Free Netpulse/E-Zone Offer Postponed Indefinitely

Approximately 1,100 fitness facilities and chains were awaiting installation.

SAN FRANCISCO - In the middle of December, Netpulse Media Networks (formerly Netpulse E-Zone Media Networks) sent a letter to its customers, stating that it would "postpone indefinitely the installation of the special offers made by both Netpulse and E-Zone between January and July of 2000." The correspondence went to the 1,100 fitness facilities and chains awaiting the installation of Netpulse and E-Zone products.

Netpulse Media Networks was formed through the merger of Netpulse Communications, E-Zone Networks and Xystos Media Networks. Prior to the merger, however, both Netpulse and E-Zone had agreed to give away its entertainment systems to clubs that could guarantee a certain level of traffic. The idea was that the companies would profit by selling advertising which club members would watch while using the entertainment systems.

At the time, Netpulse and E-Zone were simply following what was hot in the technology and Internet marketplaces, according to Adam J. Handelsman, director of public relations for Netpulse Media Networks. PC companies were giving away computers, while ISPs were offering free Internet access. In exchange for the products and services, recipients would supply the eyeballs for advertising that would appear on the computers or Web browsers.

E-Zone and Netpulse adopted a similar format, supplying a free product that would be a delivery mechanism for advertising. Little did the companies know that the market was about to change.

"Right toward the middle of our free promotional offer, the markets got slapped, NASDAQ dropped 2,500 points, and companies with our business model weren't getting funding anymore," Handelsman explained. Consequently, during their search for capital, the entertainment companies found that investors would not support a free platform. Furthermore, the impending merger also made it difficult for the companies to keep up with demand for free product.

Still, the merger is a good thing, in Handelsman's opinion. He said that the new company benefits from the sum of its parts, allowing it to supply multiple lines of products for different needs and price points. And, at the IHRSA show in March, the company will unveil a hybrid product combining the best of E-Zone, Netpulse and Xystos systems. Furthermore, the company is testing fresh programming and creating more options for the clubs.

Granted, these products won't come free, but Handelsman doesn't see that as a problem. However, he does note that some club operators are upset over the rescinded offer - "and rightfully so."

Lori Lowell, owner of Gold's Gym of Lake Ridge in Woodbridge, Va., is one of the operators affected by the "indefinite postponement" announcement. Not only was she waiting for free units, her business was one of the first clubs that E-Zone approached back in June of 1999 - long before the promise of free technology.

Initially, Lowell's club installed eight of the original E-Zone systems, with the understanding that she would receive 20 new units when her club moved to a larger location in the summer of 2000. "The deal was that when I move into the new club, my units would be $39.99 a month for three years, and then I own all of the equipment," Lowell said.

Things didn't quite work out that way. From the time the original units were installed to the time her club actually relocated, Lowell witnessed changes at E-Zone - most notably in its management and in its business model. At one point, for example, members could only use the E-Zone system by purchasing special headphones that the clubs could sell at a profit, which would help clubs pay for the E-Zone system.

"Then they decided that they were going to give us the headsets, and we were to give out the headsets for free," Lowell recalled. "And then they said we are going to give you the units for free, so you don't have to pay for the units."

As Lowell awaited delivery of her 20 free E-Zone units, Netpulse (still an E-Zone competitor) also approached her club with an offer to supply free entertainment - an offer she welcomed. In the end, however, she didn't get anything from either company. She never received any updates regarding the equipment she was expecting. She couldn't even get anyone to fix her eight existing E-Zone units, which, after being installed into her club's new location, stopped working properly.

"They have been sitting in my club like this since June," Lowell said.

Despite this, Lowell bears no grudge. She has simply decided to move on, installing a ClubCom entertainment system. Lowell reported that she is happy with ClubCom's music, television and advertising options, as well as the company's customer service.

With the free offer off the table, will other operators respond like Lowell, turning to competing entertainment providers for solutions? Handelsman doesn't think so.

"We have a great product," he claims. "We look at it this way: We sold it before. We sold it well. We decided to give it away at one point, and now we are going to be selling it again. People want the product. Gyms love the product, and the users love the product, but we can't give it away for free. It's really that simple.

"We didn't goof," he continues. "This is not a bait and switch. This is business. At one point [in 1999], the business environment said we could [give products away], and now we can't. So to save ourselves and really grow the company and prosper, and be able to put out product that people love, we'll have to charge for it."


What's In A Name?

When E-Zone, Netpulse and Xystos first announced their merger, they adopted the collective name of E-Zone Netpulse Media Networks. However, in mid-December, the company truncated the name to Netpulse Media Networks.

Why was E-Zone dropped?

"This isn't something that was taken lightly," claimed Adam J. Handelsman, director of public relations for Netpulse Media Networks. "We weighed all our options, and we felt the Netpulse name had greater brand equity - in not just the business industry, but in the capital markets."

Besides, you try saying "Netpulse E-Zone Media Networks" whenever you answer the phone. Talk about a mouthful.