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TABLE OF CONTENTS
NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year Ended March 31, 2009

Commission File Number: 0-23697

NEW FRONTIER MEDIA, INC.
(Exact name of registrant as specified in its charter)

Colorado (State of Incorporation)	84-1084061 (I.R.S. Employer I.D. Number)
7007 Winchester Circle, Suite 200, Boulder, CO 80301 (Address of principal executive offices and Zip Code)
(303) 444-0900 (Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock par value $.0001	The Nasdaq Stock Market, LLC
Rights to Purchase Series A Junior Participating Preferred Stock

         Securities registered pursuant to Section 12(g) of the Exchange Act: None.

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o YES    ý NO

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o YES    ý NO

         Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: ý YES    o NO

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o YES    o NO

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:    o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer ý Non-Accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The aggregate market value of the Registrant's common stock held by non-affiliates of the Registrant as of September 30, 2008 was approximately $52,549,000, based on the closing price of the common stock as reported on the NASDAQ Global Select Market on such date.

         The Registrant had 19,494,038 shares of its common stock outstanding on June 4, 2009.

Documents Incorporated by Reference

         The information required in response to Part III, Items 10-14, of Form 10-K is hereby incorporated by reference from the Registrant's Definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days of March 31, 2009 with respect to the Registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

NEW FRONTIER MEDIA INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2009

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business	1
	Executive Officers of the Registrant	9
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	20
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	50
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions and Director Independence	50
Item 14.	Principal Accountant Fees and Services	50
PART IV.
Item 15.	Exhibits and Financial Statement Schedules	51
Signatures		55
Table of Contents to Financial Statements		F-1

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PART I.

Forward-Looking Statements and Other Information

        This Annual Report on Form 10-K of New Frontier Media, Inc. and its consolidated subsidiaries, or the Company or the Registrant, and the information incorporated by reference includes forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding trend analysis and the Company's expected financial position and operating results, its business strategy, its financing plans and the outcome of contingencies are forward-looking statements. Forward-looking statements are also identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "could," "will," "would," "will be," "will continue," "will likely result," "are optimistic that," and similar expressions. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward looking statements. Some of these risks are detailed in Part I, Item 1A, Risk Factors and elsewhere in this Form 10-K.

        Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

        Registered trademarks identified herein that are not expressly stated to be the property of the Company are the property of the respective owners of such marks.

ITEM 1.    BUSINESS.

GENERAL

        We are a leader in transactional television and the distribution of independent and general motion picture entertainment. Our Company is organized into the four reporting segments that are discussed below in detail. Our Transactional TV segment delivers nine full-time transactional adult-themed pay-per-view, or PPV, networks to cable and satellite operators throughout the U.S. and Latin America. We are also a leading provider of video-on-demand, or VOD, adult content on cable and satellite platforms in the U.S., Canada, Latin America and Europe. Our PPV and VOD services reach over 190 million network homes domestically and an additional 22 million network homes internationally. Depending on the technological sophistication and geographic location of our customers, we have the ability to provide our customers with either PPV services, VOD services, or a combination of both PPV and VOD services. The Transactional TV segment does not produce the content it distributes to its customers.

        Our Film Production segment produces original motion pictures and events that are distributed in the U.S. and internationally on premium movie channels, such as Cinemax® and Showtime®. This segment also distributes its produced content to many of the same VOD and PPV customers that conduct business with our Transactional TV segment. The content produced by the Film Production segment primarily includes two broad categories of content: 1) erotic thrillers, and 2) horror films. Through Lightning Entertainment Group, the Film Production segment also represents the work of a full range of independent mainstream film producers in markets throughout the world. From time to time, this segment also provides contract production services to major Hollywood studios.

        Our Direct-to-Consumer segment generates revenue primarily through the distribution of content through its consumer websites. The Direct-to-Consumer segment also launched a new product offering in early fiscal year 2009 for the distribution of Internet Protocol Television, or IPTV, via a set-top box. Because of lower than expected subscriber additions for the IPTV service and other considerations during the second half of fiscal year 2009, we reduced the resources allocated to new product offering operations. We will continue to offer the IPTV service on a limited basis.

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        Our Corporate Administration segment includes costs that are not directly associated or allocated to the other operating segments.

TRANSACTIONAL TV SEGMENT

        The Transactional TV segment generated the majority of its revenue in fiscal year 2009 through the distribution of adult entertainment content on VOD platforms. VOD distribution primarily occurs through cable multiple system operators, or MSOs, and telephone company operators that also provide television services. VOD presents viewers with layered menus, similar to what is traditionally found in hotel room television offerings. These menus allow users to interactively select a movie or event and then view it immediately or at a later time once the transaction has been executed. VOD tends to have a more accretive impact on our Transactional TV segment's business relative to our PPV offering because of the variety of content available through VOD platforms and because of the flexibility VOD provides in viewing times.

        Our Transactional TV segment also distributes adult entertainment programming to cable and satellite television companies through nine 24/7 PPV channels. These cable and satellite television providers receive our broadcast channels and then distribute the content to consumers on a PPV basis. PPV offers consumers access to a timed block of programming—for example, a movie or an event—for a set fee payable to the cable or satellite providers. Our PPV programming is offered on linear channels that are available to viewers through the same electronic program guides that display basic cable channels. A PPV transaction allows access to the purchased content for a given period of time and is executed either by telephone or instantly through the use of the viewers' remote control. Some of our distributors also offer our Transactional TV segment's channels on a monthly subscription basis. However, the large majority of the PPV revenue we generate is based on individual title purchases, and subscription revenue represents a small portion of the segment's total PPV revenue.

        We earn a percentage of the revenue, or "split", from our content for each VOD or PPV transaction that is purchased on our customer's platform. Our Transactional TV segment's products typically retail for a price between $10.99 and $14.99 for a single movie or event as determined by our customers with input from us.

        We believe our VOD and PPV programming provides an attractive alternative to other forms of entertainment because it is offered conveniently in the comfort of users' homes and in quality definition. During our fiscal years ended March 31, 2009, 2008 and 2007, 81%, 73%, and 75%, respectively, of our consolidated revenue was attributed to our Transactional TV segment. Our Transactional TV segment distributes content to nearly every television provider in the United States including:

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the two largest providers of direct broadcast satellite, or DBS, services in the U.S.; and

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the top ten largest operators of cable television systems in the U.S.

        For most of its history, the Transactional TV segment has been focused on growing its distribution in the U.S. During fiscal year 2009, we began expanding our services into new markets in North America, Europe and Latin America. We believe that our business model, which has been proven in the U.S., can also be successful in international markets. International expansion also provides us with an opportunity to leverage our existing content libraries and technology infrastructure. Thus far, we have had success in expanding our distribution to international markets. We plan to continue to expand our footprint to new international locations and customers, and gain additional market share and shelf space in international markets where we currently distribute content. The VOD infrastructure in many of these international markets is relatively undeveloped, and we expect that the development of the VOD infrastructure will continue to offer opportunities to improve our international revenue. The revenue splits we receive internationally are typically higher than the splits we receive domestically because the international cable MSO and DBS industry has more market participants and is more

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fragmented, which provides us with better negotiating leverage. We have not historically operated internationally or dealt with international regulators, competitors or cultures and as a result, we may experience difficulties in increasing revenue from such operations while gaining experience with our international growth initiatives.

Programming Strategy

        Unlike many of our competitors, the Transactional TV segment does not produce its own content and currently has no plans to do so. We believe distributors that also produce content allocate a disproportionate share of their platform hours to company-produced content and therefore limit viewer quality and variety, which we believe is an important competitive factor in the industry. Rather than operate in this manner, our Transactional TV segment screens content from many independent producers each year. We then strategically select and license only those movie scenes and/or titles which fit into our programming strategy. The result is a wide range of premium content which, in terms of consumer purchases, consistently outperforms our competition. Research obtained from an independent media measurement firm indicated our content outperformed our competitors' content on almost every customer platform (based on revenue generated per server hour) during the most recently completed fiscal year. This research is consistent with anecdotal data that our Transactional TV segment receives from its cable and satellite customers.

        The Transactional TV segment's programming is designed to provide the widest variety of content to consumers while at the same time utilizing available titles from our content library. Because we do not duplicate titles across our channels or between PPV and VOD, we are able to give our consumers access to more unique titles, a wider variety of talent, and a greater variety of studio representation than any of our competitors. We focus on prime time viewing blocks and program specific types of content in those blocks to create an appointment-viewing calendar designed to drive viewers to traditionally less popular nights of the week for viewing adult content.

        Our programming department spends a significant amount of time and resources researching consumer choices and preferences. We periodically perform primary consumer research to understand buying habits and to obtain information on how we can best provide our consumers with an exceptional viewing experience. This research has enhanced our Transactional TV segment's performance and has assisted us in providing customer satisfaction. Additionally, we use this research to recommend changes to our customers' platforms in order to improve the overall performance of the adult content category.

Content Delivery System

        Our Transactional TV segment delivers its video programming to cable and satellite operators via satellite from our Digital Broadcast Center, or DBC, in Boulder, Colorado. The program signal is encrypted so that the signal is unintelligible unless it is passed through the properly authorized decoding devices. The signal is transmitted (uplinked) by a third party earth station to a designated transponder on a third party commercial communications satellite. The transponder receives the program signal that has been uplinked by the earth station, amplifies the program signal and then broadcasts (downlinks) the signal to commercial satellite dishes located within the satellite's area of signal coverage. The signal of the domestic satellites that we use covers the continental U.S., including Alaska, Hawaii and portions of the Caribbean Islands, Mexico, and Canada.

        Our Transactional TV segment's programming is downlinked by MSOs and DBS providers at their head-ends and uplink centers. This programming is received in the form of a scrambled signal. We provide these operators with decoder equipment which allows them to decode the signal and then re-distribute it via their own systems.

        Our Transactional TV segment maintains a satellite transponder lease agreement for one full-time digital transponder with a total bandwidth of approximately 36 MHz on the Galaxy 23 satellite. This

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transponder provides the satellite transmission necessary to broadcast our Transactional TV segment's networks.

        Our Transactional TV segment delivers its VOD service to cable MSOs via transport providers such as Comcast Media Center ("CMC"). CMC is a business unit of Comcast Cable, which is a division of Comcast Corporation ("Comcast"). CMC delivers content to headends currently serving Comcast's VOD-enabled cable systems. In addition, our Transactional TV segment has agreements with iN DEMAND L.L.C., TVN Entertainment Corporation and Global Digital Media Xchange to deliver VOD content to other cable MSOs.

Digital Broadcast Center

        The 12,000 square foot DBC allows us to ingest, encode, edit, play out, store and digitally deliver our PPV and VOD services. The DBC is also home to one of the largest digital libraries of its kind. The DBC is a scalable, state of the art infrastructure, which includes playlist automation for all channels; encoding and playout to air; a storage area network for near-line content movement and storage; archiving capability in a digital format; and complete integration of our proprietary media asset management database for playlist automation and program scheduling.

Program and Content Acquisitions

        We acquire our broadcast programming for each network by licensing rights from independent producers. These licenses generally cover a five-year term. We do not produce any of our own feature content for our adult networks. We generally acquire new premiere titles and scenes each month. In addition, we may license entire content libraries on an as-needed basis, or in order to facilitate a larger transaction. Once we license a title, it undergoes rigorous quality control processes prior to broadcast in order to ensure compliance with strict internal and external broadcasting standards. We obtain age verification documentation for each title we license in accordance with federal statutes. This documentation is maintained on site for the duration of the license term in accordance with 18 U.S.C. § 2257 and 28 C.F.R. 75 et seq.

        We maintain an office in California that (a) ensures all legal documentation is obtained for each title and scene licensed, (b) ensures acquired content is technically compliant, and (c) once the title is deemed acceptable, ships the title, related documentation and promotional content to our Boulder, Colorado location. Our Transactional TV segment's in-house programming and editing departments in Boulder conduct preliminary screening of potentially licensable content, license acceptable content, conform content into appropriate editing standards and program the monthly schedules for all networks and VOD services.

Competition

        Our primary competitor in this segment has historically been Playboy Enterprises, Inc. ("Playboy") which, through its Playboy TV® service and its Spice Digital Networks®, has a long operating history in the adult entertainment space. Over the past several years, we have been successful in competing with Playboy and we have experienced growth in our Transactional TV segment as a result of our ability to gain market share through the displacement of Playboy services. Other competitors, such as Hustler TV®, have also entered the market and are increasing competition.

        Our content has outperformed our competitors' content on the majority of DBS and MSO platforms as measured by revenue per server hour. As a result, we have been able to increase our shelf space on these platforms through incremental platform hours and the replacement of our competitors' hours. We believe that some competitors have been willing to execute contracts with distributors that contain lower revenue splits and/or provide revenue guarantees in order to obtain or retain channels and VOD platform hours. While we believe that our content continues to outperform the competition, we cannot predict whether that performance advantage will insulate us from further pressure on

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revenue splits. If our competitors continue to provide the DBS and MSO platforms lower revenue splits and if we are unable to maintain a performance advantage or cause the DBS and MSO providers to recognize the value from this performance advantage, then our customers could put additional pressure on us to lower our revenue splits. A reduction in our revenue splits would have a material adverse impact on our results of operations and financial condition.

        We also face competition in the adult entertainment market from other providers of adult programming including producers of adult content, adult internet sites, adult video/DVD rentals and sales, premium movie channels that broadcast adult-themed content, telephone adult chat lines, books and magazines aimed at adult consumers, and adult-oriented wireless services. Our Transactional TV segment also faces general competition from other forms of non-adult entertainment, including sporting and cultural events, other television networks, feature films, and other programming.

FILM PRODUCTION SEGMENT

        Our Film Production segment is a multi-faceted film production and distribution company, which we acquired late in fiscal year 2006. The Film Production segment expands our portfolio to the higher margin market for mainstream and erotic content and provides us with established relationships in international markets. Additionally, we have leveraged our existing Transactional TV segment customer relationships and deliver the Film Production segment's library of erotic and mainstream content to many of the same Transactional TV segment MSO and DBS customers.

        Our Film Production segment derives revenue from two principal businesses: (1) the production and distribution of original motion pictures such as erotic thrillers, horror movies, and erotic, event styled content ("owned content"); and (2) the licensing of third party films in international and domestic markets where we act as a sales agent for the product ("repped content"). This segment also periodically provides contract film production services to major Hollywood studios ("producer-for-hire" arrangements). Although we did not generate revenue in fiscal year 2009 from a producer-for-hire arrangement, we continue to pursue these opportunities and transactions and expect to generate revenue in fiscal year 2010 from such an arrangement.

        The film markets have been significantly impacted by the economic downturn and as a result, the Film Production segment's customers have been reducing their content acquisition budgets. We believe this is occurring because our customers are relying upon their existing libraries to reduce spending and costs. These changes significantly impacted the Film Production segment operating results during the third quarter of fiscal year 2009. As a result, we made material revisions to the segment's internal forecasts and engaged a third party valuation firm to assist us in performing a goodwill and intangible asset impairment analysis. Based on the analysis, we determined that the goodwill associated with the Film Production segment was impaired. We recorded a $10.0 million goodwill impairment charge for the quarter ended December 31, 2008 associated with this analysis. We believe that it is reasonably possible that this segment will continue to experience unfavorable economic conditions which could cause the operating results to remain depressed or decline.

