UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

FORM 10-K

Commission File Number: 0-15159

RENTRAK CORPORATION

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ý    No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the last sales price ($8.73) as reported by the Nasdaq National Market System, as of the last business day of the Registrant’s most recently completed second fiscal quarter (September 30, 2004), was $82,606,158.

The number of shares outstanding of the Registrant’s Common Stock as of June 1, 2005 was 10,550,395 shares.

Documents Incorporated by Reference

The Registrant has incorporated into Part III of Form 10-K, by reference, portions of its Proxy Statement for its 2005 Annual Meeting of Shareholders.

RENTRAK CORPORATION

2005 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

Where You Can Find More Information

We file annual, quarterly and other reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 as amended (“Exchange Act”).  We also make available, free of charge on our website at www.rentrak.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC.  You can also obtain paper copies of these reports, without charge, by contacting Investor Relations at (503) 284-7581.

Overview

Our primary business relates to the collection, processing, analysis and presentation of rental and sales information regarding digital videodiscs (“DVDs”), videocassettes (“Cassettes”) and video games (collectively “Units”) leased/licensed to home video specialty stores and other retailers by way of our Pay Per Transaction system (the “PPT System”). We lease product from various suppliers. Under our PPT System, home video specialty stores and other retailers that rent Units to consumers (“Retailers”), including grocery stores and convenience stores, sub-lease Units and other media from Rentrak for a zero to low initial fee and share a portion of each retail rental transaction with us.  We included video games as part of the PPT system beginning in fiscal 2003.  Our PPT System generated 88%, 84% and 78% of total revenues in fiscal years 2005, 2004 and 2003, respectively.

We also provide direct revenue sharing (“DRS”) services to various suppliers.  The DRS services collect, track, audit and report the results to our suppliers under established agreements on a fee for service basis.  In addition, our Essentials™ software and services, which we began offering in the fourth quarter of fiscal 2003, provide unique data collection, management, analysis and reporting functions, resulting in business intelligence information valuable to our clients.

During the fourth quarter of fiscal 2003, we decided to pursue a plan to sell or dispose of substantially all the assets of our subsidiary 3PF.COM, Inc. (“3PF”), which provided order processing, inventory management and fulfillment services to Rentrak and third parties. We sold substantially all the assets of 3PF’s Wilmington, Ohio operations in July 2003.  See Note 5 of Notes to Consolidated Financial Statements.

Reorganization

Effective April 1, 2005, we implemented a new corporate structure, which includes separate Pay-Per-Transaction (“PPT”) and Information Services operating divisions.  We will report our results of operations according to this new structure in future periods. As of March 31, 2005, we operated in one segment, Entertainment, and, accordingly, we have not reported segment data for the fiscal year ended March 31, 2005.

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PPT Division

The PPT Division focuses on business operations that facilitate the delivery of home entertainment products and related rental and sales information to retailers on a revenue sharing basis.

Pay-Per-Transaction System

We distribute Units principally to Retailers through our PPT System. The PPT System has various programs, which enable Retailers to obtain Units at a significantly lower overall cost than if they purchased the Units from traditional video distributors.

After the Retailer is approved for participation in the PPT System, Units are leased to the Retailer for a low and, at times, no initial fee (the “Order Processing Fee”) plus a percentage of revenues generated by the Retailer from rentals to consumers (the “Transaction Fee”).  We retain a portion of most Order Processing Fees and Transaction Fees and remit the remainder to the appropriate motion picture studios or other licensee or owner of the rights to certain video programming or video game publishers (“Program Suppliers”) that hold the distribution rights to the Units.  Due to the lower cost of “bringing Units in the door,” Retailers generally obtain a greater number of Units under the PPT System than the traditional distribution method. The intended benefit to the Retailer is a higher volume of rental transactions, as well as a reduction in capital cost and risk.  The intended benefit to the Program Supplier is an increase in the total number of Units shipped, resulting in increased revenues and opportunity for profit. The intended benefit to the consumer is the potential of finding more copies of certain newly released hit titles and a greater selection of other titles at Retailers participating in the PPT System (“Participating Retailers”).

Information Services Division

The Information Services Division concentrates on expanding the customer base of our Essentials Suite™ of business intelligence services offered on a recurring subscription basis, as well as operating our DRS services.

Essentials Suite™

The Essentials Suite™ currently includes the following:

•      Box Office Essentials™  for  reporting domestic and international theatrical ticket sales;

•      Home Video Essentials™ for reporting VHS, DVD and game rentals across the U.S. and Canada;

•      Allocation Essentials™ for use by studios, game publishers, media suppliers and retailers to plan and manage entertainment media purchases and inventory;

•      Business Intelligence Essentials™ for use by retailers to plan promotions to coincide with key  national and local events, school schedules, weather and holidays;

•      OnDemand Essentials™ that measures viewership of on demand content in the cable and broadband industries;

•      Retail Essentials™ for use by studios, game publishers and retailers for reporting DVD, VHS and video game sales across North America;

•      Supply Chain Essentials™ for use by Retailers for supply chain management. It provides real-time, Web-based access to inventory, order entry, supplier communications, and shipment and tracking activity;

•      Syndication, which involves packaging summarized subsets of information gleaned from each of the other Essentials services for sale to secondary and tertiary markets.

Direct Revenue Sharing

Our DRS services consist of data collection, tracking, auditing and reporting of revenue sharing rental and sales transactions of large retail chain video store customers that rent Units and engage in revenue sharing arrangements directly with the Program Suppliers. The DRS services are offered to Program Suppliers who participate in our PPT System.  We utilize our internally developed computer software and are compensated on a fee for service basis.

