New Frontier’s content, which already is offered on Dish Network, will reach an additional 15.1 million DirecTV subscribers.
While the move sent New Frontier shares up 11 percent, industry analysts see the satellite companies that distribute adult content as the big winners.
“Adult content programming is incredibly commoditized,” Matthew Harrigan, an analyst at Denver-based Janco Partners, said. “The margin is incredibly low.”
Analysts who focus on the satellite/cable industry note that distributors like DirecTV see their highest profit margins on adult pay-per-view content. Unlike mainstream content distribution deals, where studios see about half of the revenue, adult content providers receive only five to 15 percent of the money viewers spend on content.
The decision to bring New Frontier on board probably has more to do with competition than content, according to analyst speculation.
“The cable operators and satellite providers have always been very good at making sure there were two adult companies on their systems so that they could claw at each other,” Harrigan said.
While Playboy will see increased competition from New Frontier on DirecTV, Harrigan doesn’t think Playboy will feel a huge downside.
According to Dennis McAlpine, president of McAlpine Associates, an independent research firm, the deal has been in the works since 2003, but wasn’t expected to be finished until the end of the year.