        Despite a challenging outlook associated with the economic downturn, we believe the Film Production segment may be well positioned to take advantage of opportunities that might otherwise be realized by our competitors. Many of our Film Production segment competitors rely on funding through the credit markets, but the recent downturn in the economy and the credit markets has caused that funding to be significantly reduced or unavailable. Through New Frontier Media, the Film Production segment can fund owned content productions and repped content producer advances with existing cash and investments and is not required to rely on the credit markets for this funding. We believe this factor may provide the segment with opportunities during the economic downturn to execute additional production deals and represent higher quality productions. However, the overall decline in the film markets may negatively impact the number of possible opportunities, so this development may not have a meaningful positive effect on the segment's revenue.

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Owned Content

        The Film Production segment produces and distributes its owned content for three primary customer groups. The first customer group consists of cable MSO and DBS service providers. Since our acquisition of the Film Production segment, we have leveraged our existing Transactional TV segment relationships and established new customer opportunities for our Film Production segment's owned content. The owned content that is distributed through PPV appears on unbranded linear channels within the mainstream or adult PPV movie location of the platform's electronic programming guide. Content that is distributed through VOD appears within menu categories such as "uncensored." Our movies and events are sold to end users at retail prices typically ranging from $7.99 to $9.99. We receive a percentage share of the revenue derived from sales on these platforms. Revenue splits are typically higher than those earned by our Transactional TV segment due to the mainstream nature of the content. Owned content is distributed to cable MSO and DBS service providers using the DBC and transport providers as described above in the Transactional TV segment discussion.

        The second customer group for our owned content distribution consists of premium movie service providers such as Cinemax and Showtime. The premium movie service providers license and distribute the content as part of their late-night programming and within their subscription VOD product. The owned content is typically sold to these customers for a flat license fee.

        The third customer group consists of various international distributors including international premium movie service providers. These international distributors typically re-distribute the content to end-users. We also typically charge these customers a flat license fee for the owned content.

        The Film Production segment produced over 20 movies and events during fiscal year 2009 and substantially completed a thirteen episode series. The total cash outflow incurred to complete these productions in fiscal year 2009 was approximately $2.8 million. Third-party production staff is typically used to produce the Film Production segment's owned content and our employees provide in-house oversight over the critical areas of production such as scripting, casting, shoot location, and post production.

Sales Agency (Repped Content) Services

        Our Film Production segment has established relationships with independent mainstream filmmakers. We act as a sales agent for the filmmakers and license both domestic and international rights to their movies under Lightning Entertainment Group. Lightning Entertainment Group currently licenses approximately 100 titles. We also license titles under our Mainline Releasing Group.

        We earn a commission for licensing film rights on behalf of these producers. In addition, we earn a marketing fee for many titles that we represent. Each contract allows for the recoupment of any producer advances and costs incurred in preparing the title for market, including advertising costs, screening costs, costs to prepare the trailer, box art, screening material, and any costs necessary to ensure the movie is market ready.

        We generate revenue from our repped content through arrangements with mainstream distributors both domestically and internationally that deliver our content through various channels including theatrical, pay-television, free television and other similar arrangements. Through a recent arrangement, our distribution partner delivers our repped content to large retailers who sell the content through DVDs to end-user consumers. We earn a more favorable commission from these domestic sales, and we have recently re-focused our resources on this business. We also recently began distribution of repped content on VOD platforms through U.S. cable MSOs. We continue to leverage the relationships we have established through the Transactional TV segment with U.S. cable and DBS providers and have successfully launched the Film Production segment's repped content in over 11 million network homes.

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Other Revenue

        Other revenue relates to amounts earned through producer-for-hire arrangements, music royalty fees and the delivery of other miscellaneous film materials to customers. Through our producer-for-hire arrangements, we provide services and incur costs associated with the film production, and we earn a fee for our services once the film has been delivered to the customer. Although we maintain no ownership rights for the produced content, we are responsible for the management and oversight of the project and incur significant economic risk until the project is completed. The gross margins we generate from producer-for-hire arrangements are less than the returns we generate from our owned content and have historically been between 10% and 15% of net revenue; however, we cannot reasonably predict whether the gross margins we receive will continue to be similar to those generated historically. We did not recognize revenue during fiscal year 2009 from a producer-for-hire arrangement, but we do expect to recognize revenue during fiscal year 2010 from such an arrangement.

Competition

        For our owned content, we compete primarily with one small, privately-owned company and other branded content such as Girls Gone Wild® and Jerry Springer® Uncensored. With respect to our sales agency business, we compete with approximately 30 privately-owned companies. We compete with these companies based on licensing fees charged, content quality, ability to deliver our products on-time, relationships with decision makers in the industry, and the professionalism of our sales team.

DIRECT-TO-CONSUMER SEGMENT

        Our Direct-to-Consumer segment derives revenue primarily through subscriptions to its consumer websites. Content for the websites is obtained through licensing agreements executed by our Transactional TV segment for broadcast rights. Traffic to our consumer websites is primarily derived through either a targeted network of affiliates that earn a referral fee from us when diverted traffic converts into paying members, or "type-in" traffic in which users navigate directly to the sites by typing the addresses into their web browsers.

        This segment also launched a test initiative related to the development of a set-top box and IPTV business model. During January 2008, we acquired certain intellectual property rights to an internet protocol set-top box. Through the set-top box, consumers can access content through the internet and view the content on their television. Based on lower than expected subscriber additions for the IPTV test business model and other factors considered during the second half of fiscal year 2009, we reduced the resources allocated to the related new product offering operations.

Competition

        The adult internet industry is highly competitive and highly fragmented given the relatively low barriers to entry. Recently, the introduction of a large number of free content sites that allow users to access large libraries of content has created an even more challenging environment.

OTHER INFORMATION

Customer Concentration

        We derived 65% of our total revenue for the fiscal year ended March 31, 2009 from Comcast, DIRECTV Group ("DirecTV"), DISH Network ("DISH"), and Time Warner Cable Inc. ("Time Warner"). We generate revenue from these customers through our Transactional TV and Film Production segments. The loss of any of these major customers would have a material adverse effect on these segments and our Company as a whole. Specific financial information about the total revenue and outstanding accounts receivable from each of our major customers is incorporated by reference

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herein to Note 12—Major Customers within the Notes to the Consolidated Financial Statements included herein.

Employees

        As of March 31, 2009, we had approximately 160 employees located only in the United States. Our employees are not members of a union, and we have never suffered a work stoppage.

Financial Information about Segments and Geographic Areas

        Our revenue is primarily derived from customers located in the United States. Financial information about segments and geographic areas is incorporated herein by reference to Note 11—Segment and Geographic Information within the Notes to the Consolidated Financial Statements included herein.

Seasonality

        Although we do not consider our business to be highly seasonal, our Film Production segment sales team attends a large proportion of film trade shows just prior to and during the third fiscal quarter. In the 2008 and 2007 fiscal years, we executed contracts that represented material revenue for the segment at those tradeshows. We were able to subsequently deliver the related content for those contracts in the third fiscal quarter and as a result, our Film Production segment experienced higher revenue in that quarter. During the current fiscal year ended March 31, 2009, the Film Production segment's third fiscal quarter revenue was significantly lower than previous quarters as a result of the deterioration in film markets. We believe that it is reasonably possible that the film markets will continue to experience unfavorable economic conditions which could cause the Film Production segment's revenue to remain depressed or decline.

Intellectual Property

        During fiscal year 2008, we acquired certain intellectual property rights associated with set-top box equipment that provides customers with IPTV and other new product development. We will seek to protect our intellectual property rights. Despite our efforts, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. Policing unauthorized use of our rights is difficult. Additionally, third parties might independently develop technologies that are substantially equivalent or superior to our technologies.

Government Regulation

        Our Company is regulated by governmental authorities. We have historically operated only in the United States and so we were only regulated by domestic authorities. However, because we have expanded to international markets, we must comply with diverse and evolving regulations both domestically and internationally. Regulation relates to, among other things, licensing, access to satellite transponders, foreign investment, use of confidential customer information and content, including standards of decency and obscenity. Changes in the regulation of our operations or changes in interpretations of existing regulations by courts or regulators or our inability to comply with current or future regulations could have a material adverse impact on our financial position and results of operations.

Available Information

        We file annual, quarterly and current reports, and amendments thereto, with the Securities and Exchange Commission ("SEC") under Section 13(a) of the Securities Exchange Act of 1934. We make these reports available free of charge on or through our Internet website, www.noof.com, as soon as

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reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. Information on our website should not be considered to be a part of this report or any other SEC filing unless explicitly incorporated by reference herein. You may request a copy of these filings at no cost. Please direct your requests to:

New Frontier Media, Inc.
Attn: CFO
7007 Winchester Circle Suite 200
Boulder, CO 80301

        You can also read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site (www.sec.gov) that contains our reports, proxy and information statements and other information that we file electronically with the SEC.

EXECUTIVE OFFICERS OF THE REGISTRANT.

        Our executive officers are as follows:

Name	Age		Position
Michael Weiner		66	Chairman of the Board, Chief Executive Officer and Secretary
Ken Boenish		42	President
Marc Callipari		41	General Counsel
Scott Piper		46	Chief Technology and Information Officer
Grant Williams		33	Chief Financial Officer

        Michael Weiner.    Mr. Weiner was appointed President of New Frontier Media in February 2003 and was then appointed to the position of Chief Executive Officer in January 2004. Prior to being appointed President, he held the title of Executive Vice President and co-founded the Company. As Executive Vice President, Mr. Weiner oversaw content acquisitions, network programming, and all contract negotiations related to the business affairs of the Company. In addition, he was instrumental in securing over $20 million to finance the infrastructure build-out and key library acquisitions necessary to launch the Company's television networks. Mr. Weiner's experience in entertainment and educational software began with the formation of Inroads Interactive, Inc. in May 1995. Inroads Interactive, based in Boulder, Colorado, was a reference software publishing company dedicated to aggregating still picture, video, and text to create interactive, educational-based software. Among Inroads Interactive's award winning releases were titles such as Multimedia Dogs, Multimedia Photography, and Exotic Pets. These titles sold over 1 million copies throughout the world through its affiliate label status with Broderbund Software and have been translated into ten different languages. Mr. Weiner was instrumental in negotiating the sale of Inroads Interactive to Quarto Holdings PLC, a UK-based book publishing concern. Prior to Inroads Interactive, Mr. Weiner was in the real estate business for 20 years, specializing in shopping center development and redevelopment in the Southeast and Northwest United States. He was involved as an owner, developer, manager, and syndicator of real estate in excess of $250 million.

        Ken Boenish.    Mr. Boenish is a 20-year veteran of the cable television industry. In October 2000, he was named President of the Transactional TV segment and in June 2005 he was named President of New Frontier Media. Mr. Boenish joined New Frontier Media as the Senior Vice President of Affiliate Sales in February 1999. Prior to joining the Company, Mr. Boenish was employed by Jones Intercable ("Jones") from 1994 to 1999. While at Jones he held the positions of National Sales Manager for Superaudio, a cable radio service serving more than 9 million cable customers. He was promoted to Director of Sales for Great American Country, a then new country music video service, in 1997. While

9

at Great American Country, Mr. Boenish was responsible for adding more than 5 million new customers to the service while competing directly with Country Music Television, a CBS cable network. From 1988 to 1994 he sold cable television advertising on systems owned by Time Warner, TCI, COX, Jones, Comcast and other cable systems. Mr. Boenish holds a bachelors degree from St. Cloud State University.

        Marc Callipari.    Mr. Callipari joined New Frontier Media in August 2006 as the Vice President of Legal Affairs and shortly thereafter was promoted to General Counsel. He is responsible for New Frontier's legal and human resources functions. Mr. Callipari started his legal career over 14 years ago in Washington, D.C. where he practiced commercial litigation from 1994 to 1999 with a large, international law firm and a boutique litigation firm. More recently, he served as captive outside and then in-house counsel to Level 3 Communications, an unaffiliated international communications company, from 1999 to 2006, where he was responsible for a wide range of world-wide litigation and transactional matters, including the negotiation of several multi-million dollar telecommunication infrastructure asset purchases and sales. He graduated from the University of San Diego School of Law in 1994, is a member of the Colorado, Virginia and District of Columbia Bars and has been admitted to practice before numerous federal courts throughout the United States.

        Scott Piper.    Mr. Piper joined New Frontier Media in February 2007 as Chief Technology and Information Officer. Mr. Piper has been an information technology professional for approximately 20 years and has held senior leadership roles for the past 12 years. He has extensive experience in infrastructure design and delivery for large scale enterprises, including the implementation of over fifteen customer contact centers, some with as many as 1,500 seats. He was responsible for one of the first successful large voice over internet protocol ("VoIP") contact centers in the U.S. Prior to joining New Frontier Media, Mr. Piper was employed from 1994 to 2006 by EchoStar Satellite L.L.C. While employed in a variety of roles during his tenure at EchoStar, he most recently held the title of Vice President of IPTV. Mr. Piper was responsible for the launch of DISH Network's web based entertainment portal prior to his departure. Mr. Piper holds a Bachelor of Science in Marketing and Finance from the University of Colorado and a Masters in Science in Telecommunications from the University of Denver.

        Grant Williams.    Mr. Williams has served as Chief Financial Officer since April 2008. Mr. Williams served as the Corporate Controller of New Frontier Media from October 2006 until April 2008. From February 2004 until October 2006, Mr. Williams was employed by eFunds Corporation (which was subsequently acquired by Fidelity National Information Services, Inc.) and served in various senior manager roles, including management of Securities and Exchange Commission filings and correspondence; financial contract management for significant transactions including business acquisitions, business dispositions, and debt financing; and financial management and analysis of the company's corporate costs. Prior to February 2004, Mr. Williams was employed by Ernst and Young, LLP as a manager within the assurance and advisory services group. Mr. Williams holds a Bachelor of Accountancy from the University of Oklahoma and is a Certified Public Accountant in Colorado and Arizona.

ITEM 1A.    RISK FACTORS.

The loss of any of our current major customers, or our inability to maintain or negotiate at renewal or otherwise favorable contractual terms with these customers, could have a material adverse effect on our financial position and results of operations.

        We have agreements with the ten largest U.S. cable MSOs and two largest U.S. DBS providers. For our fiscal year ended March 31, 2009, the aggregate revenue we received from our major customers (customers that account for 10% or more of our consolidated revenue, namely Comcast, DISH, DirecTV and Time Warner) was approximately 65% of our total company-wide revenue. Our

10

agreements with these operators may be terminated without penalty and with little advance notice, and as a result are sometimes subject to renegotiation during their stated term. If one or more of these cable MSO or DBS operators terminates or does not renew our agreements, or negotiates mid-term or agrees only to renew the agreements on terms less favorable than those of our current agreements (including removing or replacing with a competitive offering one or more of our channels from their platforms), our financial position and results of operations could be materially adversely effected.

We rely on third party service providers to deliver our content to our customers via satellite uplink services. If this service were disrupted, it could cause us to lose subscriber revenue and adversely affect our financial position and results of operations.

