reporting functions, resulting in business information valuable to our clients.

The PPT Division

The financial results from the PPT Division continue to be affected by the changing dynamics in the home video rental market as well as overall economic trends and conditions. This market is highly competitive and influenced greatly by consumer spending patterns and behaviors. The end consumer has a wide variety of choices from which to select their entertainment content and can easily shift from one provider to another. Some examples include renting Units of product from our Participating Retailers or other Retailers, purchasing previously viewed Units from our Participating Retailers or other Retailers, ordering product via online subscriptions and/or online distributors (mail delivery), renting or purchasing product from kiosk locations, subscribing to at-home movie channels, downloading or streaming content via the internet, purchasing and owning the Unit directly, or selecting an at-home "pay-per-view" or "on demand" option from a satellite or cable provider. Our PPT system focuses on the traditional "brick and mortar" retailer. We believe that our system successfully addresses the many choices available to consumers and affords our Participating Retailers the opportunity to stock their stores with a wider selection of titles and a greater supply of popular box office releases. Many of our arrangements are structured so that the Participating Retailers pay minimal upfront fees and lower per transaction fees in exchange for ordering Units of all titles offered by a particular Program Supplier (referred to as "output" programs). Since these programs usually result in more overall Units rented, our Participating Retailers' revenue and the corresponding share with the studios also increase.

In an effort to stabilize and maintain our current level of overall PPT revenue and earnings, we have implemented strategies to obtain new Participating Retailers, as well as assist in the retention and growth of our current Participating Retailers. The popularity of other choices an end consumer has to obtain entertainment content has been growing and our Participating Retailers' market share has been negatively affected. Thus, for the foreseeable future, we expect their market share to experience low to mid single digit annual percentage declines and we are evaluating other initiatives to offset the effect this trend has on our PPT revenue and earnings.

We continue to be in good standing with our Program Suppliers and we make on-going efforts to strengthen those business relationships through enhancements to our current service offerings and the development of new service offerings, such as the addition of Blu-ray product.

We are also continually seeking to develop business relationships with new Program Suppliers. Our relationships with Program Suppliers typically may be terminated without cause upon thirty days' written notice by either party.

AMI and Other Divisions

We continue to allocate significant resources towards our business information service offerings, both those services that are currently operational as well as those that are in various stages of development. Our suite of business information services has been well received in the various targeted markets to date, as our offerings fit well with the needs identified by those market participants. Our Essentials™ business information service offerings which are fully operational and no longer in significant stages of development, realized a revenue increase of 21.8% in fiscal 2009 compared to fiscal 2008.

The AMI lines of business which contribute most of the revenues currently are Box Office Essentials™, which reports domestic and international gross receipt theatrical ticket sales, and OnDemand Essentials™, which measures and reports anonymous video on demand ("VOD") usage data. Additionally, we are making significant investments in TV Essentials™, which provides our clients with the ability to analyze anonymous audience viewing of programming and advertising across linear and interactive television, VOD and Digital Video Recorder ("DVR").

Box Office Essentials™ primarily reports domestic and international theatrical gross receipt ticket sales to motion picture studios and movie theater owners. Rentrak provides studios with access to box office performance data pertaining to specific motion pictures and movie theater circuits, both real-time and historical. Data is currently collected for virtually all movie theaters in North America, Guam and Puerto Rico and is primarily obtained via electronic connectivity to theater box offices. We continue to make on-going efforts to strengthen our business relationships with our existing clients as well as focus on our syndication services and international expansion plans.

OnDemand Essentials™ provides cable operators, content providers (including broadcast/cable networks and studios) and advertisers with a transactional tracking and reporting system to view and analyze the viewership of on demand content. During fiscal 2009, we added thirteen new content providers to our OnDemand Essentials™ roster of subscribers, including FX, InDemand Networks, Magnolia Pictures and Spike TV for a total of over 100 OnDemand Essentials™ service clients to date. We currently have 28 Multiple System Operators ("MSOs"), including the top 25 MSOs who offer video on demand programming, representing over 70 million set-top boxes, supporting our OnDemand Essentials™ services. We are well positioned to grow this business by adding new clients and adjusting rates as the business activity increases and as advanced advertising technology is rolled out by the industry.