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Marketing and Relationships with Program Suppliers

We currently market our PPT System throughout the United States and Canada. We offer  titles from a number of Program Suppliers, including Buena Vista Pictures Distribution, Inc., a subsidiary of The Walt Disney Company, Paramount Home Video, Inc., Universal Studios Home Video, Inc., Twentieth Century Fox Home Entertainment (formerly Fox Video), a subsidiary of Twentieth Century Fox Film Corporation, Warner Brothers, including Warner Home Video, HBO Video, New Line Home Entertainment, TNT, and Lightyear Entertainment and MGM Home Entertainment, a subsidiary of  Metro Goldman Mayer, Inc.  Our arrangements with all of our Program Suppliers are of varying duration, scope and formality. In some cases, we have obtained Units pursuant to contracts or arrangements with Program Suppliers on a title-by-title basis and in other cases the contracts or arrangements provide that all titles released for distribution by such Program Supplier will be provided to us for the PPT System.  Many of our agreements with Program Suppliers, including all major Program Suppliers, may be terminated upon relatively short notice.  Therefore, there is no assurance that any of the Program Suppliers will continue to distribute Units through the PPT System, continue to have available for distribution titles which we can distribute on a profitable basis, or continue to remain in business.  Even if titles are otherwise available from Program Suppliers, there is no assurance that they will be made available on terms acceptable to us. During the last three years, we have not experienced any material difficulty acquiring suitable Units for our markets on acceptable terms and conditions from Program Suppliers.

During fiscal 2005, 2004 and 2003, we had several Program Suppliers that supplied product in excess of 10% of our total revenues as follows:

There were no other Program Suppliers who provided product that generated 10% or more of our total revenues for the years ended March 31, 2005, 2004 or 2003.  Although management does not believe that our relationships with significant Program Suppliers will be terminated in the near term, a loss of any of these suppliers could have a material adverse effect on our financial condition, results of operations and liquidity.

Certain Program Suppliers have requested, and we have provided, financial or performance commitments, including advances or guarantees, as a condition of obtaining certain titles. We determine whether to provide such commitments on a case-by-case basis, depending upon the Program Supplier’s success with such titles prior to home video distribution and our assessment of expected success in home rental distribution.  We currently have such commitments with four Program Suppliers of approximately $1.3 million for fiscal 2006.

Significant Customers

We had one PPT customer that accounted for 20% and 17% of our total revenue in fiscal 2005 and 2004, respectively. The agreement with this PPT customer expired in September 2004. One fulfillment customer accounted for 14% of our total revenue in fiscal 2003. The agreement with this fulfillment customer expired July 31, 2003.  There were no other customers that accounted for 10% or more of our total revenue in fiscal 2005, 2004 or 2003.

Distribution of Cassettes, DVDs, and Video Games

Our proprietary Rentrak Profit Maker Software (the “RPM Software”) and Video Retailer Essentials Software (the “VRE Software”) allows Participating Retailers to order Units through their Point of Sale (“POS”) system and provides the Participating Retailers with substantial information regarding all offered titles.  Ordering occurs via a networked computer interface (RPM Software) or over the Internet (VRE

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Software).  To further assist the Participating Retailers in ordering, we also produce a monthly product catalog (“Ontrak”).

To be competitive, Participating Retailers must be able to rent their Units on the “street date” announced by the Program Supplier for the title.  Effective April 1, 2004, we  contracted with a new third-party fulfillment provider to distribute our Units via both ground and overnight air courier to assure continued delivery to Participating Retailers on or prior to the street date.  The handling and freight costs of such distribution are approximately 4.7% of our cost of sales.

Computer Operations

To participate in our PPT System, Participating Retailers must install Rentrak-approved computer software and hardware to process all of their rental and sale transactions.  Our RPM Software resides on the Participating Retailer’s POS computer system and transmits a record of PPT transactions to us over a telecommunications network.  The RPM Software also assists the Participating Retailer in ordering newly released titles and in managing its inventory of Units.

Our information system processes these transactions and prepares reports for Program Suppliers and Participating Retailers.  In addition, it determines variations from statistical norms for potential audit action.  Our information system also transmits information on new titles and confirms orders made to the RPM Software at the Participating Retailer location.   

Auditing of Participating Retailers

From time to time, we audit Participating Retailers in order to verify that they are reporting all rentals and sales of Units on a consistent, accurate and timely basis.  Several different types of exception reports are produced weekly.  These reports are designed to identify any Participating Retailers whose PPT business activity varies from our statistical norms.  Depending upon the results of our analysis of the reports, we may conduct an in-store audit.  Audits may be performed with or without notice and any refusal to allow such an audit can be cause for immediate termination from the PPT System.  If audit violations are found, the Participating Retailer is subject to fines, audit fees, immediate removal from the PPT System and/or repossession of all leased Units.

Seasonality

We believe that the home video industry is highly seasonal because Program Suppliers tend to introduce hit titles for movies at two periods of the year, early summer and Christmas.  Since the release of movies to home video usually follows the theatrical release by approximately six months (although significant variations occur on certain titles), the seasonal peaks of movies for home video also generally occur in early summer and at Christmas.  We believe our volume of rental transactions and resulting revenues and earnings reflect, in part, this seasonal pattern. However, changes in Program Suppliers’ titles available to Participating Retailers and us may obscure any seasonal effect.

Competition

The DVD, video game and cassette distribution business is a highly competitive industry that is rapidly changing.  The traditional method of distributing Units to Retailers is through purchase transactions; i.e., a Retailer purchases Units from a distributor and then offers the Units for rental or sale to the general public. As described in greater detail above (see “Pay-Per-Transaction System”), our PPT System offers Participating Retailers an alternative method of obtaining Units. Accordingly, we face intense competition from all of the traditional distributors, including Ingram Entertainment, Inc., Video Product Distributors, Inc., and Video One Canada, Ltd.  These and other traditional distributors have extensive distribution networks, long-standing relationships with Program Suppliers and Retailers, and, in some cases, significantly greater financial resources than us.

