10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 000-15159

RENTRAK CORPORATION

(Exact name of registrant as specified in its charter)

Oregon	93-0780536
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7700 NE Ambassador Place, Portland, Oregon	97220
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 503-284-7581

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock $0.001 par value	11,221,873
(Class)	(Outstanding at August 1, 2011)

RENTRAK CORPORATION

FORM 10-Q

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – June 30, 2011 and March 31, 2011 (unaudited)		2
	Condensed Consolidated Statements of Operations - Three Months Ended June 30, 2011 and 2010 (unaudited)		3
	Condensed Consolidated Statements of Cash Flows - Three Months Ended June 30, 2011 and 2010 (unaudited)		4
	Notes to Condensed Consolidated Financial Statements (unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18
Item 4.	Controls and Procedures		18
PART II - OTHER INFORMATION
Item 1A.	Risk Factors		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 6.	Exhibits		19
Signature			20

1

Rentrak Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)

	June 30, 2011		March 31, 2011
Assets
Current Assets:
Cash and cash equivalents	$	1,551	$	3,821
Marketable securities		22,670		22,556
Accounts and notes receivable, net of allowances for doubtful accounts of $627 and $645		14,360		16,713
Taxes receivable and prepaid taxes		1,815		1,726
Deferred tax assets		107		152
Other current assets		959		1,091
Total Current Assets		41,462		46,059
Property and equipment, net of accumulated depreciation of $14,440 and $13,750		9,795		8,834
Deferred tax assets		1,270		1,242
Goodwill		5,275		5,222
Other intangible assets, net of accumulated amortization of $977 and $724		13,921		14,122
Other assets		706		696
Total Assets	$	72,429	$	76,175
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	4,797	$	7,223
Accrued liabilities		2,840		3,022
Accrued compensation		4,017		6,144
Deferred revenue		1,513		1,210
Total Current Liabilities		13,167		17,599
Deferred rent, long-term portion		940		942
Taxes payable, long-term		1,244		1,261
Long-term debt		506		—
Total Liabilities		15,857		19,802
Commitments and Contingencies		—		—
Stockholders’ Equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued		—		—
Common stock, $0.001 par value; 30,000 shares authorized; shares issued and outstanding: 11,222 and 11,243		11		11
Capital in excess of par value		53,998		54,358
Accumulated other comprehensive income		690		530
Retained earnings		1,873		1,474
Total Stockholders’ Equity		56,572		56,373
Total Liabilities and Stockholders’ Equity	$	72,429	$	76,175

See accompanying Notes to Condensed Consolidated Financial Statements.

2

Rentrak Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

	For the Three Months Ended June 30,
	2011			2010
Revenue	$	22,408		$	24,561
Cost of sales		12,148			13,904
Gross margin		10,260			10,657
Operating expenses:
Selling and administrative		9,962			10,574
Provision for doubtful accounts		52			117
		10,014			10,691
Income (loss) from operations		246			(34	)
Other income:
Interest income, net		110			94
		110			94
Income before income taxes		356			60
Benefit for income taxes		(43	)		(27	)
Net income	$	399		$	87
Basic net income per share	$	0.04		$	0.01
Diluted net income per share	$	0.03		$	0.01
Shares used in per share calculations:
Basic		11,311			10,725
Diluted		11,503			11,226

See accompanying Notes to Condensed Consolidated Financial Statements.

3

Rentrak Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	For the Three Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income	$	399		$	87
Adjustments to reconcile net income to net cash flows provided by operating activities:
Tax benefit from stock-based compensation		—			785
Depreciation and amortization		1,059			756
Stock-based compensation		(734	)		1,744
Excess tax benefits from stock-based compensation		—			(654	)
Deferred income taxes		(18	)		(31	)
Realized gain on marketable securities		(7	)		(2	)
Adjustment to allowance for doubtful accounts		(18	)		(45	)
(Increase) decrease in:
Accounts and notes receivable		2,371			2,708
Taxes receivable and prepaid taxes		(89	)		(470	)
Other assets		22			304
Increase (decrease) in:
Accounts payable		(2,436	)		(117	)
Taxes payable		(17	)		(17	)
Accrued liabilities and compensation		(639	)		(1,124	)
Deferred revenue		302			(98	)
Deferred rent		18			(16	)
Net cash provided by operating activities		213			3,810
Cash flows from investing activities:
Purchase of marketable securities		(3,000	)		(6,583	)
Sale or maturity of marketable securities		3,000			1,800
Purchase of property and equipment		(1,677	)		(1,074	)
Net cash used in investing activities		(1,677	)		(5,857	)
Cash flows from financing activities:
Proceeds from notes payable		500			—
Issuance of common stock		10			1,030
Excess tax benefits from stock-based compensation		—			654
Repurchase of common stock		(1,432	)		—
Net cash provided by (used in) financing activities		(922	)		1,684
Effect of foreign exchange translation on cash		116			(449	)
Decrease in cash and cash equivalents		(2,270	)		(812	)
Cash and cash equivalents:
Beginning of period		3,821			2,435
End of period	$	1,551		$	1,623
Supplemental information:
Capitalized stock-based compensation	$	91		$	165

See accompanying Notes to Condensed Consolidated Financial Statements.

4

RENTRAK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Rentrak Corporation have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three-month period ended June 30, 2011 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2012 (“Fiscal 2012”). The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in our 2011 Annual Report on Form 10-K (the “Form 10-K”).

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.

Note 2. Net Income Per Share

Following is a reconciliation of the shares used for the basic earnings per share (“EPS”) and diluted EPS calculations (in thousands, except footnote reference):

	Three Months Ended June 30,
	2011		2010
Basic EPS:
Weighted average number of shares of common stock outstanding and vested deferred stock units (“DSUs”)(1)		11,311		10,725
Diluted EPS:
Effect of dilutive DSUs and stock options		192		501
		11,503		11,226
Options not included in diluted EPS as they would be antidilutive		822		—
Performance-based grants not included in diluted EPS		318		751

(1) Includes 75,786 and 69,500 vested DSUs, respectively, for the three months ended June 30, 2011 and 2010, that will not be issued until the directors holding the DSUs retire from our Board of Directors.

Note 3. Business Segments and Enterprise-Wide Disclosures

We operate in two business segments, our Advanced Media and Information (“AMI”) Division and our Home Entertainment (“HE”) Division, and, accordingly, we report certain financial information by individual segment under this structure. The AMI Division manages our media measurement services offered through our Entertainment Essentials™ systems primarily on a recurring subscription basis. The HE Division manages our business operations that deliver home entertainment content products and related rental and sales information for that content to our Pay-Per-Transaction (“PPT”) System retailers (“Participating Retailers”) on a revenue sharing basis. This division also includes Studio Direct Revenue Sharing (“DRS”) services, which collects, tracks, audits and reports transactions and revenue data generated by DRS retailers, such as Blockbuster Entertainment, Netflix and kiosk companies, to studios. In addition, beginning in the first quarter of Fiscal 2012, Home Entertainment Essentials™ is reported as a component of the HE Division. Prior period amounts have been reclassified to conform to this change.

Assets are not specifically identified by segment as the information is not used by the chief operating decision maker to measure the segments’ performance.

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Certain information by segment was as follows (in thousands):

	AMI		HE		Other(1)			Total
Three Months Ended June 30, 2011
Sales to external customers	$	9,057	$	13,351	$	—		$	22,408
Gross margin		5,728		4,532		—			10,260
Income (loss) from operations		1,793		2,344		(3,891	)		246
Three Months Ended June 30, 2010
Sales to external customers	$	7,988	$	16,573	$	—		$	24,561
Gross margin		5,733		4,924		—			10,657
Income (loss) from operations		1,005		2,877		(3,916	)		(34	)

(1) Includes corporate expenses and other expenses that are not allocated to a specific segment.

Note 4. Stock-Based Compensation

During the first quarter of Fiscal 2012, the Compensation Committee of our Board of Directors determined that performance requirements relating to vesting of certain stock-based awards would not be achieved. Accordingly, 318,000 performance-based stock option awards and 220,250 stock appreciation rights were cancelled at the direction of our Board of Directors. The cancellation of these awards had no effect on our results of operations.

In the first quarter of Fiscal 2012, we granted options to purchase 250,000 shares of our common stock to certain of our executive officers and other employees. The stock options were granted at the fair market value of our common stock on the dates of grant, which were $26.70 and $19.85 per share, respectively, and expire 10 years from the date of grant. The options vest annually from the date of grant in four equal installments. The value of all stock options granted, as determined using the Black-Scholes valuation model, was $2.7 million and is being recognized over the vesting periods. Approximately $0.7 million will be recognized in Fiscal 2012.

We also granted options to purchase 40,000 shares of our common stock to non-employees in connection with internal software development services relating to our Essentials™ line of businesses. The options were granted at the fair market value of our common stock on the dates of grant, which ranged from $17.43 to $22.20 per share and expire 10 years from the date of grant. The options vest annually from the date of grant in four equal installments and will be revalued at the end of each reporting period until they vest. The value recognized will be capitalized and included in property and equipment, net, in accordance with our policies relating to Capitalized Software as described in Note 2 of Notes to Consolidated Financial Statements in our Form 10-K for the fiscal year ended March 31, 2011.

Stock-based compensation in the first quarter of Fiscal 2012 includes a $1.9 million credit for the decrease in value of a stock award related to a compensation agreement entered into in the fourth quarter of Fiscal 2010 with a non-employee in connection with services provided relating to our Essentials™ lines of business. This award is revalued at the end of each reporting period utilizing the Black-Scholes valuation model and any change in value is recognized during the current period as a component of selling and administrative expenses in our Condensed Consolidated Statements of Operations. The decrease in the price of our common stock was the most significant factor in the reduction in value of the stock award in the first quarter of Fiscal 2012. The fair value of this award at June 30, 2011 and March 31, 2011 was $0.7 million and $2.6 million, respectively, and was recorded as a component of accrued compensation on our Condensed Consolidated Balance Sheets.

Total employee stock-based compensation in the first quarter of Fiscal 2012 was $1.3 million, $0.1 million of which was capitalized. This amount was offset by the $1.9 million credit for non-employee stock-based compensation discussed above, for a net benefit related to stock-based compensation of $0.7 million in the first quarter of Fiscal 2012.

6

During the first quarter of Fiscal 2012, we witheld a total of 28,752 shares, with a value of $0.5 million, relating to the exercise of stock options in exchange for the payment of those options and related withholding taxes.

Note 5. Fair Value Disclosures

We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair value of our financial assets and liabilities as follows:

• Level 1 – quoted prices in active markets for identical securities;

• Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and

• Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Following are the disclosures related to our financial assets (in thousands):

	June 30, 2011				March 31, 2011
	Fair Value		Input Level		Fair Value		Input Level
Available-for-sale marketable securities
Municipal tax exempt bond funds	$	22,670		Level 1	$	22,556		Level 1

The fair value of our “available-for-sale” marketable securities is determined based on quoted market prices for identical securities on a quarterly basis.