Through a recent, new partnership with SeaChange International, the leading provider of video on demand and IPTV software, Rentrak and SeaChange will provide a seamless process for dynamic video on demand ad insertion, verification and reporting. Together, the companies will integrate solutions to dramatically improve the ability of MSOs, networks and advertisers to monetize VOD advertising on a regional and national basis. Advanced TV advertising includes VOD, requests for information (RFIs), long-form showcases, DVR advertising, interactive program guide advertising, addressable advertising, creative versioning and advanced trafficking systems.

TV Essentials'™ comprehensive suite of research tools enables customers to analyze anonymous audience viewing of programming and advertising across linear and interactive television, video on demand and DVR across all three TV platforms - cable, satellite and telecommunications. Utilizing proprietary technology to process massive amounts of click-stream data, our TV Essentials™ system is able to aggregate and report second-by-second information from 100 million digital set-top boxes. Today, based on data from our current operator partners, we are translating viewing patterns from over 10 million digital set-top boxes into insights for our clients and we expect success in this area to continue and increase its rate of growth.

We are making good progress on expanding our data partners for our TV Essentials™ services from our commercial relationships today with AT&T and Charter Communications. In addition to those partners, we also have a relationship with DISH Network ("Dish") to provide TV Essentials™ for their internal use for a

subscription fee as we work toward commercialization of that relationship. The Dish relationship has resulted in the creation of our DVR and iTV reporting, which can be rolled out to other partners as the data to drive those services becomes available to us. We are also working on securing national ad occurrence data in order to launch the ad module of TV Essentials™ services as well as build research capabilities to begin creating syndicated products for our measurement service. Rentrak recently entered into TV Essentials™ customer relationships with our first two networks, the Inspiration Network and HDNet. A version of the system designed specifically for local stations is also in beta trials with several network groups.

We continue new product development for other component products as we work toward measuring and comparing entertainment consumption across multiple platforms, which will help us expand our Multi-Screen Essentials™ suite of services. Mobile Essentials™ has been developed to provide a comprehensive system to track usage and consumer dynamics in the mobile sector including video, video clips, games, music, mobile web, small message servicing ("SMS") data (also known as text messaging), ring tones, wallpaper and other mobile content. We recently announced our first Mobile Essentials™ customer, NBC Universal. Online Video Essentials is being developed to measure and analyze advertiser-supported online video usage across the Internet.

We intend to continue to invest in our existing, as well as new, business information services in the near-term as we expand the markets we serve and our service lines. The cost of these investments will likely lower our earnings in the short-term. Longer-term, we believe these services will provide significant future revenue and earnings streams and contribute to our overall success.

Sources of Revenue

Revenue by segment includes the following:

PPT Division

• order processing fees generated when Units are ordered by, and distributed to, retailers;

• transaction fees generated when retailers rent Units to consumers; additionally, certain arrangements include guaranteed minimum revenues from our customers; we recognize the guaranteed minimum revenue on the street (release) date in accordance with Statement of Position 00-2, "Accounting by Producers or Distributors of Films," ("SOP 00-2") provided all other revenue recognition criteria are met;

• sell-through fees generated when retailers sell previously-viewed rental Units to consumers and/or buy-out fees generated when retailers purchase Units at the end of the lease term; and

• Traditional and Digital DRS fees from data tracking and reporting services provided to Program Suppliers.

AMI Division

Subscription fee revenues from:

• Box Office Essentials™;

• Home Entertainment Essentials™;

• Supply Chain Essentials™; and

• Multi-Screen Essentials™, which includes OnDemand Essentials™.

Other Division

• revenue relating to other products and/or services which are still in the development stage, including AdEssentials ™, which will capture census-level data regarding viewing patterns of on demand advertising for reporting to marketers and advertising agencies.