        Our satellite uplink provider's services are critical to us. If our satellite uplink provider fails to provide the contracted uplinking services, our satellite programming operations would in all likelihood be suspended, resulting in a loss of substantial revenue. If our satellite uplink provider improperly manages its uplink facilities, we could experience signal disruptions and other quality problems that, if not immediately addressed, could cause us to lose customers and the related revenue.

        Our continued access to satellite transponders is critical to us. Our satellite programming operations require continued access to satellite transponders to transmit programming to our subscribers. We also use satellite transponders to transmit programming to cable operators and DBS providers. Material limitations to satellite transponder capacity could materially adversely affect our financial position and results of operations. Access to transponders may be restricted or denied if:

•

we or the satellite owner is indicted or otherwise charged as a defendant in a criminal proceeding;

•

the Federal Communications Commission issues an order initiating a proceeding to revoke the satellite owner's authorization to operate the satellite;

•

the satellite owner is ordered by a court or governmental authority to deny us access to the transponder;

•

a governmental authority commences an investigation concerning the content of the transmissions;

•

we are deemed by a governmental authority to have violated any obscenity law; or

•

our satellite transponder provider determines that the content of our programming is harmful to its name or business.

        Our ability to convince cable operators and DBS providers to carry our programming is critical to us. We can give no assurance that we will be able to continue to obtain carriage with cable operators and DBS providers in the future.

If we are unable to compete effectively with other forms of adult and non-adult entertainment, we will not be able to sustain or increase revenue.

        Our ability to increase or sustain revenue is impacted by our ability to compete effectively with other forms of adult and non-adult entertainment. We face competition in the adult entertainment industry from other providers of adult programming, adult video/DVD rentals and sales, books and magazines aimed at adult consumers, adult oriented telephone chat lines, adult oriented internet services, including free website content services, premium movie channels that broadcast adult-themed content and adult oriented wireless services. To a lesser extent, we also face general competition from other forms of non-adult entertainment, including sporting and cultural events, other television networks, feature films, and other programming and entertainment options.

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        Our ability to compete depends on a variety of factors, many of which are outside of our control. These factors include the quality and appeal of our competitors' content relative to our offerings; the strength of our competitors' brands; the technology utilized by our competitors; the effectiveness of our competitors' sales, marketing efforts and the attractiveness of their product offerings; general consumer behaviors; and preferences on how consumers choose to spend their discretionary income.

        Our existing competitors, as well as potential new competitors, may have significantly greater financial, technical and marketing resources, as well as better name recognition than we do. This may allow them to devote greater resources than we can to the development and promotion of their product offerings. These competitors may also engage in more extensive technology research and development, and adopt more aggressive pricing policies for their content. Additionally, increased competition could result in license fee reductions, lower margins and a negative impact on our financial position and results of operations.

        The popularity and notoriety of free adult entertainment through low cost and free websites has resulted in additional pressure on our business. The quality and quantity of content available on these free and low cost websites has improved. The content we sell through the Transactional TV segment typically has a retail price between $10.99 and $14.99 and is typically less explicit than the content offered on internet websites. As a result of the recent deterioration in economic conditions, customers may view internet delivered content as a replacement to our content based on the difference in cost, edit standard and availability of certain niche content that we do not distribute. A migration of customers to internet delivered content could result in a decline in our buy rates and have a negative impact on our financial position and results of operations.

The continued addition of new competitors to our business could have a material adverse affect on our operating performance.

        We face competition from established adult video producers, as well as independent companies that distribute adult entertainment, some of which is provided for free through internet websites. These competitors may include producers such as Hustler, Wicked Pictures and Vivid Entertainment. In the event that cable and/or satellite companies seek to purchase adult video content for their VOD service directly from adult video producers or other independent distributors of such content, our VOD business is likely to suffer. In addition, increased competition in the adult category could lead to downward pressure on the license fees that our customers are willing to pay for our content.

We may incur costs to defend ourselves against legal claims initiated in connection with our distribution of adult-themed content.

        Because of the adult-oriented content that we distribute, we may be subject to obscenity or other legal claims by third parties. Our financial position and results of operations could be harmed if we were found liable for this content or if costs to defend such claims proved significant. Implementing measures to reduce our exposure to this liability may require us to take steps that would substantially limit the attractiveness of our content and/or its availability in various geographic areas, which would negatively impact our ability to generate revenue. Furthermore, our insurance may not adequately protect us against all of these types of claims.

Increased government regulation in the United States and abroad could impede our ability to deliver our content and expand our business.

        New laws or regulations, or the new application of existing laws could prevent us from making our content available in various jurisdictions or otherwise have a material adverse affect on our business, financial position and operating results. These new laws or regulations may relate to liability for information retrieved from or transmitted over the internet, taxation, user privacy and other matters

12

relating to our products and services. Moreover, the application of internet related laws governing issues such as intellectual property ownership and infringement, pornography, obscenity, libel, employment, and personal privacy is still developing.

        Cable and DBS operators could become subject to new governmental regulations that could further restrict their ability to broadcast our programming. If new regulations make it more difficult for cable and DBS operators to broadcast our programming, our financial position and results of operations could be adversely affected.

Continued imposition of tighter processing restrictions by the various credit card associations and acquiring banks could make it more difficult to generate revenue from our Direct-to-Consumer segment.

        Our ability to accept credit cards as a form of payment for our products and services is critical to our Direct-to-Consumer segment. Unlike a merchant handling a sales transaction in a card present environment, the e-commerce merchant is 100% responsible for all fraud perpetrated against them.

        Our ability to accept credit cards as a form of payment for our products and services has been or could further be restricted or denied for a number of reasons, including but not limited to:

•

excessive chargebacks and/or credits;

•

excessive fraud ratios;

•

changes in policy of the acquiring banks and/or card associations with respect to the processing of credit card charges for adult-related content;

•

a continued tightening of credit card association chargeback regulations in international areas of commerce;

•

new association requirements for new technologies that consumers are less likely to use; and

•

increases in the number of European and U.S. banks that will not accept accounts selling adult-related content.

        The Direct-to-Consumer segment currently utilizes several companies to process most of the credit cards for its services. If these credit card companies were to experience liquidity issues, become unable to process our monthly credit card transactions or unexpectedly change their credit requirements or operating procedures resulting in higher fees or reserves, it could have a material adverse effect on our financial position and results of operations.

If the credit card companies that process transactions for our Direct-to-Consumer segment experience liquidity issues or are unable to continue to operate as a going concern through the current economic downturn, we may be unable to recover funds due to us from these credit card companies.

        The credit card companies that we currently utilize to process Direct-to-Consumer segment transactions withhold a portion of the funds transacted as a reserve against future potential customer chargebacks and/or credits. These funds may not be released to the Company until up to eighteen months after we discontinue our arrangement with the related credit card processor. The total funds withheld by credit card processors at March 31, 2009 were $0.5 million and were classified within long-term assets as other assets. If our credit card processors experience liquidity issues or are unable to continue to operate as a going concern and are unable to release these funds to us, we would be required to write-off the related long-term asset balance which would have a material adverse effect on our financial position and results of operations.

13

If the Film Production segment produces, acquires or represents film content that is not well-received by our customers, we may not be able to re-coup the investments made in the film.

        We have a history of impairing titles in our content library and recoupable costs associated with our repped content when the future expected economic benefits to be derived by a particular film or event are not estimated to be sufficient to recover its related carrying value. The Film Production segment's ability to continue to create or acquire film content and obtain rights to represent content that is well-received by our customers is critical to the segment's future success. If a film produced, acquired or represented by the Film Production segment does not sell as well as anticipated, we may not be able to recover our investment in the film, including, but not limited to, the cost of producing or acquiring the film, the costs associated with promoting the film, costs associated with post-production work on the film, or advances and other recoupable costs associated with representing a film. No assurance can be given that the Film Production segment's past success in generating profits from its investment in its films will continue.

Antitakeover provisions in our Amended and Restated Articles of Incorporation, as amended, and our Rights Agreement may discourage or prevent a change of control.

        Our charter documents may inhibit a takeover or change in our control that our shareholders may consider beneficial. Provisions in our Amended and Restated Articles of Incorporation may have the effect of delaying or preventing a merger or acquisition of us, or making a merger or acquisition less desirable to a potential acquirer, even where the shareholders may consider the acquisition or merger favorable. For example, our Board of Directors, without further shareholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even with the effect of losing control to others. In addition, our Board of Directors has adopted a Rights Agreement, commonly known as a "poison pill," that may delay or prevent a change of control and may also make a merger or acquisition of us less desirable. If a change of control transaction perceived by the shareholders to be in their best interest were delayed or blocked by our protective measures, the value of an investment in our securities may be negatively impacted.

If we are not able to retain our key executives it will be more difficult for us to manage our operations and our financial position or result of operations could be adversely affected.

        With only approximately 160 employees, our success depends greatly upon the contributions of our executive officers and our other key personnel. The loss of the services of any of our executive officers or other key personnel could have a material adverse effect on our financial position and results of operations. No assurance can be given that New Frontier Media will be successful in attracting and retaining these personnel.

Our inability to identify, fund the investment in, and commercially exploit new technology could have an adverse impact on our financial position and results of operations.

        We are engaged in a business that has experienced tremendous technological change over the past several years and will likely continue to experience further changes. As a result, we face all the risks inherent in businesses that are subject to rapid technological advancement, such as the possibility that a technology that we have invested in becomes obsolete, our inability to identify in a timely manner emerging technologies that may impact our business, or technology advancement may make our offerings obsolete. In any such event, we may be required to invest significant amounts of capital in new technology. Our inability to identify, fund the investment in, and commercially exploit such new technology could have an adverse impact on our financial position and results of operations. Our ability to implement our business plan and to achieve the results projected by management will be dependent upon management's ability to predict technological advances and implement strategies to take

14

advantage of such changes. We may also experience impairments related to existing investments that we have made in new technology.

Negative publicity, lawsuits or boycotts by opponents of adult content could adversely affect our financial position and results of operations and discourage investors from investing in our publicly traded securities.

        We could become a target of negative publicity, lawsuits or boycotts by one or more advocacy groups who oppose the distribution of "adult entertainment." These groups have mounted negative publicity campaigns, filed lawsuits and encouraged boycotts against companies whose businesses involve adult entertainment. The costs of defending against any such negative publicity, lawsuits or boycotts could be significant, could hurt our finances and could discourage investors from investing in our publicly traded securities. To date, we have not been a target of any of these advocacy groups. As a leading provider of adult entertainment, we cannot assure you that we may not become a target in the future.

Because we are involved in the adult programming business, it may be more difficult for us to raise money or attract market support for our stock.

        Some banking entities, investors, investment banking entities, market makers, lenders and other service providers in the investment community may decide not to provide financing to us, or to participate in our public market or other activities due to the nature of our business, which, in turn, may adversely impact the value of our stock, and our ability to attract market support or obtain financing.

We may be unable to protect our intellectual property rights or others may claim that we are infringing on their intellectual property.

        During fiscal year 2008, we acquired certain intellectual property rights. Third parties could assert infringement claims against our business in the future. Claims for infringement of all types of intellectual property rights are a common source of litigation. Infringement claims can require us to modify our products, services and technologies or require us to obtain a license to permit our continued use of those rights. We may not be able to do either of these things in a timely manner or upon reasonable terms and conditions. Failure to do so could harm our financial position and results of operations. In addition, future litigation relating to infringement claims could result in substantial costs to us and a diversion of management resources. Adverse determinations in any litigation or proceeding could also subject us to significant liabilities and could prevent us from selling some of our products, services or technologies.

        Despite our efforts to protect our intellectual property rights, third parties may infringe or misappropriate them or otherwise independently develop substantially equivalent products and services. The loss of intellectual property protection or the inability to secure or enforce intellectual property protection could harm our business.

If we experienced system failures, the services we provide to our customers could be delayed or interrupted, which could harm our business reputation and result in a loss of customers.

        Our ability to provide reliable service largely depends on the efficient and uninterrupted operations of our Digital Broadcast Center and related systems. Any significant interruptions could severely harm our business and reputation and result in a loss of revenue and customers. Our systems and operations could be exposed to damage or interruption from fire, natural disaster, unlawful acts, power loss, telecommunications failure, unauthorized entry and computer viruses. Although we have taken steps to prevent system failures, we cannot be certain that our measures will be successful and that we will not experience service interruptions. Further, our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur.

15

Our goodwill, intangible assets and other long-lived assets may have further impairment losses.

        We conducted impairment tests of goodwill and other intangible assets as of December 31, 2008 and our annual goodwill and intangible assets impairment tests as of March 31, 2009, 2008 and 2007. We also perform quarterly analyses on the valuation of long-lived assets including our prepaid distribution rights, film library, recoupable costs and producer advances, and other long-lived assets. We recognized the following impairment charges in our statements of operations:

	Year Ended March 31,
	2009		2008		2007
Goodwill	$	10,009	$	—	$	—
Film costs		1,062		684		—
Intangible assets		938		—		—
Prepaid distribution rights		—		—		436
Other long-lived assets		235		466		97
Total impairment loss	$	12,244	$	1,150	$	533

        If our goodwill, intangible assets or other long-lived assets' future benefit does not exceed its carrying value, we may be required to further write down the related assets. Declines in the future benefits from these assets could cause us to incur additional impairment losses, which could materially effect our financial position and results of operations. The ongoing uncertainty in general economic and market conditions could increase the likelihood of additional asset impairment losses being recorded in future periods. In addition, the determination of the fair value of goodwill, intangible assets and long-lived assets is subject to a high degree of judgment and complexity and changes in the estimates used in the determination of the fair value of these assets could materially effect our financial position and results of operations.

We may pursue acquisitions, joint ventures, new services and other strategic transactions and activities to complement or expand our business and add shareholder value which may not be successful.

        Our future success may depend on opportunities to acquire or form strategic partnerships with other businesses or technologies or establish new services that could complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. We may not be able to complete such transactions or activities and such transactions or activities, if executed, could pose significant risks and could have a negative effect on our financial position and results of operations. Any transactions or activities that we are able to identify and complete may involve a number of risks, including:

•

the diversion of our management's attention from our existing business to integrate the operations and personnel of the acquired, combined or created business or joint venture;

•

the diversion of our management's attention from existing business to create new services;

•

possible adverse effects on our financial position and results of operations during the integration process or implementation process; and

•

the inability to achieve the intended objectives of the transactions or activities.

        In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations, employees or activities. We may not be able to maintain uniform standards, controls, procedures and policies, and this may lead to operational inefficiencies.

        New acquisitions, joint ventures, new services and other transactions may require the commitment of significant capital that would otherwise be directed to investments in our existing businesses or be

16

distributed to shareholders. Commitment of this capital may cause us to defer or suspend any common stock dividends or share repurchases that we otherwise may have made.

Current market volatility and difficult economic conditions may materially and adversely impact our business and results of operations.

        The global capital and credit markets have deteriorated significantly in recent months, resulting in the failure of major financial institutions, the reluctance of other major financial institutions to lend money, an increase in commercial and consumer delinquencies, a lack of consumer confidence, and a widespread reduction generally of business activity. If these conditions continue, which may be likely for the foreseeable future, or worsen, our ability to borrow funds or obtain other financing on terms acceptable to us could be materially adversely affected. These conditions could also, among other things, negatively impact our customers' ability to pay us, the number of subscribers and purchasers of our products and services, and require us to increase our reserves for bad debt, the occurrence of any or all of which could materially and negatively impact our business, our financial condition and our results of operations.