Marketable securities, all of which were classified as “available-for-sale” at June 30, 2011 and March 31, 2011, consisted of the following (in thousands):

	June 30, 2011		March 31, 2011
Municipal tax exempt bond funds
Amortized cost	$	22,603	$	22,596
Gross unrecognized holding gains		67		—
Gross unrecognized holding losses		—		(40	)
Fair value	$	22,670	$	22,556

Note 6. Goodwill and Other Intangible Assets

Goodwill

The roll-forward of our goodwill was as follows (in thousands):

	Three Months Ended June 30, 2011
	AMI		HE		Total
Beginning balance	$	4,691	$	531	$	5,222
Currency translation		53		—		53
Ending balance	$	4,744	$	531	$	5,275
	Year Ended March 31, 2011
	AMI		HE		Total
Beginning balance	$	3,396	$	—	$	3,396
Acquisition of Ciné-Chiffres		1,116		—		1,116
Acquisition of Media Salvation		—		531		531
Currency translation		179		—		179
Ending balance	$	4,691	$	531	$	5,222

7

Other Intangible Assets

Other intangible assets and the related accumulated amortization were as follows (in thousands):

	Amortization Period	June 30, 2011			March 31, 2011
Local relationships	7 to 10 years	$	7,346		$	7,299
Accumulated amortization			(887	)		(671	)
			6,459			6,628
Tradenames	1 to 3 years		51			51
Accumulated amortization			(24	)		(20	)
			27			31
Existing technology	6 months		66			66
Accumulated amortization			(66	)		(33	)
			—			33
Patents	20 years		35			30
Accumulated amortization			—			—
			35			30
Global relationships	Indefinite		7,400			7,400
Total		$	13,921		$	14,122

Amortization expense and currency translation were as follows (in thousands):

	Three Months Ended June 30,
	2011		2010
Local relationships	$	212	$	117
Tradenames		4		5
Existing technology		33		—
Currency translation		4		(5	)
	$	253	$	117

Expected amortization expense is as follows over the next five years and thereafter (in thousands):

Fiscal	Local Relationships		Tradenames		Patents		Total
Remainder of Fiscal 2012	$	593	$	12	$	1	$	606
2013		889		15		2		906
2014		889		—		2		891
2015		889		—		2		891
2016		889		—		2		891
Thereafter		2,310		—		26		2,336
	$	6,459	$	27	$	35	$	6,521

Note 7. Comprehensive Income (Loss)

Comprehensive income (loss) was as follows (in thousands):

Three Months Ended June 30,	2011		2010
Net income	$	399	$	87
Unrealized gain (loss) on foreign currency translation		98		(402	)
Unrealized gain (loss) on investments, net of tax		62		(1	)
Comprehensive income (loss)	$	559	$	(316	)

8

Note 8. Share Repurchases

In May 2011, our Board of Directors authorized a new one-year share repurchase program for up to $5.0 million of our outstanding common stock. Common stock repurchases may be made from time to time in the open market at prevailing market prices or through privately negotiated transactions. The amount and timing of all repurchase transactions are contingent upon market conditions, regulatory requirements and alternative investment opportunities. During the first quarter of Fiscal 2012, we repurchased 82,491 shares pursuant to this program at an average price of $17.36 per share for a total of $1.4 million. As of June 30, 2011, $3.6 million remained available for repurchases pursuant to this program.

Note 9. State of Oregon Loan

In the first quarter of Fiscal 2012, we received a loan from the State of Oregon for $0.5 million for the purpose of facility renovations. The loan bears interest at 5% per annum and contains provisions relating to forgiveness if we meet certain requirements. The loan is due on January 31, 2014 if it is not forgiven.

Note 10. New Accounting Guidance

ASU 2010-17

In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-17, “Revenue Recognition – Milestone Method,” which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. The amendments in ASU 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The adoption of the provisions of ASU 2010-17 in the first quarter of Fiscal 2012 did not have a material effect on our financial position, results of operations or cash flows.

ASU 2011-05

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which eliminates the current option of reporting other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. Upon adoption of ASU 2011-05, comprehensive income will either be reported in a single continuous financial statement or in two separate but consecutive financial statements. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. Since ASU 2011-05 only relates to presentation of comprehensive income, we do not believe our adoption of ASU 2011-05 in the first quarter of Fiscal 2013 will have any impact on our financial position, results of operations or cash flows.

Note 11. Subsequent Events

We have considered all events that have occurred subsequent to June 30, 2011 and through August 9, 2011 and determined that no disclosure is required.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain information included in this Quarterly Report on Form 10-Q (including Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding revenue growth, gross profit margin and liquidity) constitute forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements may be identified by the use of forward-looking words such as “could,” “should,” “plan,” “depends on,” “predict,” “believe,” “potential,” “may,” “will,” “expects,” “intends,” “anticipates,” “estimates” or “continues” or the negative thereof or variations thereon or comparable terminology. Forward-looking statements in this Quarterly Report on Form 10-Q include, in particular, statements regarding:

• our future results of operations and financial condition and future revenue and expenses, including declines in Home Entertainment (“HE”) Division revenue and increases in our Essentials™ revenue;

• the future growth prospects for our business as a whole and individual business lines in particular;

• opportunities that could potentially benefit our Participating Retailers;

• expanding our product and service capabilities;

• future acquisitions or investments;

• our relationships with our customers and suppliers;

• market response to our products and services;

• the impact of changes in the timing of movie releases;

• the impact of fluctuations in foreign exchange rates or yields on the tax-exempt bond funds in which we invest; and

• our recent business acquisitions.

These forward-looking statements involve known and unknown risks and uncertainties that may cause our results to be materially different from results implied by such forward-looking statements. These risks and uncertainties include, in no particular order, whether we will be able to:

• successfully develop, expand and/or market new services to new and existing customers, including our media measurement services, in order to increase revenue and/or create new revenue streams;

• timely acquire and integrate various third party databases into our systems;

• compete with companies that may have financial, marketing, sales, technical or other advantages over us;

• deal with our data providers who are much larger than us and have significant financial leverage over us;

• successfully manage the impact on our business of the economic environment generally, both domestic and international, and in the markets in which we operate, including, without limitation, the financial condition of any of our suppliers or customers or the impact of the economic environment on our suppliers’ or customers’ ability to continue their services with us and/or fulfill their payment obligations to us;

• effectively respond to rapidly changing technology and consumer demand for entertainment content in various media formats;

• retain and grow our customer base of retailers (“Participating Retailers”) participating in the Pay-Per-Transaction system™ (the “PPT System”);

• continue to obtain home entertainment content products (DVDs, Blu-ray Discs, etc.) (collectively “Units”) leased/licensed to home video specialty stores and other retailers from content providers, generally motion picture studios and other licensors or owners of the rights to certain video programming content (“Program Suppliers”);

• retain our relationships with our significant Program Suppliers and Participating Retailers;

10

• manage and/or offset any cost increases;

• add new clients or adjust rates for our services;

• adapt to government restrictions;

• leverage our investments in our systems and generate revenue and earnings streams that contribute to our overall success;

• enhance and expand the services we provide in our foreign locations and enter into additional foreign locations; and

• successfully integrate business acquisitions or other investments in other companies, products or technologies into our operations and use those acquisitions or investments to enhance our technical capabilities, expand our operations into new markets or otherwise grow our business.

Please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011 as filed with the Securities and Exchange Commission on June 10, 2011 for a discussion of reasons why our actual results may differ materially from our forward-looking statements. Although we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations change.

Business Overview

We have two operating divisions within our corporate structure and, accordingly, we report certain financial information by individual segment under this structure. Our Advanced Media and Information (“AMI”) operating division includes our media measurement services. Our HE operating division includes our distribution services as well as services that measure, aggregate and report consumer rental and retail activity on film and video game product from traditional “brick and mortar,” online and kiosk retailers.

Our AMI Division encompasses media measurement services across multiple screens and platforms and is delivered via web-based products within our Entertainment Essentials™ lines of business. These services, offered primarily on a recurring subscription basis, capture consumer viewing data which are integrated with consumer segmentation and purchase behavior databases. We provide film studios, television networks and stations, cable, satellite and telecommunications company (“telco”) operators and advertisers insights into consumer viewing and purchasing patterns through our thorough and expansive databases of box office results and local, national and on demand television performance.

Our HE Division services incorporate a unique set of applications designed to help clients maintain and direct their business practices relating to home video products. Entertainment content is distributed to various retailers primarily on behalf of motion picture studios. We track and report performance of home entertainment products leased directly to video retailers or through our PPT System. Within this system, video retailers are given access to a wide selection of box office hits, independent releases and foreign films from the industry’s leading suppliers on a revenue sharing basis. By providing second- and third-tier retailers the opportunity to acquire new inventory in the same manner as major national chains, our PPT System enables retailers everywhere, regardless of size, to increase both the depth and breadth of their inventory, better satisfy consumer demand and more effectively compete in the marketplace. We lease product from our Program Suppliers; Participating Retailers sublease that product from us and rent it to consumers. Participating 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 Program Suppliers. Our PPT System supplies both content providers and retailers with the intelligence and infrastructure necessary to make revenue sharing a viable and productive option.

Our HE Division also includes our rental Studio Direct Revenue Sharing (“DRS”) services, which grants content providers constant, clear feedback and data, plus valuable checks and balances on how both their video products and retailers are performing. Data relating to rented entertainment content is received on both physical and digital product under established agreements on a fee for service basis.

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AMI Division

Our media measurement services, offered primarily on a recurring subscription basis, are distributed to clients through patent pending software systems and business processes, and capture data and other intelligence viewed on multiple screens across various platforms within the entertainment industry.

Our current spending, investments and long-term strategic planning is heavily focused on the development, growth and expansion of our AMI Division, both domestically and internationally. As such, we continue to allocate significant resources towards our Entertainment Essentials™ services and product lines, both those that are currently operational, as well as those that are in various stages of development. Our AMI Division revenue increased $1.1 million, or 13.4%, in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011. Our acquisition of Ciné Chiffres, which occurred in November 2010, contributed $57,000 of this revenue increase, while our existing lines of business saw revenue growth of $1.0 million, or 12.7%.

The AMI Division lines of business are:

• Box Office Essentials™,

• OnDemand Essentials™, which includes Mobile Essentials™ and Internet TV Essentials™; and

• TV Essentials™, which includes StationView Essentials™.

Typical clients subscribing to our services include motion picture studios, television networks and stations, cable and telco operators, advertisers and ad agencies.

HE Division

The financial results from the HE 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 entertainment content and can easily shift from one provider to another. Some examples include renting 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 primarily on the traditional “brick and mortar” retailer.

The popularity of the 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 our revenue in the HE Division to continue to decline.

In May 2010, a major “brick and mortar” retailer, Movie Gallery, with 2,000 locations, announced the closure of all of its stores. Also, during September 2010, Blockbuster Entertainment (“Blockbuster”) filed for Chapter 11 bankruptcy protection and closed approximately 1,000 “brick and mortar” retail locations as a result. During April 2011, Blockbuster’s assets were acquired by DISH Network Corporation, and it is expected that DISH Network will continue the delivery of home entertainment content. Although Movie Gallery and Blockbuster were not direct customers of ours, we believe the major “brick and mortar” retailers’ share of the overall industry is contracting as a result of these closures and related financial events. However, we also believe this presents opportunities that potentially benefit our Participating Retailers through increased traffic from new customers and the opportunity to expand their businesses through the addition of store locations; it is too soon to predict what effect, if any, this will have on our future financial results.

For the many regional chains and independent retailers who rent home entertainment products (DVD, Blu-ray and video games) to consumers, it is more effective to acquire “new release” rental inventory on a lease basis instead of purchasing the inventory. Our PPT System provides Participating Retailers the opportunity to increase both the depth and breadth of their inventory, better satisfy consumer demand and more effectively compete in the marketplace.

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Many of our arrangements are structured so that the Participating Retailers pay reduced 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). Additionally, after the initial release of a movie to theaters, Program Suppliers historically have exclusively distributed the movie to the home video retail market prior to distributing it in other forms throughout the industry, such as video-on-demand, which created a competitive advantage for our Participating Retailers. There is no assurance that Program Suppliers will continue to release films in this manner, and a change in the timing of releases may cause our revenue to decline.

