If you thought Thomas Proulx went down with the Netpulse/E-Zone/Xystos ship, think again.
On May 3, Proulx, who had been the CEO of Netpulse Media Networks Inc. (the company that combined Netpulse, E-Zone and Xystos), purchased the operating assets of Netpulse, his former company, from bankruptcy court. In doing so, Proulx started a totally new company, Netpulse LLC.
“There are few products in the fitness industry that users get as passionate about as Netpulse,” said Proulx in a news release. “I couldn't just stand back and let it die.”
Netpulse Media Networks, however, did die. But according to Adam Handlesman, spokesperson for Netpulse LLC, it wasn't the original Netpulse's fault.
“We didn't chapter 7 because we had a bad product or bad service,” he told Club Industry in a recent interview. “We [went] chapter 7 because we had a failed merger and a financial crisis due to a downturn in the [capital] market.”
Handlesman explained that the attempted merger of Netpulse, E-Zone and Xystos was complicated. What should have taken a month or two dragged out for six months, during which time the company sat in limbo. Meanwhile, financing dried up and the capital market collapsed. To make matters worse, all three companies were supposed to downsize following the merger, and, according to Handlesman, not all of them did.
“So you had this great merger with a lot of hoopla and then all of the sudden there was no money, and the company was too big,” he said. “There were too many managers, too many VPs, and things that had to be done weren't done.”
Proulx hopes to avoid past mistakes. Rather than give away products — a strategy that also contributed to the bankruptcy — the new Netpulse will be reverting to its original business plan: to sell Netpulse Stations.
But before selling new stations, Netpulse LLC's first order of business is to restore service to existing customers. Proulx's purchase has given him the existing Netpulse network and the clubs that were with the original Netpulse company — clubs that have been without service since February.
“We really want to take this one step at a time and grow [the company] properly,” emphasized Handlesman. “It [customer service] is one of the things we really do pride ourselves on, and this whole entire merger/bankruptcy period really hurt that, and we want to make sure that our clients know that we are firmly committed to giving them the customer service they expect….”
Once Netpulse has served existing clients, the company can turn its attention to new customers. In addition to selling stations, Netpulse will charge clients a monthly service fee to cover the cost of Internet connections, technical support, network monitoring, and software license fees and upgrades that are necessary to run the equipment and the network.
Considering that the company had once promised free products, won't prospects and customers object to the new charges? Handlesman doesn't think so.
“You wouldn't believe how many calls we get a day from people saying, ‘Hey, we heard you were back. Can I get 10 units in my club?’” he said. “It is a thrill to see how many people are still so interested.”
Besides, charging is the only way to support the company. “Our business model going forward is based on the principle that everyone pays his own way…,” Proulx said in the release. “With each fitness center customer covering its own true costs of running the Netpulse Network, Netpulse LLC will have a viable business from day one.”
Still, Netpulse won't completely abandon the online advertising model that, at one point, was supposed to support the Netpulse giveaway. However, this advertising won't be the primary business model; instead, it will help to keep the cost of the equipment down.
“Most companies that don't have dual revenue streams have to charge a large fee to make up for the lack of any other sale,” Handlesman said. “We can keep the cost down and give a good price for the service and equipment by having a back-end revenue stream.”
Not only does Netpulse promise a good price, but it also promises a good product with experienced backing. Many of the former Netpulse employees — mainly tech and salespeople — are back on the payroll.
“There were tremendous cultural differences between the [merged] companies,” Handlesman said. “Netpulse was a freethinking company where it didn't matter if you were an assistant or executive vice president; your ideas were put forth. E-Zone was very hierarchical…. There was no independent thought on the lower management level.
“Netpulse LLC is going back to what it originally was and that is what is going to help [it] survive.”
What About E-Zone
Tom Proulx may have bought Netpulse's assets, but what has become of the company's two former partners, Xystos and E-Zone?
Xystos is reportedly still working with 24 Hour Fitness and developing a television-viewing product for hospitals. E-Zone is also still around — but in a decidedly different form.
At one point, a group of former E-Zone principals calling themselves E3-Zone claimed ownership of E-Zone — a claim that didn't last. In the end, Cardio Theater, ClubCom and Town Sports International (TSI) combined forces to buy the E-Zone assets.
Cardio Theater's Tony de Leede told Club Industry that his company is now responsible for the E-Zone hardware, while ClubCom is handling the network content. TSI, for its part, gained ownership of its E-Zone units.
E-Zone's installation base includes nearly 400 health clubs. Like Proulx, E-Zone's new owners have dismissed the giveaway concept for a more traditional revenue model. Specifically, they will charge a fee for E-Zone services.
At press time, de Leede was traveling to meet with key E-Zone customers to discuss the new business model. Whether the E-Zone name will remain was not yet decided.
--Jerry Janda, Editor-in-Chief