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In the past, certain traditional distributors offered Units to Retailers on a revenue sharing basis. To our knowledge, only one does so today on a very limited basis. This distributor executed a licensing agreement with Supercomm, Inc. (“Supercomm”), now a wholly-owned subsidiary of Sony Pictures Home Entertainment (“Sony”), to market product on revenue sharing terms. Domestically, Supercomm also processes data for Sony’s direct relationships with Blockbuster Video and several other Retailers.

We also face direct competition from the Program Suppliers.  All major Program Suppliers sell Units directly to major Retailers including Blockbuster, the world’s largest chain of home video specialty stores. We believe many of the major Program Suppliers have direct revenue sharing arrangements with Blockbuster and Hollywood Entertainment, the world’s second largest chain of home video specialty stores, which was acquired by Movie Gallery in April 2005.  We also believe that certain Program Suppliers have executed direct revenue sharing agreements with several other large Retailers. We do not believe that the Program Suppliers have executed direct revenue sharing agreements with other smaller Retailers, but there can be no assurance that they will not do so in the future.

We also compete with businesses that use alternative distribution methods to provide video entertainment directly to consumers, such as the following: (1) direct broadcast satellite transmission systems; (2) traditional cable television systems; (3) pay-per-view cable television systems; and (4) delivery of programming via the Internet. Each of these distribution methods employs digital compression techniques to increase the number of channels available to consumers and, therefore, the number of movies that may be transmitted. Technological improvements in this distribution method, particularly “video-on-demand,” may make this option more attractive to consumers and thereby materially diminish the demand for Unit rentals. Such a consequence could have a material adverse effect on our results of operations and financial condition.

Formovies.com

Formovies.com is a website designed by us and dedicated to assist consumers in finding a local video store where they can rent and/or purchase the video products they want.  Consumers can find a particular movie of their choice by searching on various attributes of that title.  Once found, they can then determine the closest video store that carries that product.

Trademarks, Copyrights and Proprietary Rights

We have registered our “RENTRAK,” “PPT,” “Pay Per Transaction,” “Entertainment Essentials,” “Box Office Essentials,” “Home Video Essentials,” “ForMovies,” “ForMovies.com,” “DigiTrak,” “Ontrak,” “Fastrak,” “RPM,” “Videolink+,” “Active Home Video,” “Movie Wizard,” “Gotta Have It Guarantee” and other marks under federal trademark laws. We have applied and obtained registered status in several foreign countries for many of our trademarks. We have filed applications to register additional marks in the “Essentials” trademark family. Our trademark registrations will remain valid for an unlimited period, as long as we continue using the trademarks in commerce or as long as we intend to resume use of the mark during any period of non-use. We claim a copyright on our RPM Software and consider it to be proprietary. We have also filed notice and claim a copyright on our Essentials software. Our copyright in our software will last for at least 95 years from the first sale or licensing of the software. Our trademarks, copyrights, and other proprietary rights give us the power to prevent competitors from competing with us unfairly. We believe that our intellectual property is important to our marketing efforts and the competitive value of our services and we intend to take appropriate action to halt any infringement and protect against improper usage.

Employees

As of March 31, 2005, including all subsidiaries, we employed 168 full-time employees and 28 part-time employees.  We consider our relations with our employees to be good.

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Financial Information About Industry Segments

See Note 17 of Notes to the Consolidated Financial Statements for information regarding our business segments.  See also “Results of Operations” under Item 7 of this report for information regarding revenues contributed in each of the last three fiscal years by our principal products and services.

ITEM 2. PROPERTIES

We maintain our headquarter offices in Portland, Oregon where we lease 48,800 square feet of office space. The lease began on January 1, 1997 and expires on December 31, 2006.  We also maintain an office in Los Angeles, California where we lease 4,000 square feet of space utilized for our Box Office Essentials business.  The lease began in July 2003 and expires in June 2006.  We anticipate that these spaces will be adequate for our business needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We may from time to time be a party to legal proceedings and claims that arise in the ordinary course of our business.  In the opinion of management, the amount of any ultimate liability with respect to these potential actions is not expected to materially affect our financial condition or results of operations.  Other than as discussed below, we currently have no material outstanding litigation.

Vendor Dispute

In June 2003, we signed a definitive agreement to sell substantially all of the assets of 3PF.Com, Inc. at the Wilmington, Ohio operation, effective July 1, 2003.  In conjunction with the effective date of that asset sale agreement, we entered into a Fulfillment Agreement (the “Agreement”) with this purchaser (the “Fulfillment Provider”) for a nine-month term to provide us with fulfillment services previously provided by 3PF during the period we owned and operated it.  After its inception, disagreement between the parties arose regarding the contractual provisions of the Agreement.  As a result, we disputed certain charges for services and withheld payments accordingly. Additionally, the Fulfillment Provider has alleged that we violated the exclusivity provisions in the Agreement. The Fulfillment Provider submitted, under the provisions of the Agreement, a demand for arbitration against us seeking damages of approximately $0.9 million.  The dispute has been arbitrated and the Fulfillment Provider was awarded, in full settlement of all its claims, the sum of $0.1 million, consisting of damages from those claims plus interest thereon, effective March 25, 2005.  Accordingly, both parties have entered into an agreement for the full settlement of all the claims and the complete mutual release from any further obligations to each other with respect to any claim made or that could have been made in the arbitration of this dispute.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders during the fourth quarter of the fiscal year covered by this report.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Price and Dividends

Our common stock, $.001 par value, is traded on the Nasdaq National Market, where its prices are quoted under the symbol “RENT.”   As of June 1, 2005 there were approximately 255 holders of record of our common stock.

The following table sets forth the reported high and low sales prices of our common stock for each of the quarters in the last two fiscal years as regularly quoted on the Nasdaq National Market System:

Holders of our common stock are entitled to receive dividends if, as, and when declared by the Board of Directors out of funds legally available therefor, subject to the dividend and liquidation rights of any preferred stock that may be issued.

