Marc Kreloff has resigned as chairman and CEO of New Frontier Media, the company announced today. He'll stay on the board of directors and continue as the company chief through the end of March.
NFM, which runs The Erotic Networks among other concerns, suffered $5.9 million in losses for the quarter ending in December and overhauled its Internet operations, layoffs included. Further personnel changes include executive vice president Michael Weiner taking the reins as president.
New Frontier told AVN.com this morning they were not prepared to comment in more detail about Kreloff's resignation, other than to say in a formal statement that he was leaving "to pursue other business interests." Nor were they ready to comment in more detail about Weiner's promotion, which the board approved as they accepted Kreloff's resignation.
The company also announced they plan to restructure their Internet Group for one final time during the fourth quarter of the fiscal year ending next month – including a 50 percent termination of its Internet staff and ending its Pay-Per-Click, sale of traffic, and e-mail revenue streams, "which have achieved poor margins for the Internet Group during the past year," New Frontier said.
The Internet Group's focus will turn instead to content package sales to adult Webmasters and the marketing of its prime broadband site, Ten.com, to "third party gatekeepers and to consumers viewing the (Erotic Networks)," the company said.
The good news was that New Frontier's Pay TV Group had "significant growth" in the current fiscal year, said Erotic Networks president Ken Boenish in a statement. "Our Video-On-Demand business has grown from 500,000 addressable subscribers last year to 4.9 million addressable subscribers as of December 31?making us the dominant provider of adult VOD content to cable operators in the United States."
Boenish also said distribution of New Frontier's branded pay-per-view networks has grown 27 percent year by year in recent years. And their recent On Command distribution agreements, he added, show New Frontier's ability "to leverage existing content and technology infrastructure to create new revenue opportunities.
"What makes this opportunity with On Command unique is the ability that we now have to cross-market our branded content on pay television and broadband interactive platforms," Boenish continued. "This deal represents the direction we are taking the Pay TV business with out other distribution partners."
But New Frontier isn't up from the swamp just yet, despite the Internet Group revamping plan and the Erotic Networks' continuing growth. The company reported $8.6 million net revenue for the fiscal quarter ending in December, a 31 percent drop from the same period in 2001, when they reported $12.4 million in net revenue. The company said the losses came predominantly because of a net revenue fall (65 percent) by New Frontier's Internet group and a 7 percent net revenue fall by its subscription and pay television group.
The $5.9 million quarterly net loss came thanks to a $5.3 million "provision for income taxes due to the company providing a full valuation allowance against its deferred tax assets," New Frontier said in a formal statement. "(We have) deferred tax assets that have arisen primarily as a result of operating losses incurred and other temporary differences between book and tax accounting."