We continue to be in good standing with our Program Suppliers, and we make ongoing efforts to strengthen those business relationships through enhancements to our current service offerings and the development of new service offerings. 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.

Sources of Revenue

Revenue by segment includes the following:

AMI Division

Subscription fee and other revenue, primarily relating to custom reports, from:

• Box Office Essentials™;

• OnDemand Essentials™, which includes Mobile Essentials™ and Internet TV Essentials™; and

• TV Essentials™, which includes StationView Essentials™.

HE Division

• Transaction fees, which are generated when Participating Retailers rent Units to consumers. Additionally, certain arrangements include guaranteed minimum revenue from our customers, which are recognized on the street (release) date, provided all other revenue recognition criteria are met (please refer to “Critical Accounting Policies” at the end of this Item 7);

• Sell-through fees, which are generated when Participating Retailers sell previously-viewed rental Units to consumers and/or buy-out fees generated when Participating Retailers purchase Units at the end of the lease term;

• DRS fees, which are generated from data tracking and reporting services provided to Program Suppliers;

• Subscription fees related to Home Entertainment Essentials™; and

• Other fees, which primarily include order processing fees, which are generated when Units are ordered by, and distributed to, Participating Retailers.

Results of Operations

Certain information by segment was as follows (in thousands):

	AMI		HE		Other(1)			Total
Three Months Ended June 30, 2011
Sales to external customers	$	9,057	$	13,351	$	—		$	22,408
Gross margin		5,728		4,532		—			10,260
Income (loss) from operations		1,793		2,344		(3,891	)		246
Three Months Ended June 30, 2010
Sales to external customers	$	7,988	$	16,573	$	—		$	24,561
Gross margin		5,733		4,924		—			10,657
Income (loss) from operations		1,005		2,877		(3,916	)		(34	)

(1) Includes corporate expenses and other expenses that are not allocated to a specific segment.

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Revenue

Revenue decreased $2.2 million, or 8.8%, to $22.4 million in the first quarter of Fiscal 2012 compared to $24.6 million in the first quarter of Fiscal 2011. The decrease in revenue was primarily due to a decline in revenue from our HE Division, partially offset by an increase in AMI revenue primarily related to growth in our existing lines of business. These fluctuations are described in more detail below.

AMI Division

Revenue information related to our AMI Division was as follows (dollars in thousands):

	Three Months Ended June 30,				Dollar Change		% Change
	2011		2010
Box Office Essentials™	$	5,027	$	4,439	$	588		13.2	%
OnDemand Essentials™		2,291		2,106		185		8.8	%
TV Essentials™		1,739		1,443		296		20.5	%
	$	9,057	$	7,988	$	1,069		13.4	%

The increase in Box Office Essentials™ revenue in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was primarily due to the addition of new clients and rate increases for existing clients, as well as our acquisition of Ciné Chiffres in the third quarter of Fiscal 2011, which contributed $57,000 to the increase.

The increases in OnDemand Essentials™ and TV Essentials™ revenue in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 were due to the addition of new clients, offset by lower custom report projects. Revenue related to OnDemand Essentials™ also increased due to rate increases for existing clients.

Revenue related to our Essentials™ business information service offerings increased primarily due to our continued investment in, and successful marketing of, these offerings and retention of clients. We expect continued future increases in our Essentials™ revenue as a result of further investments, development and expansion of new and existing services, both domestically and internationally.

HE Division

Revenue information related to our HE Division was as follows (dollars in thousands):

	Three Months Ended June 30,				Dollar Change			% Change
	2011		2010
Transaction fees	$	7,854	$	10,622	$	(2,768	)		(26.1	)%
Sell-through fees		2,043		2,668		(625	)		(23.4	)%
DRS		1,676		1,377		299			21.7	%
Other		1,778		1,906		(128	)		(6.7	)%
	$	13,351	$	16,573	$	(3,222	)		(19.4	)%

The decrease in transaction fees in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was due to fewer rental transactions at our Participating Retailers, which decreased by 25.8%. Minimum guarantees decreased $0.2 million to $0.4 million in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 due to the timing and quality of releases. The decrease in rental transactions was due to fewer Participating Retailers, fewer available Units and lower quality titles in the current fiscal year period compared to the prior fiscal year period, as well as continued changing market conditions.

The decrease in used sell-through fees in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was primarily due to a 25.8% decrease in sell-through volume as a result of an overall decline in Units available for sale, as well as a 1.3% decrease in the rate per transaction, offset by higher sales to brokers once Units reach their end of term.

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The increase in DRS revenue in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was primarily due to higher transactions from kiosk distributors. The increase also reflects our acquisition of Media Salvation in the fourth quarter of Fiscal 2011, which contributed $0.3 million to the increase.

Cost of Sales

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

In the AMI Division, cost of sales primarily consists of costs associated with the operation of a call center for our Box Office Essentials™ services, as well as costs associated with amortizing capitalized internally developed software used to provide the corresponding services and direct costs incurred to obtain, cleanse and process data and maintain our systems.

In the HE Division, Unit 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 affected 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 reporting 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.

Cost of sales decreased $1.8 million, or 12.6%, in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011.

Cost of sales information related to our AMI Division follows (dollars in thousands):

	Three Months Ended June 30,				Dollar Change		% Change
	2011		2010
Costs related to:
Amortization of internally developed software	$	452	$	325	$	127		39.1	%
Call center operation		1,153		1,107		46		4.2	%
Obtaining, cleansing and processing data		1,724		823		901		109.5	%
	$	3,329	$	2,255	$	1,074		47.6	%

The increases in costs of sales within the AMI Division in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 resulted primarily from increased costs related to cleansing and processing data due to revenue sharing arrangements in place with data providers.

Cost of sales information related to our HE Division follows (dollars in thousands):

	Three Months Ended June 30,				Dollar Change			% Change
	2011		2010
Costs related to:
Transaction fees	$	6,011	$	8,123	$	(2,112	)		(26.0	)%
Sell-through fees		1,511		2,085		(574	)		(27.5	)%
Other		1,297		1,441		(144	)		(10.0	)%
	$	8,819	$	11,649	$	(2,830	)		(24.3	)%

The decreases in cost of sales within the HE Division were primarily related to the decreases in revenue discussed above.

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Gross margins as a percentage of revenue were as follows:

	Three Months Ended June 30,
	2011			2010
AMI Division		63.2	%		71.8	%
HE Division		33.9	%		29.7	%

The decline in gross margin in the AMI Division in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was primarily due to increased costs associated with a data provider agreement, which was converted from a variable arrangement based on revenues to a fixed-fee arrangement during December 2010.

The improvement in gross margin in the HE Division in the first quarter of Fiscal 2012 compared to the first quarter of Fiscal 2011 was primarily due to the increase in DRS revenue and sales to brokers, both of which have higher margins.

Selling and Administrative

Selling and administrative expenses consist primarily of compensation and benefits, development, marketing and advertising costs, legal and professional fees, communications costs, depreciation and amortization of tangible fixed assets and software, real and personal property leases, as well as other general corporate expenses.

Selling and administrative expenses decreased $0.6 million, or 5.8%, to $10.0 million in the first quarter of Fiscal 2012 compared to $10.6 million in the first quarter of Fiscal 2011. This decrease was primarily due to a $1.9 million credit related to the decrease in the value of a stock award granted to a non-employee that is valued at the end of each reporting period, compared to a $0.6 million charge related to this award in the first quarter of Fiscal 2011. This decrease was partially offset by increased costs associated with expansion of our AMI Division.

Income Taxes

Our effective tax rate was a benefit of 12.1% in the first quarter of Fiscal 2012 and was positively affected by federal and state research and experimentation credits, earnings on marketable securities that are exempt from federal income taxes and the tax impact of income in foreign locations.

Our effective tax rate was a benefit of 45.0% in the first quarter of Fiscal 2011 and was positively affected by tax benefits on stock options exercised as well as the reversal of a tax contingency due to a lapse in the statute of limitations.

Liquidity and Capital Resources

Our sources of liquidity include our cash and cash equivalents, marketable securities, cash expected to be generated from future operations and investments and our $15.0 million line of credit. Based on our current financial projections and projected cash needs, we believe that our available sources of liquidity will be sufficient to fund our current operations, the continued current development of our business information services and other cash requirements through at least June 30, 2012.

Cash and cash equivalents and marketable securities decreased $2.2 million to $24.2 million at June 30, 2011 from March 31, 2011. This decrease resulted primarily from $1.7 million used for the purchase of equipment and capitalized IT costs and $1.4 million used for the repurchase of common stock. These factors were partially offset by $0.2 million provided by operating activities and $0.5 million of proceeds received from a loan from the State of Oregon. Portions of our cash and cash equivalents are held in our foreign subsidiaries. We may not be able to repatriate these funds without significant tax implications. As of June 30, 2011, we had $1.2 million in foreign bank accounts, which we plan to use to fund our international expansion and growth.

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We had $22.7 million invested in tax-exempt bond funds as of June 30, 2011. Bond fund values fluctuate in response to the financial condition of individual issues, general market and economic conditions and changes in interest rates. In general, when interest rates rise, bond fund values fall and investors may lose principal value. While we currently have no plans or requirements to sell the securities in the foreseeable future, we are exposed to market risks and cannot predict what impact fluctuations in the market may have on the value of these funds.

Accounts and notes receivable, net of allowances, decreased $2.4 million to $14.4 million at June 30, 2011 from March 31, 2011, primarily due to lower sales in the first quarter of Fiscal 2012 compared to the fourth quarter of Fiscal 2011.

During the first quarter of Fiscal 2012, we spent $1.7 million on property and equipment, including $0.8 million for the capitalization of internally developed software for our business information service offerings. We anticipate spending a total of approximately $6.1 million on property and equipment in all of Fiscal 2012, including approximately $3.6 million for the capitalization of internally developed software, primarily for the development of systems for our Essentials™ lines of business, computer equipment and renovations to our corporate offices.

Accounts payable decreased $2.4 million to $4.8 million at June 30, 2011 from March 31, 2011, primarily due to the timing of payments to our Program Suppliers.

Accrued compensation decreased $2.1 million to $4.0 million at June 30, 2011 from March 31, 2011, primarily due to a $1.9 million decrease in accrued stock-based compensation that will be settled in cash and relates to an agreement with a non-employee, which fluctuated with our stock price during the first quarter of Fiscal 2012, and a $0.6 million decrease in our bonus accrual as bonuses related to Fiscal 2011 were paid during the first quarter of Fiscal 2012.

Deferred revenue of $1.5 million at June 30, 2011 included amounts related to quarterly and annual subscriptions for our services.

Deferred rent, current and long-term, of $1.0 million at June 30, 2011 represents amounts received for qualified renovations on our corporate headquarters and free rent for the lease term. The deferred rent related to qualified renovations is being amortized against rent expense over the remaining lease term, which is expected to end December 31, 2021, at the rate of approximately $13,000 per quarter.

In May 2011, our Board of Directors authorized a one-year share repurchase program for up to $5.0 million of our outstanding common stock. Common stock repurchases may be made from time to time in the open market at prevailing market prices or through privately negotiated transactions. The amount and timing of all repurchase transactions are contingent upon market conditions, regulatory requirements and alternative investment opportunities. During the first quarter of Fiscal 2012, we repurchased 82,491 shares pursuant to this program at a weighted average price of $17.36 per share for a total of $1.4 million. As of June 30, 2011, $3.6 million remained available for repurchases pursuant to this program.