No cash dividends have been paid or declared during the last six fiscal years.  The present policy of the Board of Directors is to retain earnings to provide funds for operation and expansion of our business. We do not intend to pay cash dividends in the foreseeable future.

Information regarding securities authorized for issuance under equity compensation plans is included in Item 12.

Issuer Purchases of Equity Securities

We repurchased the following shares of our common stock during the fourth quarter of fiscal 2005:

(1) Shares purchased during the quarter represent shares delivered by a former officer to pay the exercise price and withholding taxes relating to the exercise of employee stock options.

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ITEM 6.    SELECTED FINANCIAL DATA

(1)  We sold our fulfillment business effective July 2003.  See Note 5 of Notes to Consolidated Financial Statements.

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ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain information included in this Annual Report on Form 10-K (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 “may,” “will,” “expects,” “intends,” “anticipates,” “estimates” or “continues” or the negative thereof or variations thereon or comparable terminology.  The following factors are among the factors that could cause actual results to differ materially from the forward looking statements: our ability to retain and grow our customer base of retailers participating in the PPT System (“Participating Retailers”) and customers for our business intelligence software and services; the financial stability of the Participating Retailers and their performance of their obligations under our Pay Per Transaction system (the “PPT System”); business conditions and growth in the video industry and general economic conditions, both domestic and international; customer demand for movies in various media formats subject to company guarantees; competitive factors, including increased competition, expansion of revenue sharing programs other than the PPT System by motion picture studios or other licensees or owners of the rights to certain video programming or video game publishers (“Program Suppliers”) and new technology;  the continued availability of videocassettes (“Cassettes”), digital videodiscs (“DVDs”), and video games (collectively “Units”) leased/licensed to home video specialty stores and other retailers from Program Suppliers; the loss of significant Program Suppliers; our ability to successfully develop and market new services, including our business intelligence services, to create new revenue streams; and non-renewal of our line of credit. This Annual Report on Form 10-K further describes some of these factors.  (References to Notes are to Notes to Consolidated Financial Statements included in Item 8 of this report.)

Business Trends

Our financial results continue to be affected by the changing dynamics in the home video and game rental market, as they impact our PPT business.  We continue to experience the impact of the migration from higher historical rentals of Cassettes to greater rentals of DVDs by our Participating Retailers.  We have successfully implemented new agreements with Program Suppliers to incorporate the availability of DVDs, and we are continuing our efforts in fiscal 2006 to secure more DVD arrangements to address this impact.  In addition, our PPT business continues to be affected by a shift to “output programs” under which we agree with a Program Supplier to a lower order processing and transaction fee in exchange for the Participating Retailers’ commitment to order a greater number of Units of all the Program Supplier’s titles.  The result is an increased number of Units leased by the Participating Retailers, but a reduced amount of fees per Unit earned by the Program Supplier and us.  These output programs are, in part, an economic response to the changing dynamics of the home video rental market, and have become more prevalent since the migration from Cassette format to the DVD format.  We expect the growth of these output programs to continue, and believe that they will be financially beneficial for the Participating Retailers, Program Suppliers and us.

Our base of Participating Retailers continues to be strong. We have one Participating Retailer that accounted for 20% and 17% of PPT revenues in the fiscal years ended March 31, 2005 and 2004, respectively.  Our agreement with this Participating Retailer expired in September 2004.  The associated PPT revenue from this Participating Retailer’s rentals was $19.7 million in fiscal 2005 and $11.4 million in fiscal 2004.  We don’t expect any appreciable revenue from this Participating Retailer in fiscal 2006. We are implementing strategies to obtain new Participating Retailers and Program Suppliers in an effort to further stabilize and grow our overall PPT revenue and earnings streams.

We continue to be in good standing with all of our Program Suppliers and we make on-going efforts to enhance those business relationships through improvement of current services offered and the development of new service offerings. We are also continually seeking to develop business relationships with new Program Suppliers. In September 2003, we entered into a combined VHS/DVD revenue sharing program with one of the world’s largest studios that has resulted in their becoming our largest Program Supplier in fiscal 2005, representing 37% of our total revenues for the period. Additionally, a second Program Supplier

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represented 16% and a third represented 7% of our total revenues in fiscal 2005.  As is typical of our agreements with Program Suppliers, our relationship with these Program Suppliers may be terminated without cause upon thirty days’ written notice by either party.

We are also allocating significant resources towards our business intelligence service offerings, both those services that are currently operational as well as those that are in various stages of development.  Our suite of business intelligence software has been well received in the various targeted markets to date, as our offerings fit well with the needs identified by those market participants.  We intend to continue to make the necessary increased investments in these new business intelligence services in the near-term, lowering our earnings. We believe these services will provide significant future revenue and earnings streams and ultimately be the cornerstone of our long-term success.

In March 2004, we announced an agreement with Comcast Cable, a division of Comcast Corporation, the country’s leading cable and broadband communications provider, to conduct a 12 month pilot trial of OnDemand Essentials, a system created for measuring and reporting anonymous video on demand (“VOD”) usage data.  The trial began in May 2004 and has expanded to include all Comcast markets across the United States. The trial has been extended as the companies work through a longer-term agreement.  In July 2004, we announced a similar agreement with Insight Communications and have since announced agreements with Cablevision Systems Corporation (February 2005) and Charter Communications (March 2005).  We have processed over 500 million VOD transactions to date.  In July 2004, we announced our first content provider deal with Music Choice and are working with them to develop anonymous profiling reports from their set top box application, My Music Choice, which allows the consumer to program their own VOD channel. We currently have several additional content providers serving as beta users for our content provider version of OnDemand Essentials, which we expect to launch in July 2005.

