Online

Internext Industry Firsts: Capitalizing Your Success, Site Critique Clinics

By: Bianca Fox

Posted: 07/26/2007

HOLLYWOOD, Fla. - Internext Summer 2007 will feature two educational offerings that are firsts in the industry: a seminar entitled "Capitalizing Your Success" and a two-round "Site Critique Clinic." Business owners are expected to flock to "Capitalizing Your Success," which will guide companies to increased financial health through expansion, mergers, acquisitions, and public offerings. The site critique clinics will offer attendees the opportunity to have their websites evaluated by longtime industry insiders and Web designers.

The first SCC will occur from 1-2 p.m. Friday, Aug. 3; the second is scheduled to take place from 11 a.m. to noon on Saturday, Aug. 4. An "open forum" type of event, it will feature the advice of Vegas Ken of TheBestPorn, Shannon Warren of Think Pink Media, and Colin Rowntree of Wasteland.

Vegas Ken said he is excited about participating, because it will be a great way to communicate the pros and cons of various site designs and concepts directly to webmasters. "Sometimes, when you work so close to a project, you lose perspective," he told AVN Online. "It is nice to get outside feedback in a non-judgmental forum. At TheBestPorn.com, we have seen lots of pay sites and have a pretty good perspective about what is going on and what it takes to be more competitive. I am more than happy to share my thoughts and opinions with interested webmasters.

"Everyone always wants to know what to fix on their site prior to being reviewed," he continued. "OK, this is your chance to let me take a look! I am sure it will help you gain a higher score and retain more members.

"I think the site critique clinics are going to be one of the most valuable functions at Internext. I have people hitting me up all the time for this information, so I really think it is going to be a huge success."

"Capitalizing Your Success" will feature investment-banking professionals and major adult-company owners who have participated in capitalization transactions, and it will cover adult industry-specific solutions. The session will be led by moderator Connor Young, president of YNOT Network, and will include panelists Holt Gardiner of Ackrel Capital (a boutique investment bank), Jay Grdina of Club Jenna (which was acquired by Playboy), and Tim Valenti of NakedSword (which merged with AEBN).

Gardiner runs Ackrel's digital media practice, which offers a variety of services for emerging growth companies, including assistance with capitalization such as raising funds through private placement, selling them to either a strategic or financial buyer, or taking them public. Ackrel also represents companies that are interested in purchasing and are in search of opportunities in various industries. It assists by acquiring companies on clients' behalf and assisting with acquisitions in other ways.

One of the topics to be discussed during the seminar is whether adult companies can access public markets.

"It is very difficult to take an adult company public successfully because of the nature of the public process," Gardiner told AVN Online. "You have to have a number of institutional investors in place. But those institutions represent so many people - especially the public pension funds, private pension funds, university endowments - that the perception of the involvement in the adult business is a non-starter for them at this point.

"Secondly, typically, adult-content businesses are difficult to scale, and it's hard to get the dramatic returns, and, frankly, to invest the kind of money that the bigger funds are used to investing," he continued. "So you sort of rule out a lot of the top companies in that world. But there is a number of the more niche and boutique firms that clearly understand that you can buy these companies that are making a huge amount of money, are very profitable and are well-managed, at a relatively low multiple compared to mainstream media businesses."

Gardiner praised Spark Capital for its efforts. The major venture capital company invested in Waat Media, one of the largest distributors of adult mobile content. Waat has deals with Playboy, Private, and Vivid. Spark did what was needed to access the public market, succeeding in packaging the company together with mainstream assets and making the market look at it in a different way.

"Spark effectively re-branded Waat as a company called Twistbox," Gardiner said. "If you look at any of their public stuff, their website, Twistbox focuses on their mainstream portfolio, even though their adult portfolio contributes about 80 or 90 percent of the revenue and profitability. But they're now getting a mainstream multiple because their outgoing world perception is that of a mainstream company, even though they are an adult company."

"Capitalizing Your Success" also will debate whether adult entertainment companies should position themselves to become candidates for profitable sale or recapitalization. Gardiner will tend to this question by giving advice about creating a positive brand that transitions over to the mainstream.

"The adult companies have to be more successful in re-branding themselves as something that mainstream can accept, so that the brand itself causes desire for the product rather than the inherent product," he said. "That way, you get shelf space. That way, you get brand image and brand value. That, along with mainstream transparent accounting processes, good middle management, reliability - all of those things are absolutely necessary for a company to become attractive to any investors, especially mainstream investors. Additionally, complete compliance with 2257 regulations is absolutely mandatory."

Companies visit Gardiner and Ackrel Capital when they want to know if they are capable of a re-capitalization, what needs to be done before they go to market, and what kind of process needs to be completed. If a company is ready, Ackrel guides it about the kinds of companies to approach and what kind of valuation to expect.

"The key for all these companies is to be positioned for the markets that are profitable," Gardiner said. "Selling DVDs to distributors who are selling them to mom-and-pop stores is in decline and, in five years, will be gone completely. If you're not in position to control your distribution streams through IP, VOD, SVOD, and TV, then you have no product. And in order to get the product on those channels, or at least have a high perception on those channels, you have to have a very powerful brand.

"The few companies that are adult-based that may have chances in the public sector are those that are not content-dependent; that are distributors of adult content and have a proprietary distribution method. Going public as a content producer is probably not a good thing," he concluded. "You don't have the growth potential that would be necessary to support big valuations."