We currently have a revolving line of credit for $15.0 million, with a maturity of December 1, 2011. Interest accrues on outstanding balances under the line of credit at a rate equal to LIBOR plus 1.5 percent. The credit line is secured by substantially all of our assets and includes certain financial covenants. We were in compliance with the covenants as of and for the quarter ended June 30, 2011 and, at June 30, 2011, we had no outstanding borrowings under this agreement.

In the first quarter of Fiscal 2012, we received a loan from the State of Oregon for $0.5 million for the purpose of facility renovations. The loan bears interest at 5% per annum and contains provisions relating to forgiveness if we meet certain requirements. The loan is due on January 31, 2014 if it is not forgiven.

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Critical Accounting Policies and Estimates

We reaffirm the critical accounting policies and estimates as reported in our Fiscal 2011 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on June 10, 2011.

New Accounting Guidance

See Note 10 of Notes to Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

There have been no material changes in our reported market risks since the filing of our Fiscal 2011 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on June 10, 2011.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on that evaluation our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for the fiscal year ended March 31, 2011 includes a detailed discussion of our risk factors. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K. Accordingly, the information in this Form 10-Q should be read in conjunction with the risk factors and information disclosed in our Fiscal 2011 Form 10-K, which was filed with the Securities and Exchange Commission on June 10, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We repurchased the following shares of our common stock during the quarter ended June 30, 2011:

	Total number of shares purchased(1)		Average price paid per share		Total number of shares purchased as part of publicly announced plan		Maximum dollar amount that may yet be used to purchase shares under the plan
April 1 to April 30		—		—		—	$	5.0 million
May 1 to May 31		—		—		—	$	5.0 million
June 1 to June 30		82,491	$	17.36		82,491	$	3.6 million
Total		82,491	$	17.36		82,491	$	3.6 million

(1) All shares purchased during the first quarter of Fiscal 2012 were purchased pursuant to the May 2011 program discussed below.

In May 2011, our Board of Directors authorized a one-year share repurchase program for up to $5.0 million of our outstanding common stock. Common stock repurchases may be made from time to time in the open market at prevailing market prices or through privately negotiated transactions. The amount and timing of all repurchase transactions are contingent upon market conditions, regulatory requirements and alternative investment opportunities.

ITEM 6. EXHIBITS

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

10.1*+	Employment Agreement dated February 9, 2011 with Chris Wilson
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Label Linkbase Document

* Management Contract or Compensatory Plan or Arrangement.

+ Confidential treatment has been requested for certain portions of this agreement.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 9, 2011	RENTRAK CORPORATION
	By:/s/David I. Chemerow
	David I. Chemerow
	Chief Operating Officer and Chief Financial Officer

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EX-10.1

Exhibit 10.1

* Portions of this exhibit are considered confidential by the registrant and have been omitted from filing and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

EMPLOYMENT AGREEMENT

This Employment Agreement between CHRISTOPHER WILSON (“Executive”) and RENTRAK CORPORATION, an Oregon corporation (“Corporation”), is entered into effective as of February 9, 2011 (this “Agreement”).

1. SERVICES

1.1 Employment Position. Corporation agrees to employ Executive as President, National Linear TV and Executive accepts such employment, under the terms and conditions of this Agreement. Executive also agrees to serve, if elected, without separate compensation, as an officer and/or director of any subsidiary or affiliate of Corporation. Corporation represents to Executive that it currently has and will maintain directors and officers liability insurance.

1.2 Term.

1.2.1 General. The term of this Agreement (the “Term”) will commence on February 9, 2011 (“Start Date”), and, subject to the other provisions of this Section 1.2, will expire March 31, 2012.

1.2.2 Renewal Term or Terms. The term of this Agreement will automatically extend into one or more “Renewal Terms” of an additional one-year period that will expire on March 31, 2012 (or March 31 of any such subsequent Renewal Term), unless Corporation, not later than January 31, 2012 (or January 31 of any subsequent Renewal Term), gives written notice (a “Notice of Non-Renewal”) to Executive that the Term will not extend into a Renewal Term. Corporation may give a Notice of Non-Renewal for any reason or for no reason. Failure to extend the Term into a Renewal Term will not constitute a termination of Executive’s employment effective as of the end of the Term or any applicable Renewal Term for purposes of this Agreement. References to the “Term” of this Agreement include the initial Term and, if the Agreement extends into one or more Renewal Terms pursuant to this Section, the Renewal Term or Terms.

1.2.3 At-Will Employment. The parties acknowledge that Executive is and will be an at-will employee of Corporation and nothing in this Agreement will limit the right of Corporation or Executive to terminate this Agreement at any time for any reason or for no reason, subject to the provisions of this Agreement describing the compensation payable, if any, in connection with such a termination of employment.

1.2.4 Compensation Upon Termination Following Term of Agreement. Notwithstanding termination of this Agreement, the provisions of Section 7 will continue to apply.

1.3 Duties. During the Term, Executive will serve as Corporation’s President, National Linear TV. Executive will report directly to Corporation’s Chief Executive Officer. Executive will be responsible for the sales of the Corporation’s national linear TV network products and advertising agency and advertiser products and such other or different duties on behalf of Corporation as may be assigned from time to time by Corporation’s Chief Executive Officer or Board of Directors (the “Board”). Executive understands that the operations supporting the national linear TV business are currently combined with other operations of the Corporation and that the Corporation’s Chief Executive Officer will decide when it is advisable to assign management responsibility for such operations to Executive. Executive will do such traveling as may be required in the performance of his duties under this Agreement.

1.4 Outside Activities. During his employment under this Agreement, Executive will devote his full business time, energies, and attention to the business and affairs of Corporation, and to the promotion and advancement of its interests. Executive will perform his services faithfully, competently, and to the best of his abilities and will not engage in professional or personal business activities that may require an appreciable portion of Executive’s time or effort to the detriment of Corporation’s business.

1.5 Application of Corporate Policies. Executive will, except as otherwise provided in this Agreement, be subject to Corporation’s rules, practices, and policies applicable generally to Corporation’s senior executive employees, as such rules, practices, and policies may be revised from time to time by the Board.

2. COMPENSATION AND EXPENSES

2.1 Base Salary. Commencing the Start Date, Executive’s annual base salary will be $295,000, payable by Corporation in a manner consistent with Corporation’s payroll practices for management employees, as such practices may be revised from time to time. Executive’s annual base salary will be reviewed by Corporation’s Chief Executive Officer and Compensation Committee (the “Committee”) on or before April 1 of each year during the Term (commencing in 2012), unless Executive’s employment has been terminated earlier pursuant to this Agreement, to determine if such annual base salary should be increased (but not decreased) for the following fiscal year in recognition of services to Corporation.

2.2 Bonus Compensation.

2.2.1 Annual Bonus. Executive will be eligible to receive a cash bonus for services during each fiscal year during the Term beginning with fiscal 2012 and payable, to the extent earned, no later than June 30 of the following fiscal year. In addition, for the period from the Start Date through March 31, 2012, Executive will be eligible to earn a bonus (“Revenue Bonus”) based on the net revenues for the Corporation’s national linear TV network products and advertising agency and advertiser products (“Revenues”) as described below (“Revenue Bonus Targets”). If the amount of Revenues is $* million, a bonus of $100,000 will be earned (“50% Revenue Bonus”). If the amount of Revenues is $* million, a bonus of $150,000 will be earned (“75% Revenue Bonus”). If the amount of Revenues is $* million or more, a bonus of $200,000 will be earned (“100% Revenue Bonus”). If the amount of Revenues is less than $* million, no bonus will be earned. Payment of the Revenue Bonus will be made in increments following the satisfaction of each incremental Revenue Bonus Target set forth above upon satisfying the following conditions: (a) closing of the Corporation’s monthly financial statements for the month in which such incremental Revenue Bonus Target was met and (b) final approval by the Compensation Committee of the Board of Directors. The Compensation Committee will review its determinations regarding the incremental Revenue Bonus payments and make a final determination of the aggregate amount of the Revenue Bonus earned by Executive pursuant to this paragraph after March 31, 2012 based on the closing of the Company’s financial statements for the fiscal year ending March 31, 2012. If the amount of Revenues is between the Revenue Bonus Targets, the Revenue Bonus earned will be determined by linear interpolation. For example, if the amount of Revenues was $* million, the Revenue Bonus earned would be $120,000. To the extent that the Compensation Committee determines at that time that any portion of the payments previously received by Executive pursuant to this paragraph were not earned based on the Company’s closed financial statements for the fiscal year ending March 31, 2012, Executive will remit such unearned portion of the payments to the Company. To receive payment of any Revenue Bonus, Executive must remain employed at the time the each such Revenue Bonus is approved and paid.

2.2.2 Signing Bonus. Executive will also receive a signing bonus in the amount of $62,000.

2.3 Equity-Based or Other Long-Term Incentive Compensation. Executive will be granted a nonqualified stock option to purchase 110,000 shares of the Corporation’s common stock subject to the terms and conditions of the Corporation’s Amended and Restated 2005 Stock Incentive Plan (the “Plan”) at an exercise price equal to the fair market value of the Corporation’s common stock on the date of grant (which is intended to be the date Executive commences employment with Corporation) and subject to the Corporation’s standard 4-year vesting period, a 10-year term and the terms and conditions of the Plan and the Corporation’s standard form of stock option agreement. In addition, Executive will be granted an additional nonqualified stock option to purchase 10,200 shares subject to the Plan at an exercise price equal to the fair market value of the Corporation’s common stock on the date of grant (which is intended to be the date Executive commences employment with Corporation) subject to the terms and conditions of the Plan and the Corporation’s standard form of stock option agreement that will have a 10-year term (unless earlier terminated as set forth below) and will vest if for the period from the Start Date through March 31, 2012, the amount of Revenues is equal to or greater than $* million (“Performance Option”). Vesting of the Performance Option will occur upon satisfying the following conditions: (a) closing of the Corporation’s financial statements for the fiscal year ending March 31, 2012 and (b) final approval by the Compensation Committee of the Board of Directors. For the Performance Option to vest, Executive must remain employed through the date on which vesting will occur as provided above. To the extent the Compensation Committee of the Board of Directors determines that the Performance Option has failed to vest, unless the Compensation Committee determines otherwise, the Performance Option will at that time automatically terminate. In the future, Executive may be granted additional options to purchase shares of Corporation’s common stock and/or other equity-based awards under the Plan or under another long-term incentive compensation plan that may be developed by Corporation for its senior executives, at the times and in the amounts determined by the Committee. All awards will be subject to the provisions of the Plan or such other long-term plan.

* Confidential portions omitted pursuant to a request for confidential treatment.

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2.4 Additional Employee Benefits. Executive will receive an annual grant of 208 hours of credit (or such higher number of hours as are credited to Corporation’s other senior executives) under Corporation’s Personal Time Off (PTO) program. Personal time off and vacation may be taken in accordance with Corporation’s rules, practices, and policies applicable to Corporation’s senior executive employees, as such rules, practices, and policies may be revised from time to time by the Board or the Committee. During the Term, Executive will be entitled to any other employee benefits approved by the Board or the Committee, or available to officers and other management employees generally, including any life and medical insurance plans, 401(k) and other similar plans, and health and welfare plans, each whether now existing or hereafter approved by the Board or the Committee (“Benefit Plans”). The foregoing will not be construed to require Corporation to establish any such plans or to prevent Corporation from modifying or terminating any such Benefit Plans.