Results of Operations

                                                                 Year Ended March 31, (1)
                                                2009                      2008                     2007(2)
                                                       % of                      % of                       % of
(Dollars in thousands)                  Dollars      revenues     Dollars      revenues      Dollars      revenues
Revenues:
PPT Division                            $ 82,320         86.7 %   $ 82,805         88.9 %   $  97,899         92.6 %
AMI Division                              12,646         13.3       10,383         11.1         7,822          7.4

                                          94,966        100.0       93,188        100.0       105,721        100.0
Cost of sales                             62,575         65.9       61,814         66.3        72,242         68.3

Gross margin                              32,391         34.1       31,374         33.7        33,479         31.7
Operating expenses:
Selling and administrative                26,888         28.3       25,683         27.6        25,188         23.8
Asset impairment                             257          0.3           85          0.1            -            -

                                          27,145         28.6       25,768         27.7        25,188         23.8

Income from operations                     5,246          5.5        5,606          6.0         8,291          7.8
Other income (expense):
Interest income                            1,110          1.2        1,517          1.6         1,521          1.4
Interest expense                              (2 )         -           (10 )         -             (7 )         -
Other income, net                             -            -           144          0.2            -            -

                                           1,108          1.2        1,651          1.8         1,514          1.4

Income before income tax provision         6,354          6.7        7,257          7.8         9,805          9.3
Income tax provision                         991          1.0        2,663          2.9         3,918          3.7

Net income                              $  5,363          5.6 %   $  4,594          4.9 %   $   5,887          5.6 %

(1) Percentages may not add due to rounding.

(2) Revenue amounts for fiscal 2007 have been reclassified for the reclassification of DRS revenue to our PPT Division from our AMI Division during fiscal 2008.

Certain results of operations information by segment was as follows:

                                         PPT        AMI        Other(1)        Total
       Year Ended March 31, 2009
       Sales to external customers     $ 82,320   $ 12,646     $      -      $  94,966
       Depreciation and amortization         99      1,080           571         1,750
       Income (loss) from operations     14,648        901       (10,303 )       5,246
       Year Ended March 31, 2008
       Sales to external customers     $ 82,805   $ 10,383     $      -      $  93,188
       Depreciation and amortization         86        718           629         1,433
       Income (loss) from operations     15,216      1,271       (10,881 )       5,606
       Year Ended March 31, 2007(2)
       Sales to external customers     $ 97,899   $  7,822     $      -      $ 105,721
       Depreciation and amortization         49      1,257           430         1,736
       Income (loss) from operations     21,167     (1,052 )     (11,824 )       8,291

(1) Includes revenue and expenses relating to products and/or services which are still in early stages, as well as corporate expenses and other expenses which are not allocated to a specific segment.

(2) Revenue and income (loss) from operations amounts for fiscal 2007 have been reclassified for the reclassification of DRS revenue to our PPT Division from our AMI Division during fiscal 2008.

Additional results of operations information by segment was as follows:

                                                Year Ended March 31, (1)
                                  2009                    2008                   2007(2)
                                        % of                    % of                    % of
                                      segment                 segment                 segment
  (Dollars in thousands)   Dollars    revenues     Dollars    revenues     Dollars    revenues
  PPT Division
  Revenues                 $ 82,320      100.0 %   $ 82,805      100.0 %   $ 97,899      100.0 %
  Cost of sales              59,492       72.3       59,856       72.3       70,019       71.5

  Gross margin             $ 22,828       27.7 %   $ 22,949       27.7 %   $ 27,880       28.5 %

  AMI Division
  Revenues                 $ 12,646      100.0 %   $ 10,383      100.0 %   $  7,822      100.0 %
  Cost of sales               3,083       24.4        1,958       18.9        2,223       28.4

  Gross margin             $  9,563       75.6 %   $  8,425       81.1 %   $  5,599       71.6 %

(1) Percentages may not add due to rounding.