        We experienced a downturn in our Film Production segment results during the third quarter of fiscal year 2009 and recorded goodwill and other impairment charges in connection with that segment's deterioration in performance related to the downturn in the economy. Our Film Production segment has also experienced difficulty in obtaining higher quality repped content because some film producers are unable to obtain financing for their film production. Additionally, the adverse economic conditions contributed to restructuring and intangible asset impairment charges during the fourth quarter of fiscal year 2009 in connection with unfavorable results connected to an IPTV test business model and other initiatives within the Direct-to-Consumer segment. Although our Transactional TV segment revenue increased in fiscal year 2009 as compared to the prior fiscal year, revenue has trended lower in the second half of fiscal year 2009 as compared to the first half of fiscal year 2009 as a result of the increasingly difficult economic conditions. If the difficult economic conditions persist or worsen, our financial condition and results of operations would also be materially adversely impacted.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

        None.

ITEM 2.    PROPERTIES.

        We use the following principal facilities in our operations. All facilities are 100% utilized.

        Colorado:    We lease space in two office buildings in Boulder, Colorado. The north Boulder facility is approximately 12,000 square feet and houses our Transactional TV segment's Digital Broadcast Center, encoding and technical operations groups, content screening, and quality control functions. Our Winchester Circle facility is approximately 18,000 square feet and is used as our corporate headquarters, as well as by our Direct-to-Consumer segment's web production department and by our Transactional TV segment's marketing, sales, branding, promotions and conforming departments.

        California:    We lease approximately 4,600 square feet in Santa Monica, California. This facility houses our Film Production segment's production and licensing business.

        We believe that our facilities are adequate to maintain our existing business activities.

ITEM 3.    LEGAL PROCEEDINGS.

        For a discussion of legal proceedings, see the Legal Proceedings discussion within Note 13—Commitments and Contingencies in the Notes to the Consolidated Financial Statements included herein and incorporated herein by reference.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        No matters were submitted for a vote of the shareholders during the fourth quarter of the fiscal year covered by this report.

17

PART II.

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

        Our common stock is traded on the NASDAQ Global Select Market under the symbol "NOOF".

        The following table sets forth the range of high and low sales prices for our common stock for each quarterly period indicated, as reported on the NASDAQ Global Select Market:

Quarter Ended	High		Low		Quarter Ended	High		Low
June 30, 2008	$	5.29	$	3.31	June 30, 2007	$	9.23	$	8.39
September 30, 2008		4.28		2.05	September 30, 2007		8.84		5.60
December 31, 2008		2.56		1.27	December 31, 2007		6.69		4.75
March 31, 2009		2.20		1.05	March 31, 2008		5.88		4.00

        The high and low sales prices per share as reported on the NASDAQ Global Select Market on June 4, 2009, were $2.25 and $1.95, respectively. As of June 4, 2009, there were approximately 4,055 beneficial owners and 173 holders of record of New Frontier Media's Common Stock.

        On December 7, 2006, the Company's Board of Directors declared a special dividend of $0.60 per share. The Company paid this dividend in February 2007 to shareholders of record on January 15, 2007. During each of the quarters in fiscal year 2008, the Company's Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock. The Company paid approximately $9.0 million in cash dividends through March 31, 2008. Additionally, as of March 31, 2008, the Company had a dividend payable of $3.0 million that was subsequently paid in April 2008. The Board of Directors did not declare a quarterly dividend during fiscal year 2009, and the payment of future quarterly dividends is at the discretion of the Board of Directors.

Issuer Purchases of Equity Securities

        In June 2008, the Company's Board of Directors extended a share repurchase plan allowing for the repurchase of approximately 1.1 million shares of common stock through June 2010. During the six month period ended September 30, 2008, the Company substantially completed the share repurchase plan and repurchased approximately 1.1 million shares for a total purchase price of approximately $4.3 million.

        On November 14, 2008, the Company entered into a Stock Purchase Agreement pursuant to which a shareholder agreed to sell and the Company agreed to purchase approximately 2.6 million shares of the Company's common stock for a cash purchase price of $1.55 per share or an aggregate purchase price for all of the shares of approximately $4.1 million. The Company funded the acquisition of the shares with available cash.

        On March 11, 2009, the Company purchased through one broker in an unsolicited single block trade approximately 0.5 million shares of its common stock for a cash purchase price of $1.30 per share, or an aggregate purchase price for all of the shares of approximately $0.7 million. The acquisition was funded with available cash. Similar to the repurchase in November 2008, the acquisition was approved by the Company's Board of Directors and was effected in a manner intended to comply with the safe harbor provisions provided by Rule 10b-18 under the Securities Exchange Act of 1934. Common stock purchases by the Company during the fourth quarter of fiscal year 2009 were as follows (in thousands, except per share amounts):

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2009		—	$	—		—		3
February 1 - 28, 2009		—		—		—		3
March 1 - 31, 2009		541		1.30		—		3
Total		541	$	1.30		—

18

Stock Performance Graph

        The following graph compares the cumulative 5-year total return provided to shareholders on New Frontier Media, Inc.'s common stock relative to the cumulative total returns of the S&P SmallCap 600 index, and a customized peer group of two companies that includes: Playboy Enterprises Inc. and Private Media Group Inc. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in the Company's common stock, in the peer group, and the index on 3/31/2004 and its relative performance is tracked through 3/31/2009.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among New Frontier Media, Inc., The S&P SmallCap 600 Index
And a Peer Group

*

$100 invested on 3/31/04 in stock or index, including reinvestment of dividends.

Copyright© 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

        The stock price performance included in this graph is not necessarily indicative of future stock price performance.

        In accordance with the rules and regulations of the SEC, the above performance graph shall not be deemed to be "soliciting material" or deemed to be "filed" with the SEC or subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of the Securities and Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended, notwithstanding any general incorporation by reference of this report into any other filed document.

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ITEM 6.    SELECTED FINANCIAL DATA.

FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)

	Year Ended March 31,
	2009(3)			2008		2007(2)		2006(1)		2005
Net sales	$	52,654		$	55,911	$	63,271	$	46,851	$	46,277
Net income (loss)	$	(5,188	)	$	8,660	$	12,309	$	11,283	$	11,122
Net income (loss) per basic common share	$	(0.24	)	$	0.36	$	0.51	$	0.49	$	0.50
Net income (loss) per diluted share	$	(0.24	)	$	0.36	$	0.51	$	0.48	$	0.48
Weighted average diluted shares outstanding		22,039			24,148		24,355		23,338		23,067
Total assets	$	68,539		$	83,661	$	88,216	$	86,765	$	60,284
Long-term liabilities	$	1,863		$	2,013	$	3,684	$	7,035	$	966
Cash dividends declared per share of common stock	$	—		$	0.50	$	0.60	$	—	$	—
Cash flows from operating activities	$	8,505		$	8,184	$	18,876	$	12,312	$	14,992

(1)

In February 2006, the Company acquired MRG Entertainment, Inc., its subsidiaries and a related company, Lifestyles Entertainment, Inc. ("MRG").

(2)

Beginning in the fiscal year ended March 31, 2007, the Company adopted the provisions of SFAS No. 123(R), Share Based Payment. See Note 3—Employee Equity Incentive Plans within the Notes to the Consolidated Financial Statements for additional information.

(3)

During the third quarter of fiscal 2009, the Company incurred a goodwill impairment charge of $10.0 million associated with the Film Production segment. See Note 5—Goodwill and Other Intangible Assets within the Notes to the Consolidated Financial Statements for additional information.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTION

        Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide the readers of our accompanying consolidated financial statements with a narrative discussion about our business. The MD&A is provided as a supplement to the consolidated financial statements and accompanying notes and should be read in conjunction with those financial statements and accompanying notes. Our MD&A is organized as follows:

•

Forward-Looking Statements.  Cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause actual results to differ materially from our historical results or our current expectations or projections.

•

Executive Overview.  General description of our business and operating segments as well as trends, challenges and growth objectives.

•

Critical Accounting Policies and Estimates.  Discussion of accounting policies that require critical judgments and estimates.

•

Results of Operations.  Analysis of our consolidated results of operations for the three years presented in our financial statements for each of our operating segments: Transactional TV, Film Production, Direct-to-Consumer, and Corporate Administration.

•

Liquidity and Capital Resources.  Analysis of cash flows, sources and uses of cash, contractual obligations, and financial position.

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FORWARD-LOOKING STATEMENTS

        This annual report on Form 10-K includes forward-looking statements. These are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from such statements. The words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "could," "will," "would," "will be," "will continue," "will likely result," "are optimistic that," and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

        Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, our ability to: 1) retain our four major customers that accounted for approximately 65% of our total revenue during the fiscal year ended March 31, 2009; 2) maintain the license fee structures currently in place with our customers; 3) compete effectively with our current competitors and potential future competitors that distribute adult content to U.S. and international cable multiple system operators ("MSOs") and direct broadcast satellite ("DBS") providers; 4) retain our key executives; 5) produce film content that is well received by our Film Production segment's customers; 6) attract market support for our stock; 7) comply with future regulatory developments; and 8) successfully compete against other forms of adult and non-adult entertainment such as adult oriented internet sites and adult oriented premium channel content. The foregoing list of factors is not exhaustive. For a more complete list of factors that may cause results to differ materially from projections, please refer to the Risk Factors section of this Form 10-K.

EXECUTIVE OVERVIEW

Overview

        We are a leader in transactional television and the distribution of independent general motion picture entertainment. Our key customers are large cable and satellite operators in the United States. Our products are sold to these operators who then distribute them to retail customers via pay-per-view ("PPV") and video-on-demand ("VOD") technology. We earn revenue through contractual percentage splits of the retail price. Our three principal businesses are reflected in the Transactional TV, Film Production and Direct-to-Consumer operating segments. Our most profitable business line has historically been the Transactional TV segment. The Film Production segment has also historically been a profitable business but during fiscal year 2009 has operated at a loss as a result of continued adverse changes in its business climate. Our Direct-to-Consumer segment operated at a loss in fiscal year 2009 as a result of costs we incurred to develop a test internet protocol television ("IPTV") business model. Based on lower than expected subscriber additions for the IPTV test business model during the second half of fiscal year 2009, we have restructured the operations of the Direct-to-Consumer segment through a planned, material reduction in the resources dedicated to test business models. Our Corporate Administration segment includes all costs associated with the operation of the public holding company, New Frontier Media, Inc., including costs such as legal and accounting expenses, human resources and training, insurance, registration and filing fees with NASDAQ, executive employee costs and the SEC, investor relations, and printing costs associated with our public filings and shareholder communications.

        The business models of each of our segments are summarized below.

Transactional TV Segment

        Our Transactional TV segment is focused on the distribution of its PPV and VOD service to MSOs and DBS providers. We earn a percentage of revenue, or "split", from our content for each

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VOD, PPV or subscription that is purchased on our customers' platform. Revenue growth occurs as we launch our services to new cable MSOs or DBS providers, experience growth in the number of digital subscribers for systems where our services are currently distributed, when we launch additional services or replace our competitors' services on existing customer cable and DBS platforms, and when our proportional buy rates improve relative to our competitors. Alternatively, our revenue could decline if we experience lower buy rates, if the revenue splits we receive from our customers decline, if additional competitive channels are added to our customers' platforms or if our existing customers remove our services from their platform.

        For most of its history, the Transactional TV segment has been focused on growing its distribution of digital TV to markets in the U.S. During fiscal year 2009, we began expanding our services into new markets in North America, Europe and Latin America. We believed that our business model, which has been proven in the U.S., would also be successful internationally. International expansion also provides us with an opportunity to leverage our existing content libraries and technology infrastructure. Thus far, we have had success in expanding our distribution to international markets. We plan to continue to expand our footprint to new international locations and customers, and gain additional market share and shelf space in international markets where we currently distribute content. The VOD infrastructure in many of these international markets is relatively undeveloped, and we expect that the development of that infrastructure will continue to offer opportunities to improve our international revenue. The revenue splits we receive internationally are typically higher than the splits we receive domestically because the international cable MSO and DBS industry has more market participants and is more fragmented which provides us better negotiating leverage. We have not historically operated internationally or transacted with international regulators, competitors or cultures and as a result, we may experience operating difficulties while gaining experience with our international growth initiatives.

        Transactional TV segment revenue during the current fiscal year as compared to the prior fiscal year experienced the following trends:

•

Revenue from our VOD service has increased due to improved content performance and from a related increase in the quantity of content available on the largest MSO platform in the U.S and the other top ten largest cable MSOs in the U.S. Our improved content performance is primarily related to new content packages and recommended changes to our customers' menu positioning. Revenue also improved from new international VOD distribution. The increase in revenue was partially offset by a decline in revenue from the second largest cable MSO in the U.S. because the operator increased the retail price of content early in fiscal year 2009 and since the economic downturn, we believe consumers are less willing to pay the higher retail price. Although our year-over-year VOD revenue has improved, we have experienced a decline in buy rates during the second half of the fiscal year as compared to the first half of the fiscal year which we believe is due to a general reduction in consumer spending from the weakening economic conditions. The weaker economic conditions could continue to cause our VOD service revenue to remain depressed or cause VOD revenue to decline further.

•

Revenue from our PPV services declined due to a reduction in revenue from the second largest DBS provider in the U.S. believed to be attributable to an increase in the number of competitors on the platform and the impact of the recent economic downturn and related reduction in consumer spending. Also contributing to the decline was lower revenue from the other top ten largest cable MSOs in the U.S. related to the economic downturn. The revenue decline was partially offset by an increase in revenue related to the addition of a new channel on the largest DBS platform in the U.S. The impact from the economic downturn could continue to cause our PPV service revenue to remain depressed or cause the PPV revenue to decline further.

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•

C-Band and other revenue declined because we ceased offering C-Band services after the service became unprofitable during the second half of fiscal year 2008. The revenue reflected in this product line now primarily reflects advertising revenue we receive for spots sold on our PPV channels.

•

Although our Transactional TV segment revenue increased in fiscal year 2009 as compared to the prior fiscal year, revenue has trended lower in the second half of fiscal year 2009 as compared to the first half of fiscal year 2009. We believe this is a result of the increasingly difficult economic conditions and related reduction in consumer spending. If the difficult economic conditions persist or worsen, our Transactional TV segment results could also be materially adversely impacted.

        Generally, we believe our business has been and we expect will continue to be impacted by the downturn in the economy. For our Transactional TV segment, we are reliant on discretionary consumer purchases of our content. When consumers spend less of their discretionary income on non-essential expenses such as our content, it adversely impacts our business. Additionally, the price point of our content is significantly higher than both mainstream content and adult content that is distributed through other less expensive and free media such as the internet. As a result, consumers that would otherwise purchase our content may opt to purchase less expensive mainstream content or obtain their adult entertainment through less expensive media such as the internet during an economic downturn. Although we believe that the deterioration in the economy has negatively impacted the Transactional TV segment's results, it is not possible for us to quantify or reasonably estimate the financial impact. We have remained focused on maintaining our competitive market position by offering a wide range of high-quality content that we believe is superior to other product offerings in the industry. We are currently in discussions with many of our largest customers to seek ways to encourage increased viewing of our content and to implement value-added offers in order for our content to be more competitive with alternative media.

