from www.foxbusiness.com – LodgeNet Interactive (LNET) said it will not experience significant financial loss after an analyst report suggested its largest hotel-chain customer will phase out pornographic videos in its rooms.
The analyst note suggests that porn is a strong revenue generator for LodgeNet. But the company stood by its 2011 and 2012 guidance, and said there is no change in programming expected at currently installed properties during those years.
“It has been widely disclosed the company has been diversifying its revenue base, and is less reliant on revenue from mature content than at any point in the past,” LodgeNet said in a statement.
“The company stands behind its guidance, and has not adjusted its projections or outlook as a result of the agreement referenced in the report.”
LodgeNet’s response helped it recoup some of its losses from earlier in the day after the report sent its shares tumbling more than 30% to $2.88. The shares closed down 19.5% at $3.38 on Wednesday.
The provider of media and connectivity solutions to hospitality and health-care businesses said it has always offered hotels options to restrict mature content, and noted the customer in question will get the option to restrict the movies in 2013.
Craig-Hallum Capital Group senior research analyst Frank McEvoy said in the note that the company could see a yearly revenue loss of $25 million, assuming about 50% of LodgeNet’s guest entertainment revenue at these hotels is derived from porn, according to the Wall Street Journal.
McEvoy couldn’t immediately be reached for a comment.
But Sioux Fall, SD-based LodgeNet says it has worked with the customer, which it did not name, to adjust their “economic model” in such a way to assure it remains “economically indifferent” regarding the hotel’s decision to offer mature videos.
No existing agreement between the companies has been affected, according to LodgeNet, and all future deals are expected to be structured in such a way that any decisions on porn offerings will not have a material impact on its return. The two remain on good terms, the company said.
Also according to the analyst’s report, another hotel chain plans to strip video-on-demand from roughly 50,000 rooms over the next six months. According to LodgeNet, however, the systems only generate marginal revenues, and its customer’s decision to remove the systems has already been widely reported.
In October, LodgeNet predicted a fourth-quarter loss in the range of 16 cents to 24 cents a share on revenue of $108 million to $112 million.