New Frontier Finds Growth in Explicit VOD

Rhett Pardon
DANA POINT, Calif. — Despite claims of new video-on-demand competition, a New Frontier Media official said Tuesday that the company is riding a wave of profitability and that more explicit content is the cash king.

“VOD is just getting started, and our strategy is to grow its revenue” said Ken Boenish, president of New Frontier’s Erotic Networks unit. “When technology issues are solved, VOD will explode. That is where the growth is.”

Addressing potential investors at the Roth Capital Partners conference in Dana Point, Calif., Boenish said New Frontier is closely watching its VOD competition — mainly Chicago-based Playboy Enterprises.

“We took a hit when Playboy introduced the platform, but we’ve seen just the tip of the iceberg with VOD,” he said. “Right now VOD is just getting started, and some cable operators are unwilling to put a lot of marketing horsepower because of stability problems, particularly latency issues when the content doesn’t load.”

Boenish revealed that New Frontier, which tallies access to 75 million cable and satellite households, makes more revenue when content becomes more explicit.

“When cable [operators] offer XXX content as opposed to X content, we see 50 to 100 percent more business,” he said. “We also see a difference of $1 to $2 in the retail rate.”

Boenish also said the company is, for the most part, dumping its Internet strategy.

“We’ve finally gotten under the hood in this business, and we’ve found out it wasn’t what we thought it was,” he said. “Quite frankly, they are able to do what public companies can’t do — creating offshore businesses and doing processing overseas. We aren’t going to go that way.”

Earlier this month, Boulder, Colo.-based New Frontier, which owns The Erotic Networks including Pleasure and seven of its Ten-branded specialty channels, said net earnings for its third quarter rose to $2.9 million but that increased competition and higher tax expenses are dogging its performance.

As a result, New Frontier lowered its revenue and net earnings guidance for 2005.

New Frontier traded Tuesday at $7.33, down $1.08, on the Nasdaq.