        When considering the future operating results of the Transactional TV segment, we believe the following challenges and risks could adversely impact the segment's future operating results:

•

increased pressure from customers to reduce the revenue splits we receive or execute minimum guarantees or risk having those customers remove one or more channels from their platform;

•

declines in new and existing customer buys of adult TV services due to a migration to other lower cost adult services such as the internet;

•

adverse impacts to our business from a continued decline in discretionary consumer spending as a result of less favorable economic conditions;

•

increased VOD competition from established adult entertainment companies or new entrants to the category because the barriers of entry for this product line are low;

•

challenges associated with our continued expansion into international markets and our inexperience with international customers, buy rates, and consumer habits;

•

slowing growth of the overall adult entertainment category and limited incremental distribution opportunities within the U.S.; and

•

continued product commoditization.

        In addition to the above noted risks, our agreements typically allow our customers to make significant changes to our distribution (such as reduce the number of hours on the platform or remove one or more channels from the platform) and may be terminated on relatively short notice without penalty. For example, our agreement with DirecTV may be terminated upon 30 days notice to us. We are currently negotiating with DirecTV for a longer term agreement, but because revenue targets were

23

not achieved under the current agreement it is possible that they may seek to remove one or more of our channels from their platform going forward. If this occurs or if one or more of our cable MSO or DBS operators changes our distribution terms, terminates or does not renew our agreements, or does not renew the agreements on terms as favorable as those of our current agreements, our financial position and results of operations could be materially adversely affected.

        All the above mentioned challenges and risks, and others that we may not have identified, could have a material adverse impact on our business. Nevertheless, we believe that we are well positioned to mitigate the impact of these risks and challenges. However, not all the risks and challenges can be managed by us because the ultimate outcome will be decided by other parties such as our customers.

        During fiscal year 2010 and future periods, we believe that the Transactional TV segment will experience revenue growth if we can successfully manage and are not materially adversely impacted by the challenges and risks previously mentioned. We currently expect future growth in the segment to occur if we are successful with the following objectives:

•

continuing our international distribution expansion into new and existing geographic locations;

•

increasing the proportional VOD hours we receive on existing customer platforms;

•

replacing our competitors' PPV channels with our channels on both existing and new customer platforms;

•

transitioning cable MSO and DBS providers to less edited content standards;

•

improving the value proposition for customers such as including limited term internet access to our content for each PPV or VOD purchase;

•

improving the VOD user interfaces; and

•

increasing the advertising revenue we receive from our PPV channels.

Film Production Segment

        The Film Production segment has historically derived the majority of its revenue from two principal businesses: (1) the production and distribution of original motion pictures such as erotic thrillers, horror movies, and erotic, event styled content ("owned content"); and (2) the licensing of third party films in international and domestic markets where we act as a sales agent for the product ("repped content"). This segment also periodically provides contract film production services to certain major Hollywood studios ("producer-for-hire" arrangements). The film markets have been significantly impacted by the economic downturn and as a result, the Film Production segment's customers have been reducing their content budgets. These changes significantly impacted the Film Production segment operating results during the third quarter of fiscal year 2009. As a result, we made material revisions to the segment's internal forecasts and engaged a third party valuation firm to assist us in performing a goodwill and intangible asset impairment analysis. Based on the analysis, we determined that the goodwill associated with the Film Production segment was impaired. We recorded a $10.0 million goodwill impairment charge for the quarter ended December 31, 2008 associated with this analysis. We believe that it is reasonably possible that this segment will continue to experience pressure from the current unfavorable economic conditions which could cause the operating results to remain depressed or decline.

        We generate revenue by licensing our owned content for a one-time fee to premium TV services and through domestic and international distributors. Additionally, we leveraged our existing customer relationships with our Transactional TV segment customers and license the Film Production segment owned content to domestic and international cable MSO and DBS providers through revenue split arrangements that are structured in a similar manner to our Transactional TV segment agreements.

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The revenue splits we receive from cable MSO and DBS providers for the Film Production segment content is higher than the revenue split we receive for our Transactional TV segment content primarily due to the more mainstream nature of the content. However, the retail price for our mainstream content is lower than our Transactional TV segment content, and our per-buy revenue is often the same as our Transactional TV segment.

        We also generate repped revenue through sales agency arrangements whereby we earn a sales commission and market fees by selling mainstream titles on behalf of film producers. The Film Production segment has several well established relationships with certain independent mainstream filmmakers and licenses the rights to these filmmakers' movies through its Lightning Entertainment Group. Although the revenue is not yet meaningful to the Film Production segment, we have recently begun distribution of repped content titles to domestic retail DVD markets through a distribution partner. We have also recently identified another opportunity to leverage our existing Transactional TV segment customer relationships and have begun VOD distribution of the mainstream repped content through several domestic cable MSOs. We are optimistic that the mainstream repped content retail DVD and VOD distribution revenue could become more meaningful in fiscal year 2010.

        Our Film Production segment also infrequently acts as a producer-for-hire for major Hollywood studios. Through these arrangements, we provide services and incur costs associated with the film production. Once the film has been delivered to the customer, we earn a fee for our services. Although we maintain no ownership rights for the produced content, we are responsible for the management and oversight of the production. Although we did not generate revenue in fiscal year 2009 from a producer-for-hire arrangement, we continue to pursue these opportunities and transactions and expect to generate revenue in fiscal year 2010 from such an arrangement.

        Our Film Production segment results experienced some seasonality prior to fiscal year 2009 because the sales team attends a large proportion of film trade shows just prior to and during the third fiscal quarter. In the 2008 and 2007 fiscal years, we executed contracts that represented material revenue for the segment at those tradeshows. We were able to subsequently deliver the related content for those contracts in the third fiscal quarter and as a result, our Film Production segment experienced higher revenue in that quarter. During the current fiscal year ended March 31, 2009, the Film Production segment's third fiscal quarter revenue was significantly lower than the prior year third quarter results. We believe the reduction in revenue is primarily due to the deterioration in the film markets.

        Film Production segment revenue during the current fiscal year as compared to the prior fiscal year experienced the following trends:

•

Owned content revenue declined we believe primarily due to unfavorable economic conditions within the film markets. We believe the unfavorable economic conditions caused current and potential customers to reduce or eliminate acquisitions of our content in an effort to reduce spending which resulted in the execution of fewer owned content deals. We believe there is a reasonable possibility that the film markets will continue to experience pressure from the unfavorable economic conditions which could cause the Film Production segment's revenue to remain depressed or decline.

•

Repped content revenue also declined we believe primarily due to the above mentioned unfavorable economic conditions. In addition to the negative impact the economic environment is having on revenue, we are also finding it more difficult to identify repped content that is higher quality and acceptable by our distributors because we believe producers are having difficulty obtaining financing for their productions due to contracted credit markets.

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        When considering the future operating results of the Film Production segment, we believe the following challenges and risks could adversely impact this segment's operating results:

•

continuation of the unfavorable economic conditions and related reduction in our customers' acquisition budgets for our owned and repped content;

•

the identification and execution of owned content deals with premium movie channels could become less frequent;

•

adverse impacts to our business from a continued decline in discretionary consumer spending as a result of less favorable economic conditions;

•

declines in new and existing customer VOD buys of our erotic owned content due to a migration to other lower cost adult services such as the internet;

•

we are making larger producer advances and incurring more significant costs for repped content films with larger production budgets and we may be unable to recover these advances and costs through the future sale of the films; and

•

increased competition to our owned content from more explicit adult film offerings.

        The impact of these challenges and risks, and others that we may not have identified, could have a material adverse impact on our business. Nevertheless, we believe that we are well positioned to mitigate the impact of these risks and challenges. However, not all the risks and challenges can be managed by us because the ultimate outcome will be decided by other parties such as our customers.

        During fiscal year 2010 and in future periods, we will focus on improving the revenue we generate from this segment through the following strategic initiatives:

•

expanding the quantity of multi-series owned content deals with premium movie channels;

•

continuing the development of unique, original programming franchises;

•

improving the buy rates of VOD owned content on cable MSO and DBS platforms through the same methods utilized by our Transactional TV segment;

•

increasing investments in higher quality titles that we represent through Lightning Entertainment Group;

•

generating meaningful repped content revenue by distributing higher quality titles through the DVD retail market; and

•

generating meaningful repped content revenue by distributing higher quality titles through domestic cable MSOs.

Direct-to-Consumer Segment

        Our Direct-to-Consumer segment generates revenue primarily by selling memberships to our consumer websites. During fiscal year 2009, we experienced a decline in the Direct-to-Consumer segment revenue which we believe is due to a decline in consumer spending as a result of the unfavorable economic conditions as well as the availability of free and low-cost internet content. We recently launched a new version of our primary consumer website during fiscal year 2009 and are optimistic that the new primary website will result in improved performance during fiscal year 2010.

        The Direct-to-Consumer segment acquired certain intellectual property rights to an IPTV set-top box and other intangible assets in late fiscal year 2008 in an effort to expand the product lines that are delivered directly to consumers (rather than through an intermediary such as a cable or satellite operator). The intellectual property rights technology allows us to manufacture a device through which

26

consumers can obtain content directly through the internet and view the content on television. Based primarily on (a) lower than expected subscriber additions for the IPTV test business model during the second half of fiscal year 2009, (b) the significant downturn in economic conditions and related reduction in consumer spending during the second half of fiscal year 2009, and (c) slower than expected development of new product lines, we have restructured the operations of these new product lines to reduce future costs. Although we will continue to operate the IPTV business model and other new Direct-to-Consumer product lines, we intend to materially change the nature of those operations and dedicate fewer resources towards marketing these products.

Corporate Administration Segment

        The Corporate Administration segment reflects all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer operating segments. These costs include, but are not limited to, legal and accounting expenses, insurance, registration and filing fees with NASDAQ, executive employee costs, and the SEC, investor relations and printing costs associated with our public filings and shareholder communications. Our focus for this operating segment is balancing cost containment with the need for administrative support for the growth of the Company. We focus on reducing costs within this segment and expect to continue those efforts into fiscal year 2010.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The methods, estimates, and judgments that the Company uses in applying the accounting policies have a significant impact on the results that the Company reports in its financial statements. Some of the accounting policies require the Company to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. The Company bases its estimates and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company continuously evaluates its methods, estimates and judgments. The Company believes the following critical accounting policies reflect the more significant judgments, estimates and considerations used in the preparation of its consolidated financial statements:

•

the recognition of revenue;

•

the recognition and measurement of income tax expenses, assets and liabilities (including the measurement of uncertain tax positions and valuation of deferred tax assets);

•

the valuation of recoupable costs and producer advances;

•

the assessment of film costs and the forecast of anticipated revenue ("ultimate" revenue), which is used to amortize film costs;

•

the amortization methodology and valuation of prepaid distribution rights;

•

the valuation of goodwill, intangible and other long-lived assets; and

•

the valuation and recognition of share-based compensation.

        Each of these critical accounting policies is described in detail below.

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Revenue Recognition

        The Company's revenue consists primarily of fees earned through the electronic distribution of its licensed and owned content through various media outlets including MSOs, DBS providers, the internet and wireless platforms, premium movie channels, and other available media channels. Revenue also consists of fees earned through the licensing of third-party content whereby the Company acts as a sales agent for the film producer. Revenue is recognized when persuasive evidence of an arrangement exists as is typically evidenced through an executed contract, the services have been rendered or delivery conditions as described in the related contract for the completed film have been satisfied, the license period related to Film Production segment arrangements has begun and the customer can begin exploitation of the content, the fee is fixed or determinable and its collection is reasonably assured. The process involved in evaluating the appropriateness of revenue recognition involves judgment including estimating monthly revenue based on historical data and determining collectability of fees.

Transactional TV Segment VOD and PPV Services

        The Transactional TV segment's VOD and PPV revenue are recognized based on buys and monthly subscriber counts reported each month by cable MSOs, DBS providers and hospitality providers. The actual monthly sales information is not typically reported to the Transactional TV segment until approximately 30 - 90 days after the month of service. This practice requires management to make monthly revenue estimates based on the Transactional TV segment's historical experience with each customer. The revenue may be subsequently adjusted to reflect the actual amount earned upon receipt of the monthly sales reports.

Transactional TV Segment Advertising

        Revenue from the advertising of products on the Company's PPV networks is recognized upon sale of the related advertised product, as reported by the Company's third party partners. Revenue from spot advertising is recognized in the month the spot is run on the Transactional TV segment's networks.

Transactional TV Segment C-Band Services

        The Company ceased its C-Band services offering during the third quarter of fiscal year 2008. Prior to removing this product offering, C-Band network services were sold through customer subscriptions that ranged from a one month period to a three month period. Revenue associated with these services was recognized on a straight-line basis over the term of the subscription.

Film Production Segment Owned Content Licensing

        Revenue from the licensing of owned content is recognized consistent with the provisions of Statement of Position ("SOP") 00-2, Accounting by Producers or Distributors of Films. In accordance with that provision, revenue is recognized when persuasive evidence of an arrangement exists as is typically evidenced through an executed contract, the delivery conditions of the completed film have been satisfied as required in the contract, the license period of the arrangement has begun, the fee is fixed or determinable and collection of the fees is reasonably assured. For agreements that involve the distribution of content to the home video market, PPV market and VOD market, the Company is unable to determine or reasonably estimate the fees earned from customers in advance of receiving the reported earnings because the market acceptance varies unpredictably by film and from period to period. As a result, the Company's share of licensing revenue from these arrangements is not recognized until the amounts are reported by the customers.

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Film Production Segment Repped Content Licensing

        In accordance with the provisions of Emerging Issues Task Force ("EITF") Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes revenue from represented film licensing activities on a net basis as an agent. The revenue recognized for these transactions represents only the sales agency fee earned by the Company on the total licensing fee. The producers' share of the licensing fee is recorded as a liability by the Company until the balance is remitted to the producer. The agreements entered into with the producers may also provide for a marketing fee that can be earned by the Company. The marketing fee is stated as a fixed amount and is earned by the Company as collections from film licensing fees are received. The Company recognizes marketing fees as revenue when the amounts become determinable and the collection of the fee is reasonably assured.

Direct-to-Consumer Segment Membership Fees

        Revenue from membership fees is recognized over the life of the membership. The Company records an allowance for refunds based on expected membership cancellations, credits and chargebacks.

Income Taxes

        The Company makes certain estimates and judgments in determining its income tax provision expense. These estimates and judgments are used in the determination of tax credits, benefits and deductions, and the calculation of certain tax assets and liabilities which are a result of differences in the timing of the recognition of revenue and expense for tax and financial statement purposes. The Company also uses estimates and judgments in determining interest and penalties on uncertain tax positions. Significant changes to these estimates could result in a material change to the Company's tax provision in subsequent periods.

        The Company is required to evaluate the likelihood that it will be able to recover its deferred tax assets. If the Company's evaluation determines that the recovery is unlikely, it would be required to increase the provision for taxes by recording a valuation allowance against the deferred tax assets equal to the amount that is not expected to be recoverable. The Company currently estimates that its deferred tax assets will be recoverable. If these estimates were to change and the Company's assessment indicated it would be unable to recover the deferred tax assets, the Company would be required to increase its income tax provision expense in the period of the change in estimate.