(2) Revenue amounts for fiscal 2007 have been reclassified for the reclassification of DRS revenue to our PPT Division from our AMI Division during fiscal 2008.

Revenue by service activity was as follows (in thousands):

                 Year Ended March 31,      2009       2008       2007
                 Order processing fees   $  8,644   $  7,593   $   9,136
                 Transaction fees          53,274     54,324      64,935
                 Sell-through fees         13,432     14,093      15,356
                 DRS                        6,410      6,171       7,586
                 Essentials Suite™         12,646     10,383       7,822
                 Other                        560        624         886

                                         $ 94,966   $ 93,188   $ 105,721

Revenue

Revenue increased $1.8 million, or 1.9% to $95.0 million, in fiscal 2009 compared to $93.2 million in fiscal 2008. The increase in revenue in fiscal 2009 compared to fiscal 2008 was primarily due to increased order processing fees and increased revenue from our Essentials Suite™ of products, as described more fully below.

Revenue decreased $12.5 million, or 11.9% to $93.2 million, in fiscal 2008 compared to $105.7 million in fiscal 2007. The decrease in revenue in fiscal 2008 compared to fiscal 2007 was primarily due to decreases within our PPT Division, partially offset by an increase from our Essentials Suite™ of products in our AMI Division, as described more fully below.

PPT Division

PPT revenues decreased $0.5 million, or 0.6% in fiscal 2009 compared to fiscal
2008 and decreased $15.1 million, or 15.4% in fiscal 2008 compared to fiscal
2007. Detail of our PPT Division revenue by service line was as follows (in
thousands):



                 Year Ended March 31,      2009       2008       2007
                 Order processing fees   $  8,644   $  7,593   $  9,136
                 Transaction fees          53,274     54,324     64,935
                 Sell-through fees         13,432     14,093     15,356
                 DRS                        6,410      6,171      7,586
                 Other                        560        624        886

                                         $ 82,320   $ 82,805   $ 97,899

Order processing fees increased $1.1 million, or 13.8%, in fiscal 2009 compared to fiscal 2008 and decreased $1.5 million, or 16.9%, in fiscal 2008 compared to fiscal 2007. Order processing fees were affected by the following:

               Year Ended March 31,            2009      2008      2007
               Units shipped (in thousands)     6,554     6,268     7,385
               Fee per Unit                   $  1.32   $  1.21   $  1.24




                                                       Fiscal 2009          Fiscal 2008
                                                       compared to          compared to
                                                       fiscal 2008          fiscal 2007
Percentage increase (decrease) in Units shipped                 4.6 %               (15.1 )%
Effect of increase (decrease) in Units shipped on
revenue                                               $ 0.4 million       $ (1.4) million
Increase (decrease) in fee per Unit                   $        0.11       $         (0.03 )
Effect of increase (decrease) in fee per Unit on
revenue                                               $ 0.7 million       $ (0.1) million

The increase in volume in fiscal 2009 compared to fiscal 2008 was due to more theatrical releases which were made available from Program Suppliers in the current fiscal year compared to the prior fiscal year. The timing of new releases tends to fluctuate from studio to studio. In addition, a new Program Supplier began providing product in fiscal 2009. These factors were partially offset by a decline in the number of Participating Retailers from the prior year and a decline in the average quantity of product ordered per theatrical release due to the mix of product and economic factors.

The decrease in volume in fiscal 2008 compared to fiscal 2007 was due to an overall weakness in the quality of titles released in fiscal 2008 compared to fiscal 2007 and the decline in volume due to the significant reduction of Units received from one of our major Program Suppliers during fiscal 2008. This Program Supplier represented 6%, 7% and 16%, respectively, of our total revenues during fiscal 2009, 2008 and 2007.

Fees per Unit are affected by our mix of Units received from Program Suppliers with varying rates of upfront fees and tend to fluctuate from period to period.