Sources of Revenue

Our sources of revenue include the following:

•      order processing fees generated when DVDs, video games and Cassettes (“Units”) are ordered by and distributed to retailers;

•      transaction fees generated when retailers rent Units to consumers;

•      sell-through fees generated when retailers sell Units to consumers;

•      buy-out fees generated when retailers purchase Units at the end of the lease term;

•      communication fees when retailers’ point-of-sale systems are connected to our information system;

•      fulfillment revenue in fiscal 2004 and 2003 (ceased operations July 31, 2003); and

•      other, which includes direct revenue sharing fees from data tracking and reporting services provided to program suppliers (“DRS”); revenues from Box Office Essentialsä, Supply Chain Essentialsä, Business Intelligence Essentialsä and Home Video Essentialsä, all part of our Essentialsä business intelligence service offerings; and charges for Internet services provided by our subsidiary, Formovies.com, Inc.

Sale of 3PF.COM

In June 2003, we signed a definitive agreement to sell substantially all of the assets of 3PF at the Wilmington, Ohio operation for $0.8 million. The agreement covered all equipment and leasehold improvements at 3PF’s leased distribution facility in Wilmington, Ohio, as well as a portion of its working capital.  As part of the agreement, 3PF, as lessee, and Rentrak, as guarantor, were released from the lease.  The cash purchase price of $0.8 million is approximately equal to the net book value of the assets sold.  We completed this asset sale transaction effective July 1, 2003, and received the cash purchase price in full.  The operations of 3PF have not been reported as discontinued operations in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” because cash flows related to our fulfillment activities have not been completely eliminated.

During the sale negotiations, we received notification from 3PF’s largest customer, serviced exclusively from the leased distribution facility in Columbus, Ohio, that it did not intend to renew its fulfillment service

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contract upon the scheduled expiration at July 31, 2003.  The Columbus, Ohio distribution facility was used exclusively to service this customer.  Due to the timing of the notification, we were not able to include the Columbus, Ohio distribution facility lease in the asset sale transaction.  We completed the termination of the lease obligation for the Columbus, Ohio distribution facility, effective December 1, 2003, for a cost of $650,000, which is included as a component of cost of sales in our statement of operations.  This lease termination included the assignment of the sublease 3PF had in place with its former largest customer for approximately 194,000 square feet of this facility. 

Investigation and Recovery Efforts Regarding Misappropriated Funds

In March 2004, we learned that an employee may have engaged in fraudulent activity and we hired an outside firm to investigate the matter. The employee admitted to embezzling funds from us. It was determined that the employee had been embezzling funds from 1998 through 2003, in amounts totaling approximately $0.6 million. The investigation of this matter is complete. Other than $62,000 in underreported sales taxes, the embezzlement funds were materially expensed in the year such funds were embezzled and, therefore, had no other effect on the restatement of any financial results in fiscal 2004 or prior years.  We have secured certain assets belonging to this employee, which, in conjunction with insurance proceeds, provided us with recoveries of approximately $0.4 million in fiscal 2005, and were recorded as a reduction of selling and administrative expense.  We have incurred a total of approximately $0.2 million of legal and other professional fees related to this matter through March 31, 2005, and do not expect to incur any additional fees before the matter is resolved.

Results of Operations

(1) Percentages may not add due to rounding.

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Revenue

Revenue increased $20.4 million, or 26.1%, to $98.5 million in fiscal 2005 compared to $78.1 million in fiscal 2004, and decreased $7.8 million, or 9.1%, in fiscal 2004 compared to $85.9 million in fiscal 2003.

Increases in transaction processing fees and sell-through fees, as well as increases in our Essentials™ and DRS service offerings, which are components of other revenue, contributed to the increase in revenue in fiscal 2005 compared to fiscal 2004.  The increases in transaction processing and sell-through fees were due in large part to a relationship with a major Program Supplier beginning in September 2003. The increases were offset in part by decreases in order processing fees, which resulted from changes to our output programs as discussed below. In addition, fiscal 2005 was affected by a $4.6 million decrease in revenue related to our fulfillment business, which ceased operations as of July 31, 2003.

The decrease in revenue in fiscal 2004 compared to fiscal 2003 was primarily due to a decrease in fulfillment (3PF) revenue and order processing fees. These decreases were partially offset by an increase in revenues from transaction fees and from DRS and our Essentialsä business service offerings.

Order processing fees decreased $2.7 million, or 35.2%, in fiscal 2005 compared to fiscal 2004 due to PPT “output programs” and other PPT programs under which we agreed with the Program Supplier to charge a lower, or no, order processing fee in exchange for the Participating Retailers’ commitment to order an increased total number of Units of all the Program Suppliers’ titles.  These output programs, along with a new combined VHS/DVD revenue sharing program with a major Program Supplier, contributed to a 33% increase in total Units shipped during fiscal 2005 compared to fiscal 2004.  Total units shipped were negatively affected in fiscal 2005 due to the expiration of a contract with one of our Participating Retailers as discussed above.  The effect on transaction fee revenue related to the increase in volume was minimally offset by a decrease in the per unit fee charged for order processing.

Order processing fees decreased $7.0 million in fiscal 2004 compared to fiscal 2003 due to PPT “output programs” and other PPT programs discussed above. These output programs, along with a new combined VHS/DVD revenue sharing program with a new major Program Supplier, contributed to an 89% increase in total Units shipped during fiscal 2004 compared to fiscal 2003.

Transaction fees increased $18.0 million, or 38.7%, in fiscal 2005 compared to fiscal 2004.  The increase was primarily due to the increased number of rental transactions at our Participating Retailers from our output programs. This increase was partially offset by the expiration of a contract with one of our Participating Retailers.

Transaction fees increased $4.1 million, or 9.8%, in fiscal 2004 compared to fiscal 2003 primarily due to the increased number of Units ordered by our Participating Retailers from our output programs and rented to their customers.

Sell-through fees increased $6.0 million, or 58.0%, in fiscal 2005 compared to fiscal 2004 primarily due to the overall increase in Units shipped.