        The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of tax regulations. Effective at the beginning of the first fiscal quarter of 2008, the Company adopted the provisions of Financial Accounting Standards Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax position liabilities accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This process is based on various factors including, but not limited to, changes in facts and circumstances, changes in tax law, settlement of issues under audit, and new audit activity. Changes to these factors and the Company's estimates regarding these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.

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Recoupable Costs and Producer Advances

        Recoupable costs and producer advances represent amounts paid by the Company that are expected to be subsequently recouped through the collection of fees associated with the Company's licensing of repped content. In connection with the Film Production segment's repped content operations, the Company enters into sales agency agreements whereby the Company acts as a sales agent for a producer's film ("Sales Agency Agreements"). These Sales Agency Agreements typically include provisions whereby certain costs that are incurred for promotion related activities will be paid by the Company on behalf of the producer (such as movie trailer and ad material costs). The Company may also pay the producer an advance for the related film prior to the distribution of such film. As the Company subsequently licenses the producer's film and license fees are collected, the recoupable costs and producer advances are recovered by the Company through these license fee collections. License fees typically are not paid to the producer of the related film until such recoupable costs and producer advances have been fully recovered by the Company.

        The Company evaluates recoupable costs and producer advances for impairment on a quarterly basis based on estimates of future license fee collections. An impairment of these assets could occur if Company estimates indicated that it would be unable to collect fees from the licensing of a film sufficient to recover the related outstanding recoupable costs and producer advances. During each fiscal year ended March 31, 2009 and 2008, the Company incurred impairment charges related to recoupable costs and producer advances of $0.2 million. No material impairment charges were incurred during the fiscal year ended March 31, 2007. The impairment charges are recorded in the charge for restructuring and asset impairments other than goodwill line item within the consolidated statements of operations.

Film Costs

        The Company capitalizes its share of film costs in accordance with SOP 00-2. Film costs include costs to develop and produce films, which primarily consist of salaries, equipment and overhead costs, as well as the cost to acquire rights to films. Film costs include amounts for completed films and films still in development. Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of the films. Interest expense associated with film costs is not capitalized because the duration of productions is short-term in nature. Films are typically direct-to-television in nature. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. Film costs are reviewed for impairment on a title-by-title basis each quarterly reporting period. The Company records an impairment charge when the fair value of the title is less than the unamortized cost. Examples of events or circumstances that could result in an impairment charge for film costs include (a) an unexpected less favorable film title or event performance on a MSO platform or (b) a downward adjustment in the estimated future performance of a film title or event due to an adverse change to the general business climate as was experienced during the third quarter of fiscal year 2009. Future adjustments associated with film cost valuations could have a material impact on the Company's financial position and results of operations in future periods.

        Capitalized film costs are recognized as an expense within cost of sales using the film forecast method. Under this method, capitalized film costs are expensed based on the proportion of the film's revenue recognized for such period relative to the film's estimated remaining ultimate revenue, not to exceed ten years. Ultimate revenue is the estimated total revenue expected to be recognized over a film's useful life. Ultimate revenue for new film titles and events is typically estimated using actual historical performance of comparable films that are similar in nature (such as production cost and genre). Film revenue associated with this method includes amounts from all sources on an individual-film-forecast-computation method, as defined by SOP 00-2. Estimates of ultimate revenue are reviewed quarterly and adjusted if appropriate, and amortization is also adjusted on a prospective basis for such a change in estimate. Changes in estimated ultimate revenue could be due to a variety of

30

factors, including the proportional buy rates of the content as compared to competitive content as well as the level of market acceptance of the television product.

Prepaid Distribution Rights

        The Transactional TV segments' content library consists of film licensing agreements. The Company capitalizes the costs associated with the licenses as well as certain editing costs and amortizes these capitalized costs on a straight-line basis over the term of the licensing agreement (generally 5 years). Under the applicable accounting literature, costs associated with such license agreements should be amortized using a basis that is consistent with the manner in which the related film revenue is expected to be recognized. The Company amortizes the cost of prepaid distribution rights on a straight-line basis because each usage of the film is expected to generate similar revenue and the revenue for the films is expected to be recognized ratably over the related license term. The Company regularly reviews and evaluates the appropriateness of amortizing film costs on a straight-line basis as opposed to an alternative method of amortization such as an accelerated basis. Based on these analyses, the Company has determined that the amortization of the film library costs using a straight-line basis most accurately reflects the manner in which the revenue for the related films will be recognized.

        The Company periodically reviews the content library and assesses whether the unamortized cost approximates the fair market value of the libraries based on expected forecast results. In the event that the unamortized costs exceed the fair market value of the film libraries, the Company will expense the excess of the unamortized costs to reduce the carrying value to the fair market value.

Goodwill, Intangible and Long-lived Assets

        The Company records goodwill when the purchase price of an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. SFAS No. 142, Goodwill and Other Intangible Assets, requires that goodwill not to be amortized but tested for impairment at the operating segment level on an annual basis (March 31 for the Company) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include, but are not limited to, a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment in the determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using considerations of various valuation methodologies which could include income and market valuation approaches. The income approach involves discounting the reporting unit's projected free cash flow at its weighted average cost of capital, and the market approach considers comparable publicly traded company valuations and recent merger and acquisition valuations. The analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts; estimation of the long-term rate of growth; determination of the weighted average cost of capital; and other similar estimates. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. The Company allocates goodwill to each operating segment based on the operating segment expected to benefit from the related acquisition and/or combination.

        As an overall test of the reasonableness of the estimated fair value of the reporting segments and consolidated Company, a reconciliation of the fair value estimates for the reporting segments to the Company's market capitalization was performed as of March 31, 2009. The reconciliation considered a reasonable control premium based on merger and acquisition transactions within the media and entertainment industry and other available information. Based on the reconciliation, the Company's fair value is in excess of its market capitalization and there is no indicator of additional goodwill

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impairment. A control premium is the amount that a buyer is willing to pay over the current market price of a company as indicated by the traded price per share (i.e. market capitalization), in order to acquire a controlling interest. The premium is justified by the expected synergies, such as the expected increase in cash flow resulting from cost savings and revenue enhancements.

        Other identifiable intangible assets subject to amortization primarily include amounts paid to acquire non-compete agreements with certain key executives, contractual and non-contractual customer relationships, intellectual property rights, patents and websites. These costs are capitalized and amortized on a straight-line basis over their estimated useful lives which is typically five years. Intangible asset balances are removed from the gross asset and accumulated amortization amounts in the period in which they become fully amortized and are no longer in use.

        The Company continually reviews long-lived assets that are held and used and identifiable intangible assets that are subject to amortization for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In evaluating the fair value and future benefits of such assets, the Company considers whether the estimated undiscounted future net cash flows of the individual assets is less than the related assets' carrying value and if so, the Company records an impairment loss for the excess recorded carrying value of the asset as compared to its fair value.

Employee Equity Incentive Plans

        The Company has employee equity incentive plans, which are described more fully in Note 3—Employee Equity Incentive Plans. Effective April 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123(R)"). SFAS No. 123(R) requires employee equity awards to be accounted for under the fair value method. Accordingly, the Company measures share-based compensation at the grant date based on the fair value of the award.

        Under the modified prospective method of adoption for SFAS No. 123(R), the compensation cost that the Company recognized beginning in fiscal year 2007 includes compensation cost for all equity incentive awards granted prior to but not yet vested as of April 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all equity incentive awards granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The Company uses the straight-line attribution method to recognize share-based compensation over the service period of the award.

        The Company uses the Black-Scholes option pricing model to estimate the fair value of options granted. Volatility assumptions are derived using historical volatility data. The expected term data was stratified between officers and non-officers and determined using the weighted average exercise behavior for these two groups of employees. The dividend yield assumption is based on dividends declared by the Company's Board of Directors and estimates of dividends to be declared in the future. Share-based compensation expense is based on awards ultimately expected to vest, reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience and are stratified between officers and non-officers.

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RESULTS OF OPERATIONS

Transactional TV Segment

        The following table sets forth certain financial information for the Transactional TV segment for each of the three fiscal years presented (amounts may not sum due to rounding):

		(In millions) Year Ended March 31,									Percent Change
		2009			2008(1)			2007(1)			'09 vs '08			'08 vs '07
Net revenue
	VOD	$	22.2		$	18.9		$	17.9			17	%		6	%
	PPV		19.5			20.8			26.5			(6	)%		(22	)%
	C-Band and other revenue		0.8			1.3			2.8			(38	)%		(54	)%
	Total		42.6			41.0			47.2			4	%		(13	)%
Cost of sales			11.5			11.0			11.4			5	%		(4	)%
Gross profit			31.1			30.0			35.8			4	%		(16	)%
Gross profit %			73	%		73	%		76	%
Operating expenses			9.5			8.6			8.0			10	%		8	%
Operating income		$	21.6		$	21.4		$	27.8			1	%		(23	)%

(1)

The Company has reclassified certain prepaid distribution rights amortization from the Transactional TV segment to the Direct-to-Consumer segment to conform with the current year presentation.

Net Revenue

VOD

        Revenue from the largest MSO in the U.S. increased approximately $1.2 million during the year ended March 31, 2009 due to our improved content performance and from a related increase in the quantity of content available on the platform. Also contributing to the increase was an overall performance improvement on several of the other top ten largest cable MSOs in the U.S. Our improved content performance is primarily related to new content packages and recommended changes to our customers' menu positioning. The fiscal year 2009 results also included approximately $0.9 million of incremental international revenue. These increases in revenue were partially offset by a $0.7 million decline in revenue from the second largest cable MSO in the U.S. because the operator increased the retail price of content during fiscal year 2009 and since the economic downturn, we believe consumers are less willing to purchase content at the higher retail price.

        The fiscal year 2009 results included approximately $0.9 million in additional revenue associated with settling paid and unpaid historical amounts with a domestic MSO customer. Through our monthly review procedures, we had identified inconsistent past payment trends with the related MSO and subsequently participated in a joint research analysis with the MSO to resolve the historical issues. We subsequently entered into an arrangement based on the analysis and agreed that any historical billings and payments were resolved. The settlement of the outstanding balances completed the earning process for the net balance of $0.9 million and in the fourth quarter of fiscal 2009, we concurrently recognized the amount as domestic VOD revenue. We also made recommendations to the related MSO regarding process changes to prevent similar future reporting issues, and we believe the issues that gave rise to the adjustment are isolated to the related MSO and do not expect similar future material adjustments.

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        VOD revenue within the Transactional TV segment increased during fiscal year 2008 as compared to 2007 as a result of an improvement in the performance of our content on the largest U.S. cable MSO related to modifications in the content combinations we provide on that platform.

PPV

        The decline in PPV revenue during the fiscal year ended March 31, 2009 was primarily due to a $1.7 million reduction in revenue from the second largest DBS provider in the U.S. due to an increase in the number of competitors on the platform and a reduction in consumer spending related to the economic downturn. Also contributing to the decline was lower revenue from other top ten largest cable MSOs in the U.S. also due to the economic downturn. We believe consumers that have historically purchased our content with discretionary income are reducing or eliminating their acquisition of our content or viewing adult content through less expensive alternatives such as the internet in response to the economic downturn. Partially offsetting the revenue decline was an increase in revenue of approximately $0.9 million from the addition of a new channel on the largest DBS platform in the U.S.

        PPV revenue declined during fiscal year 2008 as compared to 2007 as a result of $5.0 million of lower revenue from the second largest DBS provider in the U.S. following the renegotiation of our contract with that customer in the third quarter of fiscal year 2007. We receive a lower revenue split under the terms of the new contract. Concurrent with the renegotiation of this contract, two additional competitive channels were added to the same customer platform which also resulted in a decline in revenue. Revenue from the largest DBS platform in the U.S. was flat in fiscal year 2008 as compared to 2007. Although we added an additional channel to that platform during the third quarter of fiscal year 2008, the increase in revenue from the additional channel was offset by a reduction in the per-channel revenue we received on the platform. Our per-channel revenue declined primarily because competitive adult channels were added to the platform.

C-Band and Other Revenue

        The decline in C-Band and other revenue during the fiscal year ended March 31, 2009 was from lower C-Band revenue because we ceased offering these services during the third quarter of fiscal year 2008. C-Band and other revenue also declined during fiscal year 2008 as compared to 2007 due to customer conversions from C-Band "big dish" analog satellite systems to smaller digital DBS satellite systems, and because we ceased offering the C-Band service during the third quarter of fiscal year 2008. We ceased offering the C-Band service as a result of the continued deterioration in subscribers. We did not incur any material costs associated with removing this service offering.

Cost of Sales

        Our cost of sales primarily consists of expenses associated with our Digital Broadcast Center, satellite uplinking, satellite transponder leases, programming acquisitions, VOD transport, and amortization of content licenses. These costs also included in-house call center operations related to the C-Band services that we ceased offering during the third quarter of fiscal year 2008.

        Cost of sales increased during fiscal year 2009 due to (a) a $0.5 million increase in transport costs to support the increase in U.S. VOD distribution, (b) a $0.4 million increase in transponder costs to support additional PPV channel offerings, and (c) a $0.3 million increase in prepaid distribution amortization expense associated with licensing higher quality content to attract additional customer purchases. The increase in cost of sales was partially offset by a $0.5 million decline in costs related to the termination of the C-Band services and a reduction in employee expenses from cost reduction efforts.

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        Cost of sales was lower during fiscal year 2008 as compared to 2007 due a $0.4 million decline in expenses related to the cancellation of the transponder service used to distribute our Plz network (formerly known as Pleasure) and a $0.2 million decline in expenses from ceasing to offer our C-Band service. The decline in costs was partially offset by an increase in VOD transport fees related to the execution of a less favorable amended contract with a transport provider in early fiscal year 2008.

Operating Expenses and Operating Income

        The increase in operating expenses during the fiscal year ended March 31, 2009 was due to higher advertising and promotion costs of approximately $1.1 million which were incurred in connection with efforts to increase domestic revenue. This increase in costs was partially offset by a $0.3 million reduction in expenses associated with equipment and tenant improvement disposition and impairment charges that were incurred in the prior fiscal year but did not recur in fiscal year 2009. Operating income for the fiscal years ended March 31, 2009 and 2008 was $21.6 million and $21.4 million, respectively.

        The increase in operating expenses during fiscal year 2008 as compared to 2007 was primarily due to (a) a $0.4 million increase in costs associated with promotion and marketing activities for new channel launches, (b) a $0.2 million loss for the early disposition of equipment used within our digital broadcast center, (c) the impact from writing off $0.1 million in tenant improvements associated with a prospective facility that proved inadequate for our requirements, and (d) a $0.3 million increase in employee related costs necessary to improve the segment's IT infrastructure. The increase in expenses was partially offset by a reduction in certain prior year advertising costs that were incurred in an effort to improve buy rates on distribution platforms. Operating income for the fiscal years ended March 31, 2008 and 2007 was $21.4 million and $27.8 million, respectively.

