CHATSWORTH, Calif. — Acid Rain has shifted its business model from DVD sales to Internet delivery. Founded in 2003 by Mitchell Spinelli, gonzo studio Acid Rain now is solely producing exclusive content for the soon-to-be launched GrindhousePorn.com.

Spinelli told XBIZ that current economic conditions forced him to reevaluate the profit potential of the DVD marketplace. Seeing his sales numbers decline over the past year, Spinelli embraced the Internet as a content delivery tool.

“It got to the point where Acid Rain was established, but I couldn’t compete with the Zero Tolerances of the world,” Spinelli said. “The DVD has gone as far as it could go for Acid Rain. It’s hard for a company like mine to compete against the titans. Over-expansion has hurt the business.

“Shelf space is diminishing in the stores. They want Coke or Pepsi, and I’m Fresca. I had two to three years of being competitive. I did the conventions, I took out ads, and then last year I hit a wall.”

In its partnership with XXX Content Direct, Acid Rain is producing niche, reality-style content for GrindhousePorn.com in addition to content available for license for paysite members areas and feeds.

Acid Rain will continue to live on, releasing compilations and box sets from its catalog of movies, which numbers close to 200. The company’s new releases will contain Internet scenes initially released through its partnership with XXX Content Direct.

Spinelli said that shooting content for the Internet is a change from the typical Acid Rain movie: The production cost is lower and because of a much quicker turnaround time, the company can shoot new talent.

“Competition is fierce,” Spinelli said. “You have to keep changing. You have to be ahead of the curve, but that’s hard. But once your instincts — and your bottom line — tell you it’s changing, best to listen and go after where it’s headed. Forget your ego, just get on the bus and reinvent yourself.”