Sell-through fees increased $1.8 million, or 20.5%, in fiscal 2004 compared to 2003 primarily due to the new combined VHS/DVD revenue sharing program noted above.

Fulfillment revenues decreased due to ceasing 3PF operations as of July 31, 2003 as discussed above.

Other revenue primarily includes revenue related to our DRS services and our Essentials™ business intelligence services offerings. Increases in other revenue in fiscal 2005 compared to fiscal 2004 included an increase of approximately $2.6 million, or 59.1%, in DRS revenues and an increase of approximately $1.2 million, or 25.8%, in revenues from our Essentials™ business intelligence services offerings.  Revenues related to our Essentialsä business intelligence service offerings have increased primarily due to our continued investment in, and marketing of, these offerings. Our DRS revenue has increased due to an increase in transactions during fiscal 2005 for certain studios under existing contracts compared to fiscal 2004, as well as new studio contracts.

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Increases in other revenue in fiscal 2004 compared to fiscal 2003 included an increase of approximately $1.3 million in DRS revenues and an increase of $2.9 million in revenues from our Essentials™ business intelligence services offerings. In fiscal 2003, there were minimal revenues generated from our Essentials™ business intelligence services as they began in the fourth quarter of fiscal 2003.

Cost of Sales

Cost of sales consists of order processing costs, transaction costs, sell-through costs, handling and freight costs, and costs associated with certain Essentialsä business intelligence service offerings. These expenditures represent the direct costs to produce revenues.  Order processing costs, transaction costs and sell through costs represent the amounts due 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. A portion of the Essentialsä business intelligence service offerings costs represent costs associated with the operation of a call center.

Cost of sales increased $10.0 million, or 16.6%, to $70.1 million in fiscal 2005 compared to $60.1 million in fiscal 2004 and decreased $11.3 million, or 15.8%, in fiscal 2004 compared to $71.3 million in fiscal 2003. Cost of sales as a percentage of revenue was 71.1% in fiscal 2005 compared to 76.9% in fiscal 2004 and 83.1% in fiscal 2003.

The increase in cost of sales in 2005 compared to 2004 was primarily due to the increase in revenues discussed above. The decrease in cost of sales as a percentage of revenue was primarily due to ceasing fulfillment operations in July 2003, which had lower margins, as well as to revenue from our higher-margin Essentialsä business service offerings increasing as a percentage of our total revenue. In addition, cost of sales in fiscal 2004 included a $650,000 charge related to costs of terminating 3PF’s Columbus, Ohio, facility lease.

A majority of the decrease in cost of sales in fiscal 2004 compared to fiscal 2003 was due to ceasing operations of 3PF in July 2003.  In addition, approximately $0.9 million of the total cost of sales decrease is attributable to the overall $1.2 million decrease in PPT revenues.  Offsetting these decreases in fiscal 2004 was a $650,000 charge related to costs of terminating 3PF’s Columbus, Ohio, facility lease.  The decrease in cost of sales as a percentage of revenue in fiscal 2004 compared to fiscal 2003 was due to approximately $3.2 million in revenues from our Essentialsä business service offerings in fiscal 2004, with $0.8 million of related cost of sales, compared to $0.3 million of revenue and $0.3 million of costs from these offerings in fiscal 2003.  In addition, the decrease is due to the receipt of $0.8 million of discretionary rebates from one of our Program Suppliers during fiscal 2004 related to guarantee shortages resulting from under-performance of certain titles, compared to $0.2 million of such rebates during fiscal 2003.

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 increased $3.5 million, or 21.5%, to $19.9 million in fiscal 2005 compared to $16.4 million in fiscal 2004 and increased $1.9 million, or 13.3%, in fiscal 2004 compared to $14.4 million in fiscal 2003.

Increases in selling and administrative expenses in fiscal 2005 compared to fiscal 2004 were primarily due to an increase of approximately $0.7 million related to our continued investment in the development and marketing of our Essentialsä business service offerings noted above, the accrual of $0.3 million in fiscal 2005 for estimated bonuses and an increase of approximately $2.1 million in corporate professional services related to legal fees, our corporate reorganization and Sarbanes-Oxley Act Section 404 compliance services.  In addition, our bad debt expense increased $0.5 million in 2005 compared to 2004 due to lower reimbursement by our Program Suppliers under our current contractual arrangements. These increases were offset by a corresponding reduction in expenses associated with our fulfillment segment, which ceased

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operations in July 2003, and $0.4 million of recoveries from the embezzlement matter.

The increase in selling and administrative expenses in fiscal 2004 compared to fiscal 2003 was primarily due to an increase of approximately $1.4 million related to the continued investment toward the development of our Essentialsä business service offerings noted above.  In addition, we had a $1.0 million decrease in advertising credits received from our Program Suppliers in fiscal 2004 compared to fiscal 2003 and our bad debt expense increased $0.7 million in the same period due to lower reimbursements by our Program Suppliers under our current contractual arrangements.  These increases were partially offset by an approximately $1.5 million decrease attributable to ceasing 3PF’s operations July 31, 2003.

Net Loss (Gain) on Litigation Settlement

The net loss on litigation settlement of $0.2 million in fiscal 2005 relates to the settlement of a disagreement with a fulfillment provider which arose in connection with the sale of our 3PF.Com assets.  The $0.2 million includes $0.1 million in damages and related interest for full settlement of all the claims and the complete mutual release from any further obligations of either party and $0.1 million of legal fees.

The net gain on litigation settlement of $0.4 million in fiscal 2003 relates to an amount that Hollywood Entertainment, a former customer, agreed to pay us in order to resolve all outstanding issues.

Asset Impairment

Asset impairment of $27,000 in fiscal 2005 relates to the write-off of capitalized software development costs for two projects which management has determined will not be completed and placed in service.