Film Production Segment

        The following table sets forth certain financial information for the Film Production segment for each of the three fiscal years presented (amounts in table may not sum due to rounding):

		(In millions) Year Ended March 31,									Percent Change
		2009			2008			2007			'09 vs '08			'08 vs '07
Net revenue
	Owned content	$	6.7		$	8.1		$	11.1			(17	)%		(27	)%
	Repped content		1.3			2.0			2.1			(35	)%		(5	)%
	Other revenue		0.5			2.9			0.5			(83	)%		#
	Total		8.6			13.1			13.7			(34	)%		(4	)%
Cost of sales			3.6			5.9			7.0			(39	)%		(16	)%
Gross profit			5.0			7.2			6.7			(31	)%		7	%
Gross profit %			58	%		55	%		49	%
Operating expenses(1)			15.9			5.0			4.5			#			11	%
Operating income (loss)		$	(10.9	)	$	2.2		$	2.2			#			0	%

(1)

The fiscal year 2009 operating expenses include a $10.0 million goodwill impairment charge and a $1.1 million film cost impairment charge. The fiscal year 2008 operating expenses include a $0.7 million impairment charge for film costs and a net $0.2 million reversal of earn-out accrual expenses. These items are discussed in more detail below.

#

Represents an increase or decrease in excess of 100%.

35

Net Revenue

Owned Content

        The revenue decline experienced during the fiscal year ended March 31, 2009 as compared to fiscal year 2008 was due to (a) a $0.7 million decline in revenue from a large PPV aggregator that no longer distributes our content, (b) a $0.4 million decline in revenue from the largest DBS provider in the U.S. because our content was moved to a more competitive location within that provider's electronic programming guide, (c) a $0.4 million decline in certain horror film revenue generated through an arrangement with a mainstream film distributor due to less favorable film performance, and (d) a general decline in revenue believed to be due to unfavorable economic conditions in the film markets during the second half of the current fiscal year. We believe the unfavorable economic conditions caused potential customers to reduce or eliminate acquisitions of our content in an effort to reduce spending which resulted in the execution of fewer owned content deals. We believe there is a reasonable possibility that the film markets will continue to experience unfavorable economic conditions which could cause the Film Production segment's revenue to remain depressed or decline. The decline in owned content revenue during the current fiscal year was partially offset by a $0.5 million increase in revenue from new VOD distribution on U.S. cable platforms.

        The decrease in owned content revenue during fiscal year 2008 as compared to 2007 was primarily due to a decline in the number of large customer agreements that were executed during fiscal year 2008. Revenue also declined approximately $1.2 million during fiscal year 2008 due to lower revenue from a large PPV aggregator and approximately $1.1 million due to lower revenue from the largest DBS platform in the U.S. due to an unfavorable change in the license fee structure with that customer and from a change in the placement of our content on that platform's electronic platform guide. These declines in revenue were partially offset by an increase in VOD revenue of approximately $1.4 million from our distribution of content on six major U.S. cable platforms.

Repped Content

        Repped content revenue includes revenue from the licensing of film titles that we represent (but do not own) under domestic and international sales agency relationships with various independent film producers. The decline in repped content revenue during fiscal year 2009 as compared to fiscal year 2008 is believed to be due to the impact of unfavorable economic conditions on the independent film market consistent with the conditions described above within the owned content revenue discussion. The revenue from our repped content was flat during fiscal year 2008 as compared to 2007.

Other Revenue

        Other revenue relates to amounts earned through producer-for-hire arrangements, music royalty fees and the delivery of other miscellaneous film materials to distributors. Other revenue declined in fiscal year 2009 as compared to 2008 because we did not generate revenue from a producer-for-hire arrangement during the current fiscal year. The increase in other revenue during fiscal year 2008 as compared to 2007 is due to our completion of a producer-for-hire arrangement with a major Hollywood studio during that fiscal year. We will pursue producer-for-hire opportunities in the future and expect to complete a producer-for-hire production in fiscal year 2010.

Cost of Sales

        Our cost of sales is primarily comprised of the amortization of our owned content film costs as well as delivery and distribution costs related to that content. These expenses also include the costs we incur to provide producer-for-hire services. There is no significant cost of sales related to the repped content services.

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        The decline in cost of sales during fiscal year 2009 as compared to the prior fiscal year was primarily due to (a) a $2.1 million decline in costs related to a producer-for-hire deal that occurred during the prior fiscal year but did not recur during the current fiscal year, and (b) a decline in film cost amortization related to the decline in owned content revenue. Film cost amortization as a percentage of the related owned content revenue during the fiscal years ended March 31, 2009 and 2008 was 39% and 34%, respectively.

        The decline in cost of sales during fiscal year 2008 was primarily related a $3.2 million reduction in film cost amortization associated with the decline in owned content revenue and from the monetization of films that were produced after the acquisition of this segment in 2006. Films that were produced prior to the MRG acquisition typically have a higher cost of sales because they were recorded at fair value when we acquired MRG. Also contributing to the decline in film cost amortization was the delivery of older titles whose film costs had been fully amortized in prior periods. Film cost amortization as a percentage of the related owned content revenue for fiscal year 2008 and 2007 was 34% and 55%, respectively. The decrease in costs was partially offset by an increase in cost of sales from expenses realized in connection with the completion of a producer-for-hire arrangement.

Operating Expenses and Operating Income (Loss)

        Operating expenses increased during the fiscal year ended March 31, 2009 as compared to the prior fiscal year primarily due to (a) a $10.0 million goodwill impairment charge, and (b) a $1.1 million impairment charge for certain owned content film and event costs. An additional discussion of the goodwill and film cost impairment charges is provided below. The fiscal year ended March 31, 2008 operating expenses included a $0.7 million charge incurred to impair the value of two film event costs which was partially offset by the reversal of $0.2 million in net earn-out accrual expenses that had been previously accrued but were reversed because the former principals of MRG did not achieve the required performance targets. The Film Production segment incurred approximately $0.2 million of impairment charges for certain recoupable costs and producer advances that were determined to be unrecoupable in each of the fiscal years ended March 31, 2009 and 2008. The Film Production segment's operating loss was $10.9 million for the fiscal year ended March 31, 2009 as compared to operating income of $2.2 million during the fiscal year ended March 31, 2008.

        Operating expenses increased in fiscal year 2008 primarily as a result of a $0.7 million impairment charge incurred for two owned content film events. See additional discussion of the film cost impairment charges below. Operating expenses were also higher during fiscal year 2008 due to (a) a $0.2 million recoupable costs and producer advances impairment charge recorded for repped content costs that were determined to be unrecoupable, (b) a $0.2 million bad debt write-off related to an uncollectible customer account, and (c) a $0.1 million increase in trade show exhibition costs. The increase in operating expenses was partially offset by a $0.9 million decrease in costs associated with an earn-out that was incurred in fiscal year 2007 but did not recur in fiscal year 2008 because certain performance targets were not achieved in fiscal year 2008. Operating income in each of the fiscal years ended March 31, 2008 and 2007 was $2.2 million.

Goodwill and Film Cost Impairment Charge

        During the third quarter of fiscal year 2009, we determined that continued adverse changes in the business climate and material revisions to the Film Production segment's internal forecasts based on lower than expected revenue for the third quarter of fiscal year 2009 were events that could indicate that the fair value of the reporting unit was less than its carrying amount. In accordance with SFAS No. 142, the Company therefore determined an impairment test as of December 31, 2008 was appropriate and engaged an independent firm to assist in performing the impairment test. The income and market valuation approaches were considered in determining the estimated fair value of the Film Production segment. The income approach involves discounting the reporting unit's projected free cash

37

flow at its weighted average cost of capital. For the market approach, we considered comparable publicly traded company valuations and recent merger and acquisition valuations. Using these methods, we determined that the estimated fair value of the Film Production segment was less than its carrying value at December 31, 2008. As required under SFAS No. 142, we then performed additional analysis to estimate the implied fair value of goodwill. We determined the implied fair value of the goodwill by first allocating the estimated fair value of the Film Production segment to the tangible and identifiable intangible assets and liabilities of the operating segment. The excess of the estimated fair value over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Based on this analysis, we recorded a non-cash goodwill impairment charge of $10.0 million to reduce the Film Production segment's goodwill from $14.9 million to the implied fair value of goodwill of $4.9 million. The goodwill impairment was primarily due to significantly lower than expected performance of the Film Production segment during the quarter ended December 31, 2008 and a subsequent significant downward revision to the segment's three year internal forecasts. The decline in performance and estimated future internal forecasts is due to the previously discussed general deterioration in the film production and distribution markets.

        We also recorded a non-cash impairment expense during fiscal year 2009 of approximately $1.1 million associated with several Film Production segment owned content films and events. During the third quarter of fiscal year 2009 and as part of our process to continually assess the expected performance of owned content, we determined that downward adjustments to the estimated performance of films and events should be recorded as a result of adverse changes to the business climate as discussed above. As a result, we recorded an impairment charge of approximately $1.1 million representing the difference in the unamortized film costs and the estimated fair value of the films and events. This difference was recorded as an asset impairment charge within the Film Production segment's operating expenses.

        During the third quarter of fiscal year 2008, we recorded a non-cash impairment expense of approximately $0.7 million associated with two Film Production segment owned content events. The events were originally valued when we acquired MRG in 2006. During the quarter ended December 31, 2007, we obtained initial revenue data that indicated the actual performance of the events would not meet the original estimates that were established when we acquired MRG. As a result, we lowered our estimate of the expected future benefits to be derived from these events and recorded an impairment charge of approximately $0.7 million representing the difference in the unamortized film costs and the estimated fair value of the events.

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Direct-to-Consumer Segment

        The following table sets forth certain financial information for the Direct-to-Consumer segment for each of the three fiscal years presented (amounts in table may not sum due to rounding):

		(In millions) Year Ended March 31,									Percent Change
		2009(3)			2008(2)			2007(1),(2)			'09 vs '08			'08 vs '07
Net revenue
	Net membership	$	1.3		$	1.4		$	1.9			(7	)%		(26	)%
	Other revenue		0.2			0.4			0.4			(50	)%		0	%
	Total		1.5			1.8			2.3			(17	)%		(22	)%
Cost of sales			2.0			0.8			1.2				#		(33	)%
Gross profit			(0.5	)		1.0			1.1				#		(9	)%
Gross profit %			^			56	%		48	%
Operating expenses			3.3			1.2			2.0				#		(40	)%
Operating loss		$	(3.8	)	$	(0.2	)	$	(0.9	)			#		78	%

(1)

The fiscal year 2007 operating expenses include a $0.4 million impairment charge for the write-off of certain licensed content and a $0.1 million impairment charge related to the write-off of certain distribution software.

(2)

The Company has reclassified certain prepaid distribution rights amortization from the Transactional TV segment to the Direct-to-Consumer segment to conform with the current year presentation.

(3)

The fiscal year 2009 operating expenses include a $0.2 million restructuring charge associated with certain consultant contract early terminations and a $0.9 million impairment charge for intangible assets.

#

Represents an increase or decrease in excess of 100%.

^

Information is not meaningful.

Net Revenue

Net Membership

        Net membership revenue during the fiscal year ended March 31, 2009 was consistent with fiscal year 2008. Net membership revenue declined during fiscal year 2008 as compared to 2007 as a result of fewer new memberships because our resources were dedicated to rebuilding our consumer websites and as a result, our marketing efforts were not as robust.

Other Revenue

        Other revenue primarily relates to the sale of content to other webmasters, the distribution of our website to the LodgeNet Entertainment Corporation customer base, and revenue from the distribution of our content through wireless platforms. Other revenue declined during fiscal year 2009 as compared to 2008 we believe primarily because of the general economic downturn and a related reduction in spending by our customers. Other revenue was flat during fiscal year 2008 as compared to 2007.

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Cost of Sales

        Cost of sales primarily consists of expenses associated with credit card processing, bandwidth, traffic acquisition, content and depreciation of assets. These costs also include expenses incurred in connection with our test IPTV business model and other new product initiatives which primarily include employee, depreciation, amortization and travel costs.

        The Direct-to-Consumer segment's cost of sales increased during fiscal year 2009 as compared to the prior fiscal year due to additional costs incurred for the test IPTV business model.

        The Direct-to-Consumer segment's cost of sales declined by $0.4 million in fiscal year 2008 as compared to the prior fiscal year due to a $0.2 million reduction in wireless distribution expenses because we reduced the resources dedicated to wireless activities. Also contributing to the decline was lower amortization expense associated with the write-off of a licensed content library during the third quarter of fiscal year 2007.

Operating Expenses and Operating Loss

        Operating expenses increased to $3.3 million during fiscal year 2009 as compared to $1.2 million in the prior fiscal year due to the following: (a) $0.9 million in intangible asset impairment charges, (b) $0.2 million in restructuring charges associated with the early termination of certain consulting contracts, (c) $0.2 million in expenses associated with settling an outstanding claim with a vendor, and (d) an increase in operating costs associated with the set-top box initiative. See additional discussion of the intangible assets and restructuring charges below. We incurred an operating loss of $3.8 million and $0.2 million during the fiscal years ended March 31, 2009 and 2008, respectively.

        Operating expenses declined in fiscal year 2008 as compared to 2007 from a $0.6 million reduction in employee costs related to wireless activities. Operating expenses were also lower because fiscal year 2007 amounts included a $0.4 million licensed content impairment expense and a $0.1 million asset impairment expense for certain distribution software. These impairment charges did not recur in fiscal year 2008. The declines in operating expenses were partially offset by a $0.4 million increase in costs from our efforts to update and improve our consumer websites and from additional employee costs associated with efforts to establish the test IPTV business model. We incurred operating losses during the fiscal years ended March 31, 2008 and 2007 of $0.2 million and $0.9 million, respectively.

Intangible Assets and Restructuring Charges

        The Direct-to-Consumer segment acquired certain intellectual property rights to an IPTV set-top box and other intangible assets in late fiscal year 2008 in an effort to expand the product lines that are delivered directly to consumers. The intellectual property rights technology allows us to manufacture a device through which consumers can obtain content directly through the internet and view the content on television. Based primarily on (a) lower than expected subscriber additions for the IPTV test business model during the second half of fiscal year 2009, (b) the significant downturn in economic conditions and related reduction in consumer spending during the second half of fiscal year 2009, and (c) slower than expected development of new product lines, we have restructured the Direct-to-Consumer segment operations as it relates to these new product lines. Although we will continue to operate the IPTV business model and other new Direct-to-Consumer product lines, we intend to materially change the nature of those operations and dedicate fewer resources towards marketing and generating revenue for these products. Based on these events and our analysis of the future expected benefits to be derived from these assets, we determined that certain intangible assets associated with the related new product lines were impaired and recorded a $0.9 million non-cash intangible asset impairment charge. Additionally, several contracts were cancelled prior to the end of the related term in connection with the restructuring and as a result, we incurred an early contract

40

termination fee of approximately $0.2 million which was paid in April 2009. We do not expect to incur additional costs or cash outlays associated with this restructuring in the future.

Corporate Administration

        The following table sets forth certain financial information for the Corporate Administration segment for each of the three fiscal years presented:

	(In millions) Year Ended March 31,						Percent Change
	2009		2008		2007		'09 vs '08			'08 vs '07
Operating expenses	$	9.9	$	10.4	$	9.9		(5	)%		5	%

        Expenses related to the Corporate Administration segment include all costs associated with the operation of the public holding company, New Frontier Media, Inc., which are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer segments. These costs include, but are not limited to, legal and accounting expenses, human resources and training, insurance, registration and filing fees with NASDAQ, executive employee costs and the SEC, investor relations, and printing costs associated with our public filings and shareholder communications.