2.5 Expenses. Subject to review and approval by the Corporation’s Chief Executive Officer, Corporation will reimburse Executive for reasonable expenses actually incurred by Executive in connection with the business of Corporation. Executive will submit to Corporation such substantiation for such expenses as may be reasonably required by Corporation.

3. CONFIDENTIAL INFORMATION

3.1 Definition. “Confidential Information” is all nonpublic information relating to Corporation or its business that is disclosed to Executive, that Executive produces, or that Executive otherwise obtains during employment. Confidential Information also includes information received from third parties that Corporation has agreed to treat as confidential. Examples of Confidential Information include, without limitation, marketing plans, customer lists or other customer information, product design and manufacturing information, and financial information. Confidential Information does not include any information that (i) is within the public domain other than as a result of disclosure by Executive in violation of this Agreement, (ii) was, on or before the date of disclosure to Executive, already known by Executive, or (iii) Executive is required to disclose in any governmental, administrative, judicial, or quasi-judicial proceeding, but only to the extent that Executive is so required to disclose and provided that Executive takes reasonable steps to request confidential treatment of such information in such proceeding.

3.2 Access to Information. Executive acknowledges that in the course of his employment he has had and will have access to Confidential Information, that such information is a valuable asset of Corporation, and that its disclosure or unauthorized use will cause Corporation substantial harm.

3.3 Ownership. Executive acknowledges that all Confidential Information will continue to be the exclusive property of Corporation (or the third party that disclosed it to Corporation), whether or not prepared in whole or in part by Executive and whether or not disclosed to Executive or entrusted to his custody in connection with his employment by Corporation.

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3.4 Nondisclosure and Nonuse. Unless authorized or instructed in advance in writing by Corporation, or required by law (as determined by licensed legal counsel), Executive will not, except as required in the course of Corporation’s business, during or after his employment, disclose to others or use any Confidential Information, unless and until, and then only to the extent that, such items become available to the public through no fault of Executive.

3.5 Return of Confidential Information. Upon request by Corporation during or after his employment, and without request upon termination of employment pursuant to this Agreement, Executive will deliver immediately to Corporation all written, stored, saved, or otherwise tangible materials containing Confidential Information without retaining any excerpts or copies.

3.6 Duration. The obligations set forth in this Section 3 will continue beyond the term of employment of Executive by Corporation and for so long as Executive possesses Confidential Information.

4. NONCOMPETITION

4.1 Competitive Entity. For purposes of this Agreement, a Competitive Entity is any firm, corporation, partnership, limited liability company, business trust, or other entity that is engaged in all or any of the following business activities:

(a) The wholesale and/or revenue sharing physical or electronic distribution of home entertainment software in any media, including without limitation video cassettes, DVDs, video games, and PC software (“Entertainment Software”);

(b) The fulfillment, warehouse, or distributing business in connection with the Entertainment Software industry;

(c) The collection, aggregation, tracking, and dissemination of market information and data (such as sales, marketing, inventory, occurrence, expenditure, and advertising data) related to consumer activity in the entertainment industry; or

(d) The delivery of technological intelligence, industry analysis, and strategic and tactical guidance with respect to consumer activity in the entertainment industry.

4.2 Covenant. During the Term of and for a period ending on the last day of the applicable Noncompete Period described in Section 5.7, Executive will not, within any geographical area where Corporation engages in business:

(a) Directly or indirectly, alone or with any individual, partnership, limited liability company, corporation, or other entity, become associated with, render services to, invest in, represent, advise, or otherwise participate in any Competitive Entity; provided, however, that nothing contained in this Section 4.2 will prevent Executive from owning less than 5 percent of any class of equity or debt securities listed on a national securities exchange or market, provided such involvement is solely as a passive investor;

(b) Solicit any business on behalf of a Competitive Entity from any individual, firm, partnership, corporation, or other entity that is a customer of Corporation during the 12 months immediately preceding the date Executive’s employment with Corporation is terminated; or

(c) Employ or otherwise engage, or offer to employ for Executive or any other person, entity, or corporation, the services or employment of any person who has been an employee, sales representative, or agent of Corporation during the 12 months preceding the date Executive’s employment with Corporation is terminated.

For purposes of this Section 4, “Corporation” means Corporation and its subsidiaries (whether now existing or subsequently created) and their successors and assigns.

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4.3 Severability; Reform of Covenant. If, in any judicial proceeding, a court refuses to enforce this covenant not to compete because it covers too extensive a geographic area or is too long in its duration, the parties intend that it be reformed and enforced to the maximum extent permitted under applicable law.

5. TERMINATION

Executive’s employment under this Agreement may terminate as follows:

5.1 Death. Executive’s employment will terminate automatically upon the date of Executive’s death.

5.2 Disability. Corporation may, at its option, terminate Executive’s employment under this Agreement upon written notice to Executive if Executive, because of physical or mental incapacity or disability, fails to perform the essential functions of his position, with reasonable accommodation, required of him under this Agreement for a continuous period of 120 days of any 180 days within any 12-month period.

5.3 Termination by Corporation for Cause. Corporation may terminate Executive’s employment under this Agreement for Cause at any time. For purposes of this Agreement, “Cause” means: (a) Executive’s willful material misconduct in performance of the duties of his position with Corporation or a material breach by Executive of this Agreement, (b) Executive’s willful commission of a material act of malfeasance, dishonesty, or breach of trust against Corporation or its successors that materially harms or discredits Corporation or its successors or is materially detrimental to the reputation of Corporation or its successors, or (c) Executive’s conviction of or a plea of nolo contendere to a felony involving moral turpitude. In all cases, Corporation will give Executive notice setting for forth in reasonable detail the specific respects in which the Corporation believes it has Cause to terminate Executive and allow Executive a reasonable opportunity to correct such conduct.

5.4 Termination by Executive for Good Reason. Executive may terminate his employment with Corporation under this Agreement for “Good Reason” if Corporation has not cured the actions or circumstances which are the basis for such termination within 30 days following receipt by the Board of written notice from Executive setting forth the actions or circumstances constituting Good Reason, which notice must be delivered to the Board within 90 days of the initial existence of such actions or circumstances. For purposes of this Agreement, “Good Reason” means:

(a) Failure of Corporation to comply with the material terms of this Agreement; or

(b) The occurrence (without Executive’s express written consent) of any of the following acts by Corporation or failures by Corporation to act:

(i) A substantial adverse alteration in the nature or status of Executive’s title, position, duties, or reporting responsibilities as an executive of Corporation;

(ii) A material reduction in Executive’s base salary as set forth in this Agreement or as the base salary may be increased from time to time;

(iii) The failure by Corporation to continue to provide Executive with benefits and participation in Benefit Plans made available by Corporation to its senior executives; or

(iv) The requirement that Executive relocate from the New York metropolitan area.

5.5 Termination by Corporation Without Cause. Corporation may terminate Executive’s employment with Corporation without Cause for any reason or for no reason at any time by written notice to Executive.

5.6 Termination by Executive Without Good Reason. Executive may terminate Executive’s employment with Corporation other than for Good Reason for any other reason or for no reason at any time by written notice to the Chief Executive Officer of Corporation.

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5.7 Applicable Noncompete Periods upon Termination. The duration of Executive’s obligations under Section 4 (the “Noncompete Period”) will be as follows:

(a) In the event Executive terminates his employment with Corporation for Good Reason under Section 5.4 or Corporation terminates Executive’s employment with Corporation without Cause under Section 5.5, the Noncompete Period will continue so long as Executive is entitled to receive Monthly Severance Payments under Sections 6.3(a) or 7.2(a) (without giving effect to any prepayment pursuant to the Outside Payment Date provisions of such Sections). Executive’s obligations under this Agreement will terminate immediately if Corporation fails to make a Monthly Severance Payment within 15 days after it is due. For this purpose, a check for a Monthly Severance Payment mailed within such 15-day period (as evidenced by official postmark) will be deemed to be made within such 15-day period.

(b) Subject to extension by Corporation as provided below, in the event Executive terminates his employment with Corporation other than for Good Reason under Section 5.6, the Noncompete Period will be one year from the date of termination. Corporation may in its sole discretion extend the Noncompete Period for a period not to extend beyond 24 months from the date the Noncompete Period would otherwise expire by agreeing to make Monthly Severance Payments to Executive during the extended Noncompete Period. To extend the Noncompete Period, Corporation must give Executive written notice (an “Extension Notice”) no later than 60 days following the date of termination, stating the elected duration of the extended Noncompete Period. The Extension Notice will constitute a binding commitment by Corporation to make Monthly Severance Payments for the full duration of the extended Noncompete Period and no further extension of the Noncompete Period will be permitted. Executive’s obligations under this Agreement will terminate immediately if Corporation fails to make a Monthly Severance Payment within 15 days after it is due.

(c) In the event Corporation terminates Executive’s employment for Cause, the Noncompete Period will be one year from the date of termination.

6. COMPENSATION UPON TERMINATION DURING TERM OF AGREEMENT

6.1 Definitions. For purposes of Sections 6.3 and 7.2, the following terms have the meanings set forth below:

“Applicable Severance Period” means the greater of (i) six months, or (ii) a period equal to three months for each full four years of continuous service as an employee of Corporation, determined based on the number of full years of service as of the date of termination. For example, for an employee with 18 years of continuous service as of the date of termination, the Applicable Severance Period would be 12 months.

“Outside Payment Date” means the later of (i) the 15^th day of the third calendar month of the calendar year immediately following the date of termination of Executive, or (ii) the 15^th day of the third calendar month of the fiscal year of Corporation immediately following the date of termination of Executive.

6.2 Death or Disability. Upon termination of Executive’s employment pursuant to Section 5.1 or Section 5.2 prior to the expiration of the Term, all obligations of Corporation under this Agreement will cease, except that Executive will be entitled to:

(a) Accrued base salary through the date of Executive’s termination of employment; and

(b) Other benefits under Benefit Plans to which Executive was entitled upon such termination of employment in accordance with the terms of such Benefit Plans.

6.3 Termination Without Cause or by Executive for Good Reason.

(a) Monthly Severance Payments.

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(i) If prior to the expiration of the Term, Executive terminates his employment with Corporation for Good Reason under Section 5.4 or Corporation terminates Executive’s employment with Corporation without Cause under Section 5.5, Executive will be entitled to the benefits described in Section 6.2, plus severance payments equal to the Applicable Severance Period multiplied by the base salary per month in effect as of the date of termination, payable in equal monthly installments (each installment, a “Monthly Severance Payment”). Monthly Severance Payments will be paid in monthly installments commencing in the calendar month following termination; provided however, that if the period over which Monthly Severance Payments would otherwise be payable would extend beyond the Outside Payment Date, the unpaid portion of the aggregate amount of Monthly Severance Payments as of the Outside Payment Date will be paid to Executive in a lump sum not later than the Outside Payment Date.

(ii) Corporation’s obligations to pay Monthly Severance Payments under this Section 6.3(a) and to continue medical and dental insurance benefits as provided in Section 6.3(b) are expressly conditioned on (i) Executive’s execution (not later than 45 days after Executive’s termination) of a release (in the form attached to this Agreement as Appendix 6.3(a)(ii), with such modifications specifically in response to changes in applicable law as counsel for Corporation determines to be reasonably necessary or desirable to ensure effective release of all claims) of any and all claims that Executive may hold through the date such release is executed against Corporation or any of its subsidiaries or affiliates, and (ii) the expiration of any applicable revocation period specified in such release without revocation of the release by Executive.

(iii) Monthly Severance Payments will be payable in a manner consistent with Corporation’s payroll practices for management employees.