In fiscal 2003, we determined that it was unlikely that 3PF would achieve its business plans and we initiated a plan to sell the assets of 3PF.  Prior to March 31, 2003, it was determined that, more likely than not, substantially all of 3PF’s assets would be sold or otherwise disposed of.  As a result of this determination, during the quarter ended March 31, 2003, we assessed the current and historical operating and cash flow losses, prospects for growth in revenues and other alternatives for improving the operating results of 3PF.

We then performed an assessment of the fair value of the 3PF assets under the guidelines of SFAS 144, “Accounting for the Impairment of Long-Lived Assets.”  This assessment resulted in 3PF recognizing an asset impairment charge during the three-month period ended March 31, 2003 in the amount of $0.8 million for the write down of its assets to estimated fair market value of approximately $0.8 million.

Other Income (Expense)

Interest income in fiscal 2005, 2004 and 2003 includes $173,000, $156,000 and $57,000 of interest earned on a note receivable due from one of 3PF’s clients, which was issued in June 2002.  See Note 5 of Notes to Consolidated Financial Statements.

Income Taxes

Our effective tax rate was 39.6%, 25.0% and (27.8)%, respectively, in fiscal 2005, 2004 and 2003.  The tax rate in fiscal 2004 was positively affected primarily by the benefit of tax intangible amortization.  In addition, our effective tax rate differs from the federal statutory tax rate primarily due to state income taxes.

Discontinued Operations

Discontinued operations include the operations of BlowOut Video, which consisted of retail store operations for the sale of used Units.  Due to the significant increase in sell-through activity throughout the industry, the operations of BlowOut Video did not meet our expectations, and, as a result, during fiscal 2003, we initiated and completed a plan to discontinue the retail store operations of BlowOut Video. The plan called for an exit from the stores by the end of fiscal 2003, either through cancellation of the lease commitments and liquidation of assets, or through sale of the stores to a third party.  As of March 31, 2003, all operations had ceased.  In January 2004, we were notified by the purchaser of a portion of BlowOut Video’s operations of their intent to default on a note receivable due to us.  As such, we provided an approximate $0.2 million reserve for the remaining balance of this note receivable in the three-month period ended December 31, 2003.  This reserve resulted in a reported loss, net of tax benefit, from these discontinued operations of

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$0.1 million, or $0.01 per share in fiscal 2004.  We are continuing to sell our contractually available end-of-term PPT revenue-sharing product through broker channels.  Current and prior year amounts have been restated to classify the results of BlowOut Video operations, net of related tax effects, as discontinued.

The results of operations related to BlowOut Video were as follows:

Inflation

We believe that the impact of inflation was minimal on our business in fiscal 2005, 2004 and 2003.

Liquidity and Capital Resources

Our sources of liquidity include our cash balance, cash generated from operations and our $6.0 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 development of our business intelligence services and other cash requirements through at least March 31, 2006.

Cash and cash equivalents increased $13.3 million to $22.0 million at March 31, 2005 compared to $8.7 million at March 31, 2004.  This increase resulted primarily from $10.3 million provided by operations as detailed below, $2.8 million of proceeds related to the issuance of stock to an unrelated party as discussed in Note 13 of Notes to Consolidated Financial Statements, $2.1 million of proceeds related to the issuance of stock pursuant to our stock plans, and $0.4 million received on a note receivable, which were partially offset by $1.8 million used for the purchase of property and equipment and internally developed software and $0.5 million used for an equity investment. Our current ratio was 2.7:1.0 at March 31, 2005 compared to 1.85:1.0 at March 31, 2004.

Advances to Program Suppliers decreased $3.0 million to $1.2 million at March 31, 2005 compared to $4.2 million at March 31, 2004.  These amounts represent the unearned portion of guarantees with certain Program Suppliers, offset by reserves for estimated shortages under the guarantees.  These advances to Program Suppliers increase and decrease over time based on the changes in business volume, as well as timing of payments.

Deferred tax assets, short and long-term, were $1.1 million at March 31, 2005 compared to $3.4 million at March 31, 2004.  The reduction of $2.3 million primarily relates to utilizing net operating loss carryforwards (“NOLs”) at March 31, 2005 to reduce taxes payable in fiscal 2005.  The remaining deferred tax asset balance primarily relates to net operating loss carryforwards and various reserves not currently deductible for tax purposes.

Note receivable from related party of $0.8 million at March 31, 2005 represents a note receivable from our former president plus accrued interest pursuant to his January 2005 separation agreement.  This amount was paid in full on May 4, 2005.

During fiscal 2005, we spent $1.8 million on property and equipment, including $1.3 million for the capitalization of internally developed software for our business intelligence service offerings. We anticipate spending a total of approximately $2.7 million on property and equipment in fiscal 2006, including approximately $1.6 million for the capitalization of internally developed software for our business intelligence service offerings.

Other assets of $0.9 million at March 31, 2005 include $0.5 million related to our equity investment in a privately held company that develops and provides information technology solutions for clients in various entertainment industry market segments, as well as $222,000 which represents the long-term portion of a

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note receivable from the sale of our 3PF assets.  The total amount due on this note was $0.7 million as of March 31, 2005. During fiscal 2005, we received $0.4 million on this note receivable and there were no past due amounts as of March 31, 2005.

Accounts payable decreased $3.0 million to $12.5 million at March 31, 2005 compared to $15.4 million at March 31, 2004 primarily due to the timing of Program Supplier and other vendor payments.

Accrued liabilities decreased $0.2 million to $0.7 million at March 31, 2005 compared to $0.9 million at March 31, 2004. The decrease represents payments made on our insurance policies and other miscellaneous expenditures.

Accrued compensation increased $0.9 million to $1.5 million at March 31, 2005 compared to $0.6 million at March 31, 2004.  The increase represents an increase in accrued bonuses based on fiscal 2005 financial results.  Bonuses totaling approximately $0.3 million were paid in April 2005.

