There are few public companies in the adult industry, which means we don’t get a whole lot of reliable business numbers. But everybody broadly agrees the whole industry was in decline (due a variety of business challenges broadly related to the increasing availability of “free” content) prior to 2008, when the recession hit everybody hard. There was at that time a wave of consolidation and buyouts, as the stronger companies bought up some of the weaker ones.
Now we learn that FriendFinder Networks (the unholy lovechild dating from 2007 of Penthouse Media Group and Various, Inc.), publisher of Penthouse Magazine and owner of a great many huge internet dating sites like Adult Friend Finder and Alt.com, has just filed for a Chapter 11 bankruptcy and reorganization of its debt. This is interesting because it tells us just how terrible the business has gotten:
Penthouse Magazine and AdultFriendFinder.com owner FriendFinder Networks Inc. (FFN) has filed for Chapter 11 bankruptcy protection in Wilmington, Del., after reporting losses in seven consecutive years to 2012.
The company listed assets of less than $10 million and liabilities of as much as $500 million to $1 billion, according to court papers.
FFN CEO Anthony Previte, who took over the top post in July of 2012 after Marc Bell stepped down from his position, told XBIZ that the central reason for the company’s restructure was due to mounting compounded debt over time that had banks, credit card processors and creditors perceiving the company as a bad risk despite it having paid back nearly $150 million.
“It was tough to keep up with the accretion of debt. We hit a tough spot in September of 2012 because of it,” Previte said.
The company’s filing read, “Despite continuing member interest and high volume traffic, the debtors did not make certain payments to the holders of existing first lien notes and cash pay second lien notes which constituted a default under their respective indentures.”
FFN has reportedly not made a profit since at least 2006 and reported a second-quarter net loss of $10.3 million, or 32 cents a share, on Aug. 15. It had cash or equivalents of $38.6 million on Mar. 31 compared with outstanding principal debt of $544 million, according to the financial statement.
Although the company’s live cam and dating businesses are doing well, according to Previte, Penthouse magazine has been the company’s biggest drain. He said shrinking retail outlets and scarcity of printers has hurt the publication. And although there are no immediate plans to kill the magazine, its long-term fate is questionable because of these external factors.
Wow. That’s bad. “Continuing member interest and high volume traffic” but no profits. That’s the adult web in a nut shell, right there.
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