BOULDER, Colo. — New Frontier Media, in an annual report filed with regulators, said revenue from its transactional TV unit fell lower than expected in the past fiscal year, partly because of the availability of free porn on the Internet.
As a result, New Frontier Media said that it would take a $3.7 million goodwill impairment charge for the segment after two straight years of decline and will adjust downward its five-year economic forecast.
"We believe the increase in availability of free and low-cost internet websites in combination with the continued global economic downturn has caused historical consumers and potential new consumers to view content through free and low-cost Internet websites rather than through our TV VOD and PPV services," New Frontier said in the report filed with regulators.
The annual report, released Friday, offered numbers that painted a company with slipping numbers, but the company said it continues to invest in new and unique content packages and points to a strategy of international growth.
New Frontier Media sells adult video-on-demand and pay-per-view content through satellite, cable and hotel networks. Offerings include Penthouse TV premium channel and The Erotic Networks, which include Xtsy, Juicy and VaVoom.
For the year ended March 31, New Frontier Media had a $4.8 million operating loss, compared to a $1.1 million loss for the prior year. The company reported revenue of $40.8 million in the past year, nearly $8 million short from the previous year.
Free porn over the Internet and challenging economic conditions isn't the only area of concern for Boulder, Colo.-based New Frontier Media.
Manwin, which last year became licensor of Playboy Premium, has inched up the industry totem poll and has become a viable rival to the company. Playboy, historically, has been New Frontier Media's primary direct competitor
Manwin's vast portfolio of content includes Brazzers, Digital Playground and Twistys, among others. It also operates numerous adult sites including YouPorn, Spankwire, Webcams Tube8, ExtremeTube, KeezMovies, Mofos, ExtremeTube, JuicyBoys and PornHub.
"We believe that Manwin has significantly greater financial, technical and marketing resources, as well as better name recognition than we do through its branded Internet websites," New Frontier Media said. "Other competitors, such as Hustler TV, are also expanding their distribution which has resulted in increased competition in the adult broadcast industry."
Manwin, of course, earlier this year made an unsolicited bid for New Frontier Media while the company was involved in a bitter proxy battle that ended in a legal settlement.
New Frontier Media reached the settlement agreement with Channel Islands-based Longkloof, which owns 15.9 percent of the company.
As part of the settlement agreement, Longkloof said it would withdraw a board nomination and not support any board candidates not recommended by New Frontier for the remainder of 2012.
But if New Frontier Media does not engage in a sale, merger or change of control by Dec. 31, Longkloof would have the right to nominate one person to New Frontier's board for a term through 2013.
New Frontier Media was trading at $1.56 a share on the Nasdaq at post time.