We currently have a secured revolving line of credit for $6.0 million, with a maturity of December 1, 2005.  Interest on the line of credit is at our choice of either the bank’s prime interest rate minus 0.5 percent or LIBOR plus 2 percent. The credit line is secured by substantially all of our assets. The line of credit includes certain financial covenants requiring: (1) a consolidated pre-tax income to be achieved each fiscal quarter beginning with the quarter ending March 31, 2005 of a minimum of $1.00, and consolidated after-tax income not less than $1.00 on an annual basis, determined at fiscal year end; (2) a minimum current ratio of 1.5:1.0, measured quarterly; and (3) a maximum debt-to-tangible net worth ratio of 1.5:1.0, measured quarterly.  Based upon the financial results reported as of, and for the fiscal year ended March 31, 2005, we determined that we were in compliance with the financial covenants as of March 31, 2005.   At March 31, 2005, we had no outstanding borrowings under this agreement.

Contractual Payment Obligations

A summary of our contractual commitments and obligations as of March 31, 2005 is as follows:

Critical Accounting Policies and Estimates

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Following is a discussion of our critical accounting estimates.  See Note 2 of Notes to Consolidated Financial Statements, Significant Accounting Policies, for additional information.

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Allowance for Doubtful Accounts

Credit limits are established through a process of reviewing the financial history and stability of each customer. We regularly evaluate the collectibility of accounts receivable by monitoring past due balances. If it is determined that a customer may be unable to meet its financial obligations, a specific reserve is established based on the amount we expect to recover.  An additional general reserve is provided based on aging of accounts receivable and our historical collection experience. If circumstances change related to specific customers, overall aging of accounts receivable or collection experience, our estimate of the recoverability of accounts receivable could materially change. Our allowance for doubtful accounts totaled $654,039 and $839,122, respectively, at March 31, 2005 and 2004.

Program Supplier Reserves

We have entered into guarantee contracts with certain program suppliers providing titles for distribution under our PPT system. These contracts guarantee the Program Suppliers minimum payments that are recoupable based on revenue-sharing activity.  In some cases, these guarantees are paid in advance. For amounts not paid in advance, we record a liability for the gross amount of the guarantee due to the Program Supplier on the street date in accordance with Statement of Position 00-2, “Accounting by Producers or Distributors of Films” (“SOP 00-2”). The unearned portion of the guarantees is included as Advances to Program Suppliers on our consolidated balance sheets.  Using historical experience and year to date rental experience for each title, we estimate the projected revenue to be generated under each guarantee.  We have historically been able to reasonably estimate shortages after 30 to 60 days of rental activity. We then establish a Program Supplier reserve for titles that are projected to experience a shortage under the provisions of the guarantee.  The program supplier reserve is netted against Advances to Program Suppliers on our consolidated balance sheets.  We continually review these factors and make adjustments to the reserves as needed.  Actual results could differ from these estimates and could have a material effect on the recorded Program Supplier reserves. The balance in this reserve totaled $3.2 million and $4.5 million, respectively, at March 31, 2005 and 2004.

Deferred Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.”  In accordance with SFAS No. 109, deferred tax assets arise from the tax benefit of amounts expensed for financial reporting purposes but not yet deducted for tax purposes and from unutilized tax credits and NOL carry forwards. We evaluate our deferred tax assets on a regular basis to determine if a valuation allowance is required. To the extent it is determined the recoverability of the deferred tax assets is unlikely, we will record a valuation allowance against deferred tax assets.  As of March 31, 2005 and 2004, we had a valuation allowance of $0.4 million and $0.3 million, respectively, recorded against our Canadian net operating loss carryforwards. Net deferred tax assets totaled $1.1 million and $3.4 million, respectively, as of March 31, 2005 and 2004.

New Accounting Pronouncements

See Note 3 of Notes to Consolidated Financial Statements for a discussion of the impact of new accounting pronouncements.

Off-Balance Sheet Arrangements

Other than disclosed above under Contractual Payment Obligations, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have considered the provisions of Financial Reporting Release No. 48 “Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments.”  We had no holdings of derivative financial or commodity instruments at March 31, 2005.  A review of our other financial instruments and risk exposures at that date revealed that we had exposure to interest rate risk related to our cash deposits.  We utilized sensitivity analyses to assess the potential effect of this risk and concluded that near-term changes in interest rates should not materially adversely affect our financial position, results of operations or cash flows.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Rentrak Corporation

We have audited the accompanying consolidated balance sheet of Rentrak Corporation as of March 31, 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rentrak Corporation as of March 31, 2005, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The financial statement schedule listed in the index at Item 15 is presented for purposes of additional analysis and is not a required part of the basic financial statements.  This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Rentrak Corporation’s internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 20, 2005 expressed an unqualified opinion on management’s assessment, and an adverse opinion on the effective operation, of internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Rentrak Corporation:

We have audited the accompanying consolidated balance sheet of Rentrak Corporation and subsidiaries as of March 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2004.  In connection with our audits of the consolidated financial statements, we also have audited the supplementary information included in Schedule II. These consolidated financial statements and the consolidated financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements and the consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rentrak Corporation and subsidiaries as of March 31, 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended March 31, 2004 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 4 to the accompanying consolidated financial statements, the Company has restated its consolidated statements of operations, stockholders’ equity, and cash flows and the consolidated financial statement schedule for the period ended March 31, 2003.

KPMG LLP

Portland, Oregon

July 9, 2004

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Rentrak Corporation and Subsidiaries

Consolidated Balance Sheets

See accompanying Notes to Consolidated Financial Statements.

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Rentrak Corporation and Subsidiaries

Consolidated Statements of Operations

See accompanying Notes to Consolidated Financial Statements.

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Rentrak Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For The Years Ended March 31, 2005, 2004 and 2003