YNOT – Blaming increased scrutiny by MasterCard and “a combination of things stemming from the raid in 2010,” adult video-on-demand network HotMovies.com on Monday shuttered about 90 percent of the white-labeled online theaters it operates for other companies.
The raid, mentioned briefly in a posting to HotMovies’ Facebook page, took place in late October 2010 at the Philadelphia corporate headquarters of parent company National A-1 Advertising Inc. Over the course of two days, federal agents and local police seized records and other materials relating to the operation of another National A-1 property, Escorts.com. In November 2011, National A-1 and a sister company pleaded guilty to money laundering, forfeited $4.9 million and paid a $1.5 million fine as a result of charges filed after the raid. Federal authorities reserved the right to file additional charges.
At the moment, HotMovies appears more concerned about the MasterCard wrinkle.
“MasterCard has begun to enforce longstanding rules and regulations on processing transactions and URLs,” a notice posted to the website of the company’s affiliate program, MovieDollars stated. “Due to their rules, we can no longer offer affiliate-owned URLs on custom theaters.”
The notice proposed one circumstance in which HotMovies might continue to operate custom theaters on their own URLs:
“As of today, we are no longer offering the option to have custom URLs associated with white-label theaters, unless the URL can be transferred to our ownership and we feel there is potential for significant earnings.”
The notice indicated any domains transferred to HotMovies would be returned to the previous owner upon request “at any time.”
The custom VOD theaters did not entirely disappear, but owners will need to forward their URLs to a subdomain owned by HotMovies.
“All theaters will now exist on ct.vod.com,” the notice stated. “All end-users are still assigned to your theater and your affiliate ID. Only the address bar is changing.
“We are also taking this time to eliminate underperforming theaters,” the notice continued. “Any theater that didn’t make a minimum [in monthly revenue] is now redirected to one of our default custom theaters. Those theaters will continue to have the affiliate ID on the links, but no longer exist in our system [as white-labeled sites].”
Within hours, competitor GameLink stepped in with an offer for affiliates affected by HotMovies’ decision.
“GameLink is here to assist all affiliates affected by this very sudden development,” said Jeff Dillon, director of online sales for GameLink parent company Private Media Group. “I would never wish this kind of situation on anyone, be it a competitor or not. However, my biggest concern is for all of the site owners who lost their revenue and are trying to work out the next step.
“We are offering immediate help and will build their custom theater at no cost to them, plus offer double commissions [during] all of February to help compensate for the loss due to this major setback.”
Private is not without problems of its own. In November, NASDAQ suspended Private’s trading privileges and is in the process of permanently delisting the Barcelona-based company amid concerns about corporate leadership and financial health. Private, in receivership by order of a Nevada court, recently ousted all but one member of its board of directors after a U.S. federal judge ordered the company to hold a new corporate election. Among those given the boot was Berth Milton, Private’s embattled former chairman and chief executive officer and the son of the company’s founder.