Transaction fees decreased $1.1 million, or 1.9%, in fiscal 2009 compared to fiscal 2008 and decreased $10.6 million, or 16.3%, in fiscal 2008 compared to fiscal 2007.

The transaction fee revenue decrease in fiscal 2009 compared to fiscal 2008 was primarily due to a 5.6% decline in rental transactions offset by a shift in mix to studios with more guarantees. Rental transactions declined due to the overall market conditions, including changes in consumer behavior, technological advances in entertainment content delivery and the perceived value of other alternatives. The rate per transaction increased by 3.9% due to the timing and magnitude of guarantees. The guaranteed rate per Unit drives rates up during the first month of the rental cycle. When there are fewer guarantees or more guarantee Units reach the second and third months of the rental cycle, rates per transaction decrease.

The decrease in fiscal 2008 compared to fiscal 2007 was primarily due to lower rental transactions. Rental transactions at our Participating Retailers decreased 14%, while the overall rate per transaction decreased by 3%. Rental transactions declined due to the overall market conditions noted above and the reduction in Units received from one of our Program Suppliers noted above. The rate per transaction decreased due to the timing and magnitude of guarantees.

Sell-through fees decreased $0.7 million, or 4.7%, in fiscal 2009 compared to fiscal 2008 primarily due to an overall decline in Units available for sale on average, taking release dates and product sell-through restrictions into account.

Sell-through fees decreased $1.3 million, or 8.2%, in fiscal 2008 compared to fiscal 2007 primarily due to an overall decrease in the volume of Units released.

DRS fees increased $0.2 million, or 3.9%, in fiscal 2009 compared to fiscal 2008. DRS fees increased due to adding new clients to this service offering.

DRS fees decreased $1.4 million, or 18.7%, in fiscal 2008 compared to fiscal 2007 primarily due to the loss of one major studio customer.

AMI Division

Revenues from our AMI division increased $2.3 million, or 21.8%, in fiscal 2009 compared to fiscal 2008 and $2.6 million, or 32.7%, in fiscal 2008 compared to fiscal 2007. The Box Office Essentials™ revenues increased $0.6 million, or 12.1%, from fiscal 2008 to fiscal 2009, primarily the result of an increase in syndication client revenue, as the result of adding new clients, and rate increases for existing accounts. The OnDemand Essentials™ revenues increased $1.1 million, or 30.2 %, from fiscal 2008 to fiscal 2009 mostly attributable to additional new client subscriptions, custom enhancements made for specific clients and rate increases for existing accounts. Revenues related to our Essentials™ business information service offerings have increased primarily due to our continued investment in and successful marketing of these offerings and successful retention of clients. We expect continued future increases in these Essentials™ revenues as well, as a result of further investments and additional successful launches of those services.

Other Division

We did not have any revenues from our Other Division in fiscal 2009, 2008 or 2007.

Cost of Sales

Cost of sales consists of order processing costs, transaction costs, sell-through costs, handling and freight costs in the PPT Division and costs in the AMI Division associated with certain Essentials™ business information service offerings. These expenditures represent the direct costs to produce revenues.

In the PPT Division, order processing costs, transaction costs and sell through costs represent the amounts due to the Program Suppliers that hold the distribution rights to the Units. Freight costs represent the cost to pick, pack and ship orders of Units to the Participating Retailers. Our cost of sales can also be impacted by the release dates of Units with guarantees. We recognize the guaranteed minimum costs on the release date. The terms of some of our agreements result in 100% cost of sales on titles in the first month in which the Unit is released, which results in lower margins during the initial portion of the revenue sharing period. Once the Unit's rental activity exceeds the required amount for these guaranteed minimums, margins generally expand during the second and third months of the Unit's revenue sharing period. However, since these factors are highly dependent upon the quality, timing and release dates of all new products, margins may not expand to any significant degree during any period. As a result, it is difficult to predict the impact these Program Supplier Revenue Sharing programs with guaranteed minimums will have on future results of operations in any reporting period.

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