(iv) Executive will not be required to mitigate the Monthly Severance Payments pursuant to this Agreement by seeking other employment; provided however, that amounts payable by Corporation as Monthly Severance Payments will be reduced by compensation actually received by Executive from a new employer during the severance period described above.

(b) Medical and Dental Insurance Benefits. In addition to Monthly Severance Payments, subject to the execution of a release as described in Section 6.3(a)(ii), Corporation will continue to provide or will arrange to provide (at Corporation’s cost) Executive with medical and dental insurance benefits substantially similar to those to which Executive was entitled as of the date of termination until Corporation’s obligation to make Monthly Severance Payments expires (without giving effect to any prepayment pursuant to the Outside Payment Date provisions of Section 6.3(a)); provided, however, that (i) if Executive is employed with another employer and is eligible to receive medical and dental insurance benefits under another employer-provided plan, Corporation’s obligation to provide the medical and dental benefits described in this paragraph will terminate automatically, and (ii) any payments or reimbursements from Corporation that are not exempt from taxation under Sections 105 or 106 of the Internal Revenue Code must be made by Corporation no later than the Outside Payment Date.

(c) Effect of Competition. Corporation’s obligation to make Monthly Severance Payments and provide medical and dental insurance benefits to Executive will terminate if Executive breaches a material provision of Section 4.

6.4 Termination For Cause or by Executive Without Good Reason. In the event that, prior to the expiration of the Term, Corporation terminates Executive’s employment with Corporation for Cause under Section 5.3, or Executive terminates his employment with Corporation for other than Good Reason under Section 5.6, Corporation’s obligations under this Agreement will cease and Executive will be entitled to that portion of his base salary and employment benefits for which he is qualified as of the date of termination and Executive will not be entitled to any other compensation or consideration.

6.5 No Deferral of Compensation. This Agreement is intended to be exempt from the requirements of Section 409A of the Internal Revenue Code by reason of all payments under this Agreement being either “short-term deferrals” within the meaning of Treas. Reg. § 1.409A-(1)(b)(4) or excluded welfare benefits under Treas. Reg. § 1.409A-(1)(a)(5). All provisions of this Agreement shall be interpreted in a manner consistent with preserving these exemptions.

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7. COMPENSATION UPON TERMINATION FOLLOWING TERM OF AGREEMENT

7.1 Application of Section. The provisions of this Section 7 apply only if Executive has five or more continuous years of employment with Corporation.

7.2 Termination Without Cause or by Executive for Good Reason.

(a) Monthly Severance Payments.

(i) If after the expiration of the Term, Executive terminates his employment with Corporation for Good Reason under Section 5.4 or Corporation terminates Executive’s employment with Corporation without Cause under Section 5.5, Executive will be entitled to the benefits described in Section 6.2, plus severance payments equal to the Applicable Severance Period multiplied by the base salary per month in effect as of the date of termination, payable in equal monthly installments (each installment, a “Monthly Severance Payment”). Monthly Severance Payments will be paid in monthly installments commencing in the calendar month following termination; provided however, that if the period over which Monthly Severance Payments would otherwise be payable would extend beyond the Outside Payment Date, the unpaid portion of the aggregate amount of Monthly Severance Payments as of the Outside Payment Date will be paid to Executive in a lump sum not later than the Outside Payment Date.

(ii) Corporation’s obligations to pay Monthly Severance Payments under this Section 7.2(a) and to continue medical and dental insurance benefits as provided in Section 7.2(b) are expressly conditioned on (i) Executive’s execution (not later than 45 days after Executive’s termination) of a release (in the form attached to this Agreement as Appendix 6.3(a)(ii), with such modifications specifically in response to changes in applicable law as counsel for Corporation determines to be reasonably necessary or desirable to ensure effective release of all claims) of any and all claims that Executive may hold through the date such release is executed against Corporation or any of its subsidiaries or affiliates, and (ii) the expiration of any applicable revocation period specified in such release without revocation of the release by Executive.

(iii) Monthly Severance Payments will be payable in a manner consistent with Corporation’s payroll practices for management employees.

(iv) Executive will not be required to mitigate the Monthly Severance Payments pursuant to this Agreement by seeking other employment; provided however, that amounts payable by Corporation as Monthly Severance Payments will be reduced by compensation actually received by Executive from a new employer during the severance period described above.

(b) Medical and Dental Insurance Benefits. In addition to Monthly Severance Payments, subject to the execution of a release as described in Section 7.2(a)(ii), Corporation will continue to provide or will arrange to provide (at Corporation’s cost) Executive with medical and dental insurance benefits substantially similar to those to which Executive was entitled as of the date of termination until Corporation’s obligation to make Monthly Severance Payments expires (without giving effect to any prepayment pursuant to the Outside Payment Date provisions of Section 7.2(a)); provided, however, that if (i) Executive is employed with another employer and is eligible to receive medical and dental insurance benefits under another employer-provided plan, Corporation’s obligation to provide the medical and dental benefits described in this paragraph will terminate automatically, and (ii) any payments or reimbursements from Corporation that are not exempt from taxation under Sections 105 or 106 of the Internal Revenue Code must be made by Corporation no later than the Outside Payment Date.

(c) Effect of Competition. Corporation’s obligation to make Monthly Severance Payments and provide medical and dental insurance benefits to Executive will terminate if Executive breaches a material provision of Section 4.

7.3 Effect of Expiration of Term. The provisions of this Section 7 will continue to apply and will be binding on Corporation and Executive after the expiration of the Term for so long as Executive continues to be an employee of Corporation unless expressly revoked or modified in writing by Corporation and Executive.

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8. REDUCTION IN SEVERANCE PAYMENTS

8.1 Definitions.

“Change in Control”. For purposes of this Agreement, a “Change in Control” means a change in ownership control as set forth in Treas. Reg. § 1.280G-1.

“Other Payment” means any payment or benefit payable to Executive in connection with a Change in Control of Corporation pursuant to any plan, arrangement, or agreement (other than this Agreement) with Corporation, a person whose actions result in such Change in Control, or any person affiliated with Corporation or such person.

“Total Payments” means all payments or benefits payable to Executive in connection with a Change in Control, including Monthly Severance Payments pursuant to this Agreement and any Other Payments pursuant to any other plan, agreement, or arrangement with Corporation, a person whose actions result in the Change in Control, or any person affiliated with Corporation or such person.

8.2 Reduction in Payments.

(a) Amount of Reduction. In the event that any portion of the Total Payments payable to Executive in connection with a Change in Control of Corporation would constitute an “excess parachute payment” within the meaning of Section 280G(b) of the Internal Revenue Code that is subject to the excise tax imposed on so-called excess parachute payments pursuant to Section 4999 of the Internal Revenue Code (an “Excise Tax”), Monthly Severance Payments otherwise payable under Sections 6.3 or 7.2 will be reduced to avoid such Excise Tax if, and to the extent that, such reduction will result in a larger after-tax benefit to Executive, taking into account all applicable federal, state, and local income and excise taxes.

(b) Application. For purposes of this Section 8.2:

(i) No portion of the Total Payments, the receipts or enjoyment of which Executive has effectively waived in writing prior to the date of payment of any Monthly Severance Payments, will be taken into account;

(ii) No portion of the Total Payments will be taken into account which, in the opinion of tax counsel selected by Corporation and reasonably acceptable to Executive (“Tax Counsel”), does not constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code;

(iii) If Executive and Corporation disagree whether any payment of Monthly Severance Payments will result in an Excise Tax or whether a reduction in any Monthly Severance Payments will result in a larger after-tax benefit to Executive, the matter will be conclusively resolved by an opinion of Tax Counsel;

(iv) Executive agrees to provide Tax Counsel with all financial information necessary to determine the after-tax consequences of payments of Monthly Severance Payments for purposes of determining whether, or to what extent, Monthly Severance Payments are to be reduced pursuant to Section 8.2(a); and

(v) The value of any noncash benefit or any deferred payment or benefit included in the Total Payments, and whether or not all or a portion of any payment or benefit is a “parachute payment” for purposes of this Section 8.2, will be determined by Corporation’s independent accountants in accordance with the principles of Sections 280(G)(d)(3) and (4) of the Internal Revenue Code.

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(c) Effect on Other Agreements. In the event that any other agreement, plan, or arrangement providing for Other Payments (an “Other Agreement”) has a provision that requires a reduction in the Other Payment governed by such Other Agreement to avoid or eliminate an “excess parachute payment” for purposes of Section 280G of the Internal Revenue Code, the reduction in Monthly Severance Payments pursuant to Section 8.2(a) will be given effect before any reduction in the Other Payment pursuant to the Other Agreement. To the extent possible, Corporation and Executive agree that reductions in benefits under any plan, program, or arrangement of Corporation will be reduced (only to the extent described in Section 8.2(a)) in the following order of priority:

(i) Monthly Severance Payments under this Agreement;

(ii) Any other payments under this Agreement; and

(iii) The acceleration in the exercisability of any stock option or other stock related award granted by Corporation.

9. REMEDIES

The respective rights and duties of Corporation and Executive under this Agreement are in addition to, and not in lieu of, those rights and duties afforded to and imposed upon them by law or at equity. Executive acknowledges that any breach or threatened breach of Sections 3 or 4 of this Agreement will cause irreparable harm to Corporation and that any remedy at law would be inadequate to protect the legitimate interests of Corporation. Executive agrees that Corporation will be entitled to specific performance, or to any other form of injunctive relief to enforce its rights under Sections 3 or 4 of this Agreement without the necessity of showing actual damage or irreparable harm or the posting of any bond or other security. Such remedies will be in addition to any other remedy available to Corporation at law or in equity.

10. SEVERABILITY OF PROVISIONS

The provisions of this Agreement are severable, and if any provision of this Agreement is held invalid, unenforceable, or unreasonable, it will be enforced to the maximum extent permissible, and the remaining provisions of the Agreement will continue in full force and effect.

11. NONWAIVER

Failure of Corporation at any time to require performance of any provision of this Agreement will not limit the right of Corporation to enforce the provision. No provision of this Agreement or breach of this Agreement may be waived by either party except in writing signed by that party. A waiver of any breach of a provision of this Agreement will be construed narrowly and will not be deemed to be a waiver of any succeeding breach of that provision or a waiver of that provision itself or of any other provision.

12. NOTICES

All notices required or permitted under this Agreement must be in writing and will be deemed to have been given if delivered by hand, or mailed by first-class, certified mail, return receipt requested, postage prepaid, to the respective parties as follows (or to such other address as any party may indicate by a notice delivered to the other parties hereto): (i) if to Executive, to his residence as listed in Corporation’s records, and (ii) if to Corporation, to the address of the principal office of Corporation, at:

One Airport Center

7700 N.E. Ambassador Place

Portland, Oregon 97220

With a copy to:

Roy W. Tucker

Perkins Coie LLP

1120 NW Couch St, 10th Floor

Portland, Oregon 97209

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13. ATTORNEY FEES

In the event of any suit or action or arbitration proceeding to enforce or interpret any provision of this Agreement (or which is based on this Agreement), the prevailing party will be entitled to recover, in addition to other costs, the reasonable attorney fees incurred by the prevailing party in connection with such suit, action, or arbitration, and in any appeal. The determination of who is the prevailing party and the amount of reasonable attorney fees to be paid to the prevailing party will be decided by the arbitrator or arbitrators (with respect to attorney fees incurred prior to and during the arbitration proceedings) and by the court or courts, including any appellate courts, in which the matter is tried, heard, or decided, including the court which hears any exceptions made to an arbitration award submitted to it for confirmation as a judgment (with respect to attorney fees incurred in such confirmation proceedings).

