New Frontier In Profile: 2

Rodger Jacobs
In this series conclusion, we'll continue our profile of adult industry powerhouse, New Frontier:

63 Million Subscribers
New Frontier asserts that its racy television networks are available to "more than 63 million addressable subscribers" through their cable and DBS affiliates, including nine of the 10 largest multiple system operators in the United States.

"What we report is the number of customers that are enabled to purchase our content via VOD," Karyn Miller, New Frontier chief financial officer, explained to XBiz from the company's Boulder headquarters.

New Frontier's market, Miller says, is defined "as viewers who have access to our product because this is really industry standard." All of the networks, from Playboy and Viacom and ESPN, use the same measurement.

"There is no other relevant metric by which to measure how effective we are being at selling our product to the cable/DBS customer. Since we do not own the customer data for the true end-user of our product, we cannot report the number of unique purchases because we do not get access to that data."

Network households — the number of viewers that have access to New Frontier's networks — is the only metric that can be used to provide investors with anything resembling a gauge of the company's market share.

That uncertainty may explain why New Frontier has few competitors in its chosen field.

Spain-based Private Media Group remains primarily a content producer, although the company recently made a modest entry into the U.S. markets.

The Dish Deal
"Private was successful in getting a launch for a branded service with DISH network last February," Miller says. "We have not seen any negative effects on our own revenue from this launch of a competitive service on DISH, and Private has not had any success gaining distribution with any other platform in the United States."

Miller does not perceive a threat from LFP Broadcasting either. Hustler TV for PPV launched on Oct. 1 and is offered on an individual title format or in three-hour and six-hour blocks or as a monthly subscription service on a 24/7 basis. A VOD offering of Hustler TV called Hustler TV On Demand was recently launched nationwide to multiple cable operators with various size packages, some up to 50 hours of VOD programming per month with a 50 percent refresh rate.

As evidenced by the Pitt episode, New Frontier has no problem attracting headline-grabbing allies whenever an obstacle is thrown in its path.

In November 1999 the company announced that Alan L. Isaacman, name partner at the legal firm of Isaacman, Kaufman & Painter Inc., had joined its board of directors. Isaacman, a legendary litigation attorney and First Amendment expert, earned a reputation when he tried the landmark case of Hustler magazine and Larry C. Flynt vs. Jerry Falwell and the subsequent landmark petition before the U.S. Supreme Court, as documented in the motion picture "The People vs. Larry Flynt."

At the time of Isaacman's recruitment by New Frontier there was an issue looming before the U.S. Supreme Court that could have seriously curtailed New Frontier's ability to broadcast its content 24/7.

Sect. 505 of the Telecommunications Act of 1996, also known as the Communications Decency Act, sought to protect underage viewers from being exposed to "signal bleed," which is when nonsubscribers receive fuzzy or partial adult content video images and/or audio signal. The act imposed "safe harbor" viewing hours, restricting adult cable programming to the hours of 10 p.m. to 6 a.m.

On May 23, 2000, six months after New Frontier added Isaacman to the board, the U.S. Supreme Court ruled against the implementation of Sect. 505, determining that the law was unconstitutional.

Isaacman hailed the court's decision as "an important blow for the First Amendment."

"The onerous blocking requirements would have required the installation of highly expensive scrambling technology on all U.S. cable channels carrying adult content, Isaacman said." If upheld, the requirement would have resulted in substantial impairment of broadcasters' basic free speech rights and viewers' freedom of choice rights."

In a tale brimming with irony, it can be said that New Frontier's willingness to confront possible legal challenges to its ability to broadcast paved the way for Larry Flynt to enter into the marketplace with Hustler TV — and it was accomplished with the aid and consultation of Flynt's former lawyer.

But Isaccman's usefulness to New Frontier doesn't end with the Supreme Court's ruling on Sect. 505.

Antiporn Watchdog
Citizens for Community Values, a Sharonville, Ohio-based conservative values watchdog group, has been extremely active in the last three years in convincing hotels to pull the plug on in-room adult movies. At least seven hotel chains in the greater Cincinnati area have shuttered the channels since the summer of 2002, including the Cincinnati Marriott Northeast, the Quality Inn in Norwood, and the Holiday Inn in Sharonville, resulting in the loss of hundreds of thousands of dollars to suppliers like Sioux Falls, S.D.-based Lodge Net Entertainment.

Cable systems in parts of Wyoming, Utah, Montana and Colorado have also been eliminating adult product from their channel lineups. In March 2003, Bresnan Communications bought a 314,000 subscriber service in that four-state area from AT&T Broadband and opted to no longer carry adult-specific entertainment.

If the demographics provided by New Frontier say anything, however, it is that adult content delivered via a burgeoning host of electronic platforms is finding audiences in every state of the union, red, blue and otherwise. Pundits in the social, moral and political spectrum would have us believe that we are a nation as divided today as we were when John Wilkes Booth assassinated President Lincoln. The widespread appeal of adult content and the association of Fortune 500 companies and heavy hitters like Pitt and Isaacman suggests otherwise.