Netpulse, E-Zone, Xystos Merge

The new company reports that it will reach more than 11 million consumers in health and fitness facilities worldwide.

SAN FRANCISCO - At press time, the awaited merger between Netpulse Communications, E-Zone Networks and Xystos Media Networks (see The Inside Track, September) was coming to a close. The combined interactive entertainment company is now called Netpulse E-Zone Media Networks.

Netpulse E-Zone Media Networks will operate from a San Francisco headquarters under the guidance of a new executive team made up of leaders from the merged companies. Tom Proulx, former CEO of Netpulse and co-founder of Intuit Inc., and Robert McKenzie, former CEO of E-Zone and co-founder of MetroNet Communications (now AT&T Canada), both carry the new title of co-executive chairman. Andrew Wiswell - the senior vice president who joined E-Zone last year to help build Club TV, the advertising stream portion - is the CEO elect.

In addition to Wiswell, Proulx and McKenzie, company leaders include board member Leonard Schlemm, formerly chairman of Xystos and co-founder of 24 Hour Fitness. Nat Findlay, former president of Xystos, will head up efforts to expand the new company into select international markets.

Noticeably absent from this lineup is Mike Stein, who recently came from StairMaster to join E-Zone's upper management. "Mike has left the company by mutual agreement," Wiswell told Club Industry. "The merger only created so many senior spots. He has agreed to stay on in the transition period."

Management wasn't the only thing affected by this merger. Prior to the deal, the respective companies had either formed or had begun to form alliances with other entertainment companies - namely Cardio Theater (in the case of E-Zone) and BroadcastVision and ClubCom (in the case of Netpulse). How does this merger affect them?

"We have a marketing arrangement with Cardio Theater, and that will continue into the merger," Wiswell replied. "Netpulse had some discussions with ClubCom and BroadcastVision, and we'll look at those as we move forward."

Although BroadcastVision officials were unavailable for an interview, Vice President Tony Garcia did release a statement to Club Industry in which he commented about the merger and its effect on his company and the industry. "Clearly, the entertainment opportunities within our industry are exploding," he wrote. "Customers are demanding quality entertainment solutions and proven revenue opportunities such as those presented by ClubCom. This has created challenges for manufacturers in satisfying an overwhelming demand. Fortunately, BroadcastVision has properly forecasted this evolution and is well positioned to immediately deliver its wireless entertainment products and personal viewing screens to more than 4,500 existing customers.

"As to the Netpulse and E-Zone merger, we have had a good working relationship with Netpulse and we congratulate them. We understand their need to merge the companies in an effort to better position them for fund-raising in order to satisfy their commitments to select national accounts."

Indeed, there are many commitments. When E-Zone and Netpulse both shifted to advertising as a main source of revenue, they offered to give away their entertainment systems to clubs that could guarantee a high level of member traffic - the idea being that a large, captive audience of consumers would support the companies' ad-based model.

While the companies ended their free offers in the spring, 20,000 terminals still remain contracted. "We will continue to raise the capital to fund the installs," Wiswell said. "We are out raising that capital this fall. We are committed to satisfying the demand for this product."

And this product will be changing - for the better, according to Wiswell. The combined companies are working toward an integrated platform that provides the best of their networks, including Internet access, television, and music and video on demand, as well as club news, information and advertising opportunities.

Meanwhile, existing customers can expect modified software that will give members new functionality and a similar interface. For example, someone with existing Netpulse units should be able to offer the one-on-one training of the E-Zone network. The limitations will depend upon the club's network.

While the company will tweak its product, it doesn't plan to change its revenue stream. Yes, leasing equipment will provide profit opportunities, but Netpulse E-Zone Media Networks intends to make most of its money by selling to companies that want to deliver a marketing message to club members, who tend to inhabit a well-educated, affluent market. "The bulk will be advertising and sponsorships from people who want to reach an attractive demographic," Wiswell said.

The company also hopes to branch out beyond the club industry, to design entertainment and advertising products for other audiences. "We see that our mission as a company is to grow into other targeted markets," Wiswell said. "We have talked to people in other verticals, any places where people are captive."

However, Wiswell made it clear that the company won't serve new markets at the expense of its core club market. "Our commitment to the health and fitness industry is very strong," he said. "It's the market we started in, and the one we will continue to work on. We are excited about serving the industry."

Operation FitKids (OFK), a program supported by the American Council on Exercise (ACE), is a nonprofit organization dedicated to improving the health and fitness of America's youth. Through the use of recycled commercial fitness equipment, Operation FitKids provides fitness facilities to communities in need. Working with local high schools, organizations and youth groups, Operation FitKids creates fitness centers, at minimal cost, to provide adolescents and teenagers with greater access to comprehensive physical fitness programs.

Club Industry encourages you to help Operation FitKids meet its goal of opening 100 new facilities a year. Corporate and private sponsors that share the goal of encouraging kids to get active and fit can give tax-deductible donations to help drive the program nationwide. A financial donation will help provide OFK fitness facilities to communities in need and educate the public, media and legislators about the value of Operation FitKids.

Equipment manufacturers and health clubs can donate new or used fitness equipment and accessories. Operation FitKids will provide the necessary documentation to receive the tax benefits of depreciated capital equipment. You can earmark your donation to a specific site, support an internship to a fit kid who is interested in a career in the fitness industry, or help facilities with training needs.

OFK needs your financial, in-kind, or good lines/recycled of commercial fitness equipment to open new Operation FitKids facilities that are pending in Arizona, California, Colorado, Georgia, Illinois, Louisiana, Montana and New York!

Club Industry and OFK wish to thank the most recent companies and contributors who have supported Operation FitKids, either with in-kind or financial assistance: American Council on Exercise (ACE); the Step Company; Sporting Goods Manufacturers of America (SGMA); Club Industry Trade Show; Henry Hriczko Trucking Inc.; Jazzercise Inc.; and Glenn Colarossi, operator/owner of The Stamford Athletic Club and AgeFit.

Want to get involved? Contact DeeDee Kovacevich, executive director of OFK, at (800) 825-3636, ext. 707 or [email protected]

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