14. GOVERNING LAW

This Agreement will be construed in accordance with the laws of the state of Oregon, without regard to any conflicts of laws rules. Any suit or action arising out of or in connection with this Agreement, or any breach of this Agreement, must be brought and maintained in the Multnomah County Circuit Court of the State of Oregon. The parties irrevocably submit to the jurisdiction of such court for the purpose of such suit or action and expressly and irrevocably waive, to the fullest extent permitted by law, any claim that any such suit or action has been brought in an inconvenient forum.

15. GENERAL TERMS AND CONDITIONS

This Agreement constitutes the entire understanding of the parties relating to the employment of Executive by Corporation, and supersedes and replaces all written and oral agreements heretofore made or existing by and between the parties relating to such employment. Executive acknowledges that he has read and understood all of the provisions of this Agreement and that the restrictions contained in Sections 4 and 5.7 of this Agreement are reasonable and necessary for the protection of Corporation’s business and have been entered into in connection with a bona fide advancement of Executive with Corporation in that Executive has been granted a long-term employment contract. This Agreement will inure to the benefit of any successors or assigns of Corporation. All captions used in this Agreement are intended solely for convenience of reference and will in no way limit any of the provisions of this Agreement.

[Signature pages follow]

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The parties have executed this Employment Agreement as of the date stated above.

	RENTRAK CORPORATION
/s/ Christopher Wilson	By:	/s/ William P. Livek
Christopher Wilson		William P. Livek
		Chief Executive Officer

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APPENDIX 6.3(a)(ii)

FORM OF AGREEMENT AND RELEASE

THIS AGREEMENT AND RELEASE (“Release”) is made on this day of     ,     , by and between Rentrak Corporation, an Oregon corporation (“Corporation”) and Christopher Wilson (“Executive”). Corporation and Executive agree as follows:

1. Payment to Executive.

(a)

Upon the execution of this Release, and after expiration of the revocation period specified in Section 9 of this Release, Corporation will commence payment of the applicable Monthly Severance Payments described in Section 6 or 7 of Executive’s Employment Agreement dated effective as of                  , 2011 (the “Employment Agreement”), less normal deductions and withholdings.

(b)

Executive specifically acknowledges and agrees that Corporation has paid Executive all wages and other compensation and benefits to which Executive is entitled except those described in Paragraph 1(a) of this Release and that the execution of this Release (and compliance with the noncompetition provisions of Section 4 of the Employment Agreement) are conditions precedent to Corporation’s obligation to make the Monthly Severance Payments.

2. Release by Executive.

Executive completely releases and forever discharges Corporation and each of its past, present, and future parent and subsidiary corporations and affiliates and each of their respective past, present, and future shareholders, officers, directors, agents, employees, insurers, successors, and assigns (collectively, the “Released Parties”), from any and all claims, liabilities, demands, and causes of action of any kind, whether statutory or common law, in tort, contract, or otherwise, in law or in equity, and whether known or unknown, foreseen or unforeseen, in any way arising out of, concerning, or related to, directly or indirectly, Executive’s employment with Corporation, including, but not limited to, the termination of Executive’s employment based on any act or omission on or prior to the effective date of this Release, but not including (i) any claim for workers’ compensation or unemployment insurance benefits, (ii) any claims to enforce the Employment Agreement, or (iii) any claims by Executive for indemnification or insurance coverage relating to claims brought or asserted against Executive by third parties arising from Executive’s employment with Corporation or status as an officer, shareholder, and/or director of Corporation or any of its subsidiaries. Without limiting the generality of the foregoing, this release specifically includes, but is not limited to, a release of claims arising under Title VII of the Civil Rights Act of 1964; the Age Discrimination in Employment Act; the Older Workers Benefit Protection Act; the Americans with Disabilities Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act; the Worker Adjustment and Retraining Notification Act; and ORS chapters 652, 653, and 659A, and any amendments to any of such laws.

3. Return of Corporation Property.

Executive represents and warrants that Executive has returned to Corporation all property belonging to Corporation, including, but not limited to, all documents or other media containing confidential or proprietary information of Corporation (including without limitation customer, production, and pricing information), and all Corporation credit cards, keys, cellular telephones, and computer hardware and software.

4. No Liability or Wrongdoing.

Corporation specifically denies any liability or wrongdoing whatsoever. Neither this Release nor any of its provisions, terms, or conditions constitute an admission of liability or wrongdoing or may be offered or received in evidence in any action or proceeding as evidence of an admission of liability or wrongdoing.

5. Severability.

If any provision of this Release is found by any court to be illegal or legally unenforceable for any reason, the remaining provisions of this Release will continue in full force and effect.

6. Attorney Fees.

If any action is brought to interpret or enforce this Release or any part of it, the prevailing party will be entitled to recover from the other party its reasonable attorney fees and costs incurred therein, including all attorney fees and costs on any appeal or review.

7. Choice of Law.

This Release will be governed by the laws of the state of Oregon, without regard to its principles of conflicts of laws.

8. Consideration of Agreement.

Corporation advises Executive to consult with an attorney before signing this Release. Executive acknowledges that he has been given at least 21 days to consider whether to execute this Release. For purposes of this 21-day period, Executive acknowledges that this Release was delivered to him on             , 20   , that the 21-day period will expire             , 20   , and that he may have until that date to consider the Release.

9. Revocation.

Executive may revoke this Release by written notice, delivered to              within seven days following his date of signature as set forth below. This Release becomes effective and enforceable after such seven-day period has expired.

10. Knowing and Voluntary Agreement.

Executive acknowledges and agrees that: (a) the only consideration for this Release is the consideration expressly described in this document and such consideration is in addition to that which Executive is entitled to in the absence of a waiver; (b) he has carefully read the entire Release; (c) he has had the opportunity to review this Release and to have it reviewed and explained to him by an attorney of his choosing; (d) he fully understands the final and binding effect; and (e) he is signing this Release voluntarily and with the full intent of releasing Corporation from all claims.

11. Miscellaneous.

The benefits of this Release will inure to the successors and assigns of the parties. This is the entire agreement between Executive and Corporation regarding the subject matter of this Release and neither party has relied on any representation or statement, written or oral, that is not set forth in this Release. Executive represents and warrants that Executive has not assigned any claim that Executive may have against the Released Parties to any person or entity.

RENTRAK CORPORATION

By:
Title:
Date:	Date:

STATE OF

COUNTY OF

This instrument was acknowledged before me on     ,     , by [            ].

Notary Public for the State of             

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a)

I, William P. Livek, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rentrak Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2011

By: /s/ William P. Livek

William P. Livek

Director and Chief Executive Officer

Rentrak Corporation

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a)

I, David I. Chemerow, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rentrak Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2011

By: /s/ David I. Chemerow

David I. Chemerow

Chief Operating Officer

and Chief Financial Officer

Rentrak Corporation

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Rentrak Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William P. Livek, Director and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ William P. Livek

William P. Livek

Director and Chief Executive Officer

Rentrak Corporation

August 9, 2011

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Rentrak Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David I. Chemerow, Chief Operating Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ David I. Chemerow

David I. Chemerow

Chief Operating Officer

and Chief Financial Officer

Rentrak Corporation

August 9, 2011

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data	Jun. 30, 2011	Mar. 31, 2011
Condensed Consolidated Balance Sheets
Accounts and notes receivable, allowances for doubtful accounts	$ 627	$ 645
Property and equipment, accumulated depreciation	14,440	13,750
Other intangible assets, accumulated amortization	$ 977	$ 724
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	30,000	30,000
Common stock, shares issued	11,222	11,243
Common stock, shares outstanding	11,222	11,243

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Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data	3 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements Of Operations
Revenue	$ 22,408	$ 24,561
Cost of sales	12,148	13,904
Gross margin	10,260	10,657
Operating expenses:
Selling and administrative	9,962	10,574
Provision for doubtful accounts	52	117
Total operating expenses	10,014	10,691
Income (loss) from operations	246	(34)
Other income:
Interest income, net	110	94
Total other income	110	94
Income before income taxes	356	60
Benefit for income taxes	(43)	(27)
Net income	$ 399	$ 87
Basic net income per share	$ 0.04	$ 0.01
Diluted net income per share	$ 0.03	$ 0.01
Shares used in per share calculations:
Basic	11,311	10,725
Diluted	11,503	11,226

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Document And Entity Information	3 Months Ended
	Jun. 30, 2011	Aug. 01, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2012
Trading Symbol	rent
Entity Registrant Name	RENTRAK CORP
Entity Central Index Key	0000800458
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,221,873

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Comprehensive Income (Loss)

3 Months Ended

Jun. 30, 2011

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Note 7. Comprehensive Income (Loss)

Comprehensive income (loss) was as follows (in thousands):

Three Months Ended June 30,	2011		2010
Net income	$	399	$	87
Unrealized gain (loss) on foreign currency translation		98		(402	)
Unrealized gain (loss) on investments, net of tax		62		(1	)
Comprehensive income (loss)	$	559	$	(316	)

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Business Segments And Enterprise-Wide Disclosures

3 Months Ended

Jun. 30, 2011

Business Segments And Enterprise-Wide Disclosures

Business Segments And Enterprise-Wide Disclosures

Note 3. Business Segments and Enterprise-Wide Disclosures

We operate in two business segments, our Advanced Media and Information ("AMI") Division and our Home Entertainment ("HE") Division, and, accordingly, we report certain financial information by individual segment under this structure. The AMI Division manages our media measurement services offered through our Entertainment Essentials™ systems primarily on a recurring subscription basis. The HE Division manages our business operations that deliver home entertainment content products and related rental and sales information for that content to our Pay-Per-Transaction ("PPT") System retailers ("Participating Retailers") on a revenue sharing basis. This division also includes Studio Direct Revenue Sharing ("DRS") services, which collects, tracks, audits and reports transactions and revenue data generated by DRS retailers, such as Blockbuster Entertainment, Netflix and kiosk companies, to studios. In addition, beginning in the first quarter of Fiscal 2012, Home Entertainment Essentials™ is reported as a component of the HE Division. Prior period amounts have been reclassified to conform to this change.

Assets are not specifically identified by segment as the information is not used by the chief operating decision maker to measure the segments' performance.

Certain information by segment was as follows (in thousands):

	AMI		HE		Other(1)			Total
Three Months Ended June 30, 2011
Sales to external customers	$	9,057	$	13,351	$	—		$	22,408
Gross margin		5,728		4,532		—			10,260
Income (loss) from operations		1,793		2,344		(3,891	)		246
Three Months Ended June 30, 2010
Sales to external customers	$	7,988	$	16,573	$	—		$	24,561
Gross margin		5,733		4,924		—			10,657
Income (loss) from operations		1,005		2,877		(3,916	)		(34	)

(1) Includes corporate expenses and other expenses that are not allocated to a specific segment.

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State Of Oregon Loan

3 Months Ended

Jun. 30, 2011

State Of Oregon Loan

State Of Oregon Loan

Note 9. State of Oregon Loan

In the first quarter of Fiscal 2012, we received a loan from the State of Oregon for $0.5 million for the purpose of facility renovations. The loan bears interest at 5% per annum and contains provisions relating to forgiveness if we meet certain requirements. The loan is due on January 31, 2014 if it is not forgiven.

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New Accounting Guidance

3 Months Ended

Jun. 30, 2011

New Accounting Guidance

New Accounting Guidance

Note 10. New Accounting Guidance

ASU 2010-17

In April 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-17, "Revenue Recognition – Milestone Method," which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. The amendments in ASU 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The adoption of the provisions of ASU 2010-17 in the first quarter of Fiscal 2012 did not have a material effect on our financial position, results of operations or cash flows.

ASU 2011-05

In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income," which eliminates the current option of reporting other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. Upon adoption of ASU 2011-05, comprehensive income will either be reported in a single continuous financial statement or in two separate but consecutive financial statements. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. Since ASU 2011-05 only relates to presentation of comprehensive income, we do not believe our adoption of ASU 2011-05 in the first quarter of Fiscal 2013 will have any impact on our financial position, results of operations or cash flows.

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Share Repurchases

3 Months Ended

Jun. 30, 2011

Share Repurchases

Share Repurchases

Note 8. Share Repurchases

In May 2011, our Board of Directors authorized a new one-year share repurchase program for up to $5.0 million of our outstanding common stock. Common stock repurchases may be made from time to time in the open market at prevailing market prices or through privately negotiated transactions. The amount and timing of all repurchase transactions are contingent upon market conditions, regulatory requirements and alternative investment opportunities. During the first quarter of Fiscal 2012, we repurchased 82,491 shares pursuant to this program at an average price of $17.36 per share for a total of $1.4 million. As of June 30, 2011, $3.6 million remained available for repurchases pursuant to this program.

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Basis Of Presentation

3 Months Ended

Jun. 30, 2011

Basis Of Presentation

Basis Of Presentation

Note 1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Rentrak Corporation have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three-month period ended June 30, 2011 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2012 ("Fiscal 2012"). The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in our 2011 Annual Report on Form 10-K (the "Form 10-K").

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.

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Stock-Based Compensation

3 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

Note 4. Stock-Based Compensation

During the first quarter of Fiscal 2012, the Compensation Committee of our Board of Directors determined that performance requirements relating to vesting of certain stock-based awards would not be achieved. Accordingly, 318,000 performance-based stock option awards and 220,250 stock appreciation rights were cancelled at the direction of our Board of Directors. The cancellation of these awards had no effect on our results of operations.

In the first quarter of Fiscal 2012, we granted options to purchase 250,000 shares of our common stock to certain of our executive officers and other employees. The stock options were granted at the fair market value of our common stock on the dates of grant, which were $26.70 and $19.85 per share, respectively, and expire 10 years from the date of grant. The options vest annually from the date of grant in four equal installments. The value of all stock options granted, as determined using the Black-Scholes valuation model, was $2.7 million and is being recognized over the vesting periods. Approximately $0.7 million will be recognized in Fiscal 2012.

We also granted options to purchase 40,000 shares of our common stock to non-employees in connection with internal software development services relating to our Essentials™ line of businesses. The options were granted at the fair market value of our common stock on the dates of grant, which ranged from $17.43 to $22.20 per share and expire 10 years from the date of grant. The options vest annually from the date of grant in four equal installments and will be revalued at the end of each reporting period until they vest. The value recognized will be capitalized and included in property and equipment, net, in accordance with our policies relating to Capitalized Software as described in Note 2 of Notes to Consolidated Financial Statements in our Form 10-K for the fiscal year ended March 31, 2011.

Stock-based compensation in the first quarter of Fiscal 2012 includes a $1.9 million credit for the decrease in value of a stock award related to a compensation agreement entered into in the fourth quarter of Fiscal 2010 with a non-employee in connection with services provided relating to our Essentials™ lines of business. This award is revalued at the end of each reporting period utilizing the Black-Scholes valuation model and any change in value is recognized during the current period as a component of selling and administrative expenses in our Condensed Consolidated Statements of Operations. The decrease in the price of our common stock was the most significant factor in the reduction in value of the stock award in the first quarter of Fiscal 2012. The fair value of this award at June 30, 2011 and March 31, 2011 was $0.7 million and $2.6 million, respectively, and was recorded as a component of accrued compensation on our Condensed Consolidated Balance Sheets.

Total employee stock-based compensation in the first quarter of Fiscal 2012 was $1.3 million, $0.1 million of which was capitalized. This amount was offset by the $1.9 million credit for non-employee stock-based compensation discussed above, for a net benefit related to stock-based compensation of $0.7 million in the first quarter of Fiscal 2012.

During the first quarter of Fiscal 2012, we witheld a total of 28,752 shares, with a value of $0.5 million, relating to the exercise of stock options in exchange for the payment of those options and related withholding taxes.

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Fair Value Disclosures

3 Months Ended

Jun. 30, 2011

Fair Value Disclosures

Fair Value Disclosures

Note 5. Fair Value Disclosures

We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair value of our financial assets and liabilities as follows:

• Level 1 – quoted prices in active markets for identical securities;

• Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and

• Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Following are the disclosures related to our financial assets (in thousands):

	June 30, 2011				March 31, 2011
	Fair Value		Input Level		Fair Value		Input Level
Available-for-sale marketable securities
Municipal tax exempt bond funds	$	22,670		Level 1	$	22,556		Level 1

The fair value of our "available-for-sale" marketable securities is determined based on quoted market prices for identical securities on a quarterly basis.

Marketable securities, all of which were classified as "available-for-sale" at June 30, 2011 and March 31, 2011, consisted of the following (in thousands):

	June 30, 2011		March 31, 2011
Municipal tax exempt bond funds
Amortized cost	$	22,603	$	22,596
Gross unrecognized holding gains		67		—
Gross unrecognized holding losses		—		(40	)
Fair value	$	22,670	$	22,556

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Goodwill And Other Intangible Assets

3 Months Ended

Jun. 30, 2011

Goodwill And Other Intangible Assets

Goodwill And Other Intangible Assets

Note 6. Goodwill and Other Intangible Assets

Goodwill

The roll-forward of our goodwill was as follows (in thousands):

	Three Months Ended June 30, 2011
	AMI		HE		Total
Beginning balance	$	4,691	$	531	$	5,222
Currency translation		53		—		53
Ending balance	$	4,744	$	531	$	5,275
	Year Ended March 31, 2011
	AMI		HE		Total
Beginning balance	$	3,396	$	—	$	3,396
Acquisition of Ciné-Chiffres		1,116		—		1,116
Acquisition of Media Salvation		—		531		531
Currency translation		179		—		179
Ending balance	$	4,691	$	531	$	5,222

Other Intangible Assets

Other intangible assets and the related accumulated amortization were as follows (in thousands):

	Amortization Period	June 30, 2011			March 31, 2011
Local relationships	7 to 10 years	$	7,346		$	7,299
Accumulated amortization			(887	)		(671	)
			6,459			6,628
Tradenames	1 to 3 years		51			51
Accumulated amortization			(24	)		(20	)
			27			31
Existing technology	6 months		66			66
Accumulated amortization			(66	)		(33	)
			—			33
Patents	20 years		35			30
Accumulated amortization			—			—
			35			30
Global relationships	Indefinite		7,400			7,400
Total		$	13,921		$	14,122

Amortization expense and currency translation were as follows (in thousands):

	Three Months Ended June 30,
	2011		2010
Local relationships	$	212	$	117
Tradenames		4		5
Existing technology		33		—
Currency translation		4		(5	)
	$	253	$	117

Expected amortization expense is as follows over the next five years and thereafter (in thousands):

Fiscal	Local Relationships		Tradenames		Patents		Total
Remainder of Fiscal 2012	$	593	$	12	$	1	$	606
2013		889		15		2		906
2014		889		—		2		891
2015		889		—		2		891
2016		889		—		2		891
Thereafter		2,310		—		26		2,336
	$	6,459	$	27	$	35	$	6,521

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands	3 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net income	$ 399	$ 87
Adjustments to reconcile net income to net cash flows provided by operating activities:
Tax benefit from stock-based compensation		785
Depreciation and amortization	1,059	756
Stock-based compensation	(734)	1,744
Excess tax benefits from stock-based compensation		(654)
Deferred income taxes	(18)	(31)
Realized gain on marketable securities	(7)	(2)
Adjustment to allowance for doubtful accounts	(18)	(45)
(Increase) decrease in:
Accounts and notes receivable	2,371	2,708
Taxes receivable and prepaid taxes	(89)	(470)
Other assets	22	304
Increase (decrease) in:
Accounts payable	(2,436)	(117)
Taxes payable	(17)	(17)
Accrued liabilities and compensation	(639)	(1,124)
Deferred revenue	302	(98)
Deferred rent	18	(16)
Net cash provided by operating activities	213	3,810
Cash flows from investing activities:
Purchase of marketable securities	(3,000)	(6,583)
Sale or maturity of marketable securities	3,000	1,800
Purchase of property and equipment	(1,677)	(1,074)
Net cash used in investing activities	(1,677)	(5,857)
Cash flows from financing activities:
Proceeds from notes payable	500
Issuance of common stock	10	1,030
Excess tax benefits from stock-based compensation		654
Repurchase of common stock	(1,432)
Net cash provided by (used in) financing activities	(922)	1,684
Effect of foreign exchange translation on cash	116	(449)
Decrease in cash and cash equivalents	(2,270)	(812)
Cash and cash equivalents:
Beginning of period	3,821	2,435
End of period	1,551	1,623
Supplemental information:
Capitalized stock-based compensation	$ 91	$ 165

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Net Income Per Share

3 Months Ended

Jun. 30, 2011

Net Income Per Share

Net Income Per Share

Note 2. Net Income Per Share

Following is a reconciliation of the shares used for the basic earnings per share ("EPS") and diluted EPS calculations (in thousands, except footnote reference):

	Three Months Ended June 30,
	2011		2010
Basic EPS:
Weighted average number of shares of common stock outstanding and vested deferred stock units ("DSUs")(1)		11,311		10,725
Diluted EPS:
Effect of dilutive DSUs and stock options		192		501
		11,503		11,226
Options not included in diluted EPS as they would be antidilutive		822		—
Performance-based grants not included in diluted EPS		318		751

(1) Includes 75,786 and 69,500 vested DSUs, respectively, for the three months ended June 30, 2011 and 2010, that will not be issued until the directors holding the DSUs retire from our Board of Directors.

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Subsequent Events

3 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

Note 11. Subsequent Events

We have considered all events that have occurred subsequent to June 30, 2011 and through August 9, 2011 and determined that no disclosure is required.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Mar. 31, 2011
Assets
Cash and cash equivalents	$ 1,551	$ 3,821
Marketable securities	22,670	22,556
Accounts and notes receivable, net of allowances for doubtful accounts of $627 and $645	14,360	16,713
Taxes receivable and prepaid taxes	1,815	1,726
Deferred tax assets	107	152
Other current assets	959	1,091
Total Current Assets	41,462	46,059
Property and equipment, net of accumulated depreciation of $14,440 and $13,750	9,795	8,834
Deferred tax assets	1,270	1,242
Goodwill	5,275	5,222
Other intangible assets, net of accumulated amortization of $977 and $724	13,921	14,122
Other assets	706	696
Total Assets	72,429	76,175
Liabilities and Stockholders' Equity
Accounts payable	4,797	7,223
Accrued liabilities	2,840	3,022
Accrued compensation	4,017	6,144
Deferred revenue	1,513	1,210
Total Current Liabilities	13,167	17,599
Deferred rent, long-term portion	940	942
Taxes payable, long-term	1,244	1,261
Long-term debt	506
Total Liabilities	15,857	19,802
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued
Common stock, $0.001 par value; 30,000 shares authorized; shares issued and outstanding: 11,222 and 11,243	11	11
Capital in excess of par value	53,998	54,358
Accumulated other comprehensive income	690	530
Retained earnings	1,873	1,474
Total Stockholders' Equity	56,572	56,373
Total Liabilities and Stockholders' Equity	$ 72,429	$ 76,175