        Corporate administration expenses were lower in fiscal year 2009 primarily due to a $0.5 million decline in employee costs primarily related to a reduction in executive bonus accruals and from lower legal and human resource costs of $0.2 million related to organizational improvements. The reduction in costs was partially offset by an increase in third party advisor fees of approximately $0.1 million and higher stock option expenses from grants that occurred during the first quarter of fiscal year 2009.

        Corporate administration costs increased in fiscal year 2008 due to an increase in employee costs of approximately $0.8 million which included additional expenses primarily for a sales executive whose function is to sell products across all segments (these employee costs were previously associated with the wireless activities within the Direct-to-Consumer segment) and an increase in costs associated with the hiring of a chief technology and information officer in February 2007. These increases were partially offset by a $0.4 million decrease in external legal fees and a decline in bonus accruals.

LIQUIDITY AND CAPITAL RESOURCES

        Our current priorities for the use of our cash are:

•

investments in processes intended to improve the quality and marketability of our products;

•

funding our operating and capital requirements; and

•

funding, from time to time, opportunities to enhance shareholder value, whether in the form of repurchase of shares of our common stock, cash dividends or other strategic transactions, although we do not currently have foreseeable plans to participate in such opportunities.

        We anticipate that our existing cash and investments and cash flows from operations will be sufficient in the next fiscal year to satisfy our operating requirements. We also anticipate that we will be able to fund our estimated outlay for capital expenditures, new content licensing, film production costs and other related purchases that may occur in fiscal year 2010 through our available existing cash and investments, our expected cash flows from operations during the next fiscal year and available borrowing facilities.

        Our line of credit matures in July 2009. Although we have no current indication that the related bank will not extend the term of our line of credit, the recent deterioration in the credit markets could result in our inability to extend the term of the line of credit. Further, the financial institution that provided us with the line of credit recently announced that they will be selling their banking division

41

that provides us with the line of credit to another financial institution. Although we have no indication that the pending sale will impact our ability to draw down on our line of credit or result in our inability to extend the term of that line of credit beyond July 2009, it is possible that either of these events could occur. As of March 31, 2009, there is a $4.0 million outstanding balance under the existing line of credit. We have approximately $16.1 million of available cash and investments as of March 31, 2009. We believe that if (a) we are unable to draw down additional funds through our line of credit, (b) we were required to pay down the existing line of credit or (c) we were unable to extend the term of the line of credit beyond July 2009, we could sufficiently satisfy our operating requirements for at least the next twelve months utilizing our available cash, investments and estimated cash generated through operations in fiscal year 2010.

Cash Flows from Operating Activities and Investing Activities:

        Our cash flows from operating and investing activities for each of the three fiscal years presented are as follows (amounts in table may not sum due to rounding):

		(In millions) Year Ended March 31,
		2009			2008			2007
Net cash provided by operating activities		$	8.5		$	8.2		$	18.9
Cash flows from investing activities:
	Payment for business acquisitions, net of cash acquired		—			—			(0.0	)
	Purchase of marketable securities		(2.0	)		(2.8	)		(26.3	)
	Redemption of marketable securities		2.8			11.2			27.8
	Purchases of equipment and furniture		(2.7	)		(2.1	)		(1.8	)
	Purchase of intangible assets		(0.8	)		(0.4	)		—
	Payment of related party note arising from business acquisition		(0.0	)		(0.6	)		(0.6	)
Net cash provided by (used in) investing activities		$	(2.7	)	$	5.3		$	(0.9	)

Cash flows from operating activities

        The changes in cash flows from operating activities during fiscal year 2009 compared to the prior fiscal year primarily reflect the following:

•

a $5.3 million increase in cash flows from improved efficiencies related to the collection of accounts receivable in our Transactional TV and Film Production segments;

•

a $1.3 million increase in cash flows from the decline in owned content creation within the Film Production segment;

•

a $0.9 million increase in cash flows arising primarily from lower employee bonus payments made during the first quarter of fiscal year 2009 as compared to the same prior year quarter;

•

a $1.4 million decline in cash flows from recoupable costs incurred to obtain higher quality repped content to support existing repped content sales and our new initiatives to distribute repped content through retail DVD and VOD markets; and

•

a decline in cash flows primarily associated with unfavorable performance within the Film Production segment and additional spending to support the Direct-to-Consumer segment's set-top box initiative.

        Cash flows from operating activities during fiscal year 2009 were significantly higher as compared to the operating loss incurred in fiscal year 2009 as a result of non-cash goodwill, intangible and other

42

asset impairment charges. If the economic environment worsens, it is reasonably possible that we may be required to incur similar non-cash impairment charges in the future.

        The decrease in cash provided by operating activities during fiscal year 2008 as compared to 2007 is primarily related to the following:

•

a $3.6 million decrease in net income;

•

a reduction in cash flows generated by the Film Production segment as reflected in the $3.2 million decline in that segment's depreciation and amortization and the $1.5 million increase in cash used for film production; and

•

a $2.9 million impact from cash paid for employee compensation.

Cash flows from investing activities

        Cash used in investing activities was $2.7 million during fiscal year 2009. We received approximately $0.8 million of cash from net redemptions of marketable securities. Approximately $2.7 million of cash was used for capital expenditures primarily to acquire additional electronic storage equipment for our Transactional TV segment and to upgrade certain administrative hardware and software, such as our financial reporting system. We also used approximately $0.8 million to purchase intangible assets within our Direct-to-Consumer segment. We expect cash used for capital expenditures and intangible asset purchases to be lower in fiscal year 2010 and will primarily consist of purchases necessary to retain our current infrastructure service level and support the international distribution growth within the Transactional TV segment.

        The increase in cash provided by investing activities during fiscal year 2008 is primarily related to the net $8.4 million of cash received from the redemption of marketable securities. This cash was primarily used to pay quarterly shareholder dividends and for the purchase of approximately 621,000 shares of common stock at an average price of $6.24 per share through our stock repurchase program as reflected in the financing activities section of the consolidated statements of cash flows discussed below. Capital expenditures of $2.1 million primarily relate to purchases of servers and editing equipment to maintain our Digital Broadcast Center and computers, and we paid $0.4 million primarily related to our purchase of the intellectual property rights of for the IPTV set-top boxes. The related party note payable disbursements during each period presented were paid to the former principals of MRG from whom we acquired the Film Production segment.

        Net cash used in investing activities was $0.9 million in fiscal year 2007. Cash disbursements in fiscal year 2007 primarily included capital expenditures for the purchase of editing equipment, computers, servers, software, encryption equipment for new cable launches, a storage area network system, and an archival storage system. These cash disbursements were partially offset by cash receipts associated with the net redemption of $1.5 million of marketable securities.

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Cash Flows from Financing Activities:

        Our cash flows from financing activities for each of the three fiscal years presented are as follows (amounts in table may not sum due to rounding):

		(In millions) Year Ended March 31,
		2009			2008			2007
Cash flows from financing activities:
	Purchases of common stock	$	(9.1	)	$	(3.9	)	$	(2.2	)
	Payment of dividends		(3.0	)		(9.0	)		(14.6	)
	Proceeds from line of credit		4.0			—			—
	Proceeds from stock option and warrant exercises		—			0.5			2.8
	Excess tax (shortfall) benefit from option/warrant exercises		—			(0.1	)		0.8
Net cash used in financing activities		$	(8.0	)	$	(12.5	)	$	(13.2	)

        Net cash used in financing activities during fiscal year 2009 includes $9.1 million for the purchase of approximately 4.3 million shares of our common stock and $3.0 million in payments for cash dividends that were declared in the fourth quarter of fiscal year 2008 and paid in the first quarter of fiscal year 2009. We borrowed $4.0 million from our line of credit to support our working capital needs.

        Net cash used in financing activities during fiscal year 2008 reflects $9.0 million in payments for quarterly cash dividends and $3.9 million for the purchase of approximately 0.6 million shares of common stock through our stock repurchase plan. This use of cash was slightly offset by $0.5 million in proceeds from the exercise of stock options. The excess tax (shortfall) benefit relates to the tax deductions that we received upon exercise of an option by an employee or non-employee director in excess of those anticipated at the time of the option grant, and amounts were immaterial in fiscal year 2008.

        Net cash used in financing activities during fiscal year 2007 primarily includes the payment of a special dividend in the amount of $0.60 per share, or $14.6 million, in February 2007. We also used $2.2 million of cash to repurchase approximately 0.3 million shares of our common stock during the quarter ended September 30, 2006 at an average price of $8.64 per share. These cash disbursements were partially offset by $2.8 million in proceeds from the exercise of stock options during the fiscal year and an excess tax benefit of $0.8 million related to tax deductions we received upon the exercise of options by employees and non-employee directors.

Stock Repurchase and Cash Dividends

        In June 2008, our Board of Directors extended a share repurchase plan allowing for the repurchase of approximately 1.1 million shares of common stock through June 2010. During the six month period ended September 30, 2008, we substantially completed the share repurchase plan and repurchased approximately 1.1 million shares for a total purchase price of approximately $4.3 million.

        On November 14, 2008, we entered into a Stock Purchase Agreement pursuant to which a shareholder agreed to sell and we agreed to purchase approximately 2.6 million shares of our common stock for a cash purchase price of $1.55 per share or an aggregate purchase price for all of the shares of approximately $4.1 million. We funded the acquisition of the shares with available cash.

        On March 11, 2009, we purchased through one broker in an unsolicited single block trade approximately 0.5 million shares of our common stock for a cash purchase price of $1.30 per share, or an aggregate purchase price for all of the shares of approximately $0.7 million. The acquisition was funded with available cash. The acquisition was approved by our Board of Directors and was effected

44

in a manner intended to comply with the safe harbor provisions provided by Rule 10b-18 under the Securities Exchange Act of 1934.

        On December 7, 2006, our Board of Directors declared a special dividend of $0.60 per share. We paid this dividend in February 2007 to shareholders of record on January 15, 2007. During each of the quarters in fiscal year 2008, our Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock. We paid approximately $9.0 million in cash dividends through March 31, 2008. Additionally, as of March 31, 2008, we had a dividend payable of $3.0 million that was subsequently paid in April 2008. The Board of Directors did not declare a quarterly dividend during fiscal year 2009, and the payment of future quarterly dividends is at the discretion of the Board of Directors.

        Although we are under no obligation and currently have no plans to effect any further stock repurchases or dividends, we may seek to make additional repurchases from time to time as market conditions warrant, through open market purchases, negotiated transactions, or in such other manner as may be deemed appropriate by us and our Board of Directors. Additionally, we will also continue to evaluate other available methods to enhance shareholder value, whether in the form of cash dividends or otherwise.

Borrowing Arrangements

        In July 2008, we obtained a $9.0 million line of credit from a third-party financial institution. Amounts borrowed under the line of credit can be used to support our short-term working capital needs. The line of credit is secured by our trade accounts receivable and will mature in July 2009. Per the contractual loan agreement, borrowings under the line of credit are based on the greater of the current prime rate less 0.13% or 5.75%. The terms of the line of credit include certain defined negative and affirmative covenants customary for facilities of this type, and we were in compliance with the covenants at March 31, 2009. We made borrowings under the line of credit during the third quarter of fiscal year 2009 to support our working capital needs, and the outstanding balance as of March 31, 2009 was $4.0 million.

Commitments and Contingencies

Contractual Cash Obligations

        The following table reflects our contractual cash obligations as of March 31, 2009 for each of the fiscal year time periods specified (amounts may not sum due to rounding):

		Payments Due by Period (in millions):
Contractual Obligations		Total		2010		2011-2012		2013-2014		2015 and thereafter
Operating lease obligations		$	6.0	$	2.1	$	2.9	$	1.0	$	—
Vendor obligations			13.1		4.5		3.0		2.1		3.5
Line of credit			4.0		4.0		—		—		—
Employment contract obligations			7.9		4.6		3.3		—		—
	Total	$	31.0	$	15.2	$	9.2	$	3.1	$	3.5

        For the purposes of this table, contractual obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, such as fixed or minimum services to be purchased and the approximate timing of the transaction. Obligations to acquire specified quantities of movie license rights that are subject to the delivery of the related movies are included in vendor obligations because we estimate that the movies will be delivered in the specified time periods.

        We maintain non-cancelable leases for office space and equipment under various operating leases. The leases for office space expire through November 2013 and contain annual Consumer Price Index

45

escalation clauses. Our Transactional TV segment has entered into direct lease agreements that expire through December 2010 with an unrelated party for the use of transponders to broadcast its channels on satellites. As the lessee of transponders under the transponder agreements, we are subject to arbitrary refusal of service by the service provider if that service provider determines that the content being transmitted by us is harmful to the service provider's name or business. Any such service disruption would substantially and adversely affect the financial position and results of operations. We also bear the risk that the access of their networks to transponders may be restricted or denied if a governmental authority commences an investigation concerning the content of the transmissions. Additionally, cable operators may be reluctant to carry less edited or partially edited adult programming on their systems. If either of the above scenarios occurred, it could adversely affect our financial position and results of operations. We had no equipment under capital lease at March 31, 2009 or 2008.

        From time to time, we enter into arrangements with movie studios to acquire license rights for a fixed and/or minimum quantity of movies over various purchase periods as defined by the agreements. Additionally, we are party to certain uplinking, transport and marketing services that contractually obligate us to receive services over specified terms as per these arrangements. We are also obligated to make future payments associated with our purchase of intellectual property and patent rights. These contractual obligations are reflected in the above table as vendor obligations.

        We have recorded long-term income taxes payable of $0.2 million for uncertain tax positions, reduced by the associated federal deduction for state taxes. We are unable to reliably estimate the timing of future payments, if any, related to these uncertain tax positions. Therefore, the amounts have been excluded from the above table.

Uncertain Tax Positions

        In accordance with FIN No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109, we had total unrecognized tax benefits of approximately $0.2 million at March 31, 2009 that are not expected to be settled within one year and have been classified within long-term taxes payable. If we were to prevail or the uncertainties were settled in our favor for all uncertain tax positions, the net effect is estimated to be a benefit to tax expense of approximately $0.2 million. As of March 31, 2009, we had accrued immaterial amounts of interest expense related to uncertain tax position liabilities.

        During fiscal year 2009, the statute of limitations expired on approximately $1.6 million of uncertain tax positions resulting in a decline in the uncertain tax position balance as reflected in the current portion of taxes payable. This reversal of the uncertain tax positions resulted in a $0.4 million reduction in our current period tax expense and a $0.4 million reversal of related interest expense. Approximately $1.1 million of the reversal of the uncertain tax position liabilities was recorded as an increase to additional paid-in capital because the amount was originally recorded as a reduction of additional paid-in capital and had no impact on income tax expense.

        The aggregate change in the balance of the unrecognized tax benefits during fiscal year 2009 was as follows (in thousands):

Beginning balance at April 1, 2008	$	1,838
Expiration of statute of limitations in the current year		(1,598	)
Other		2
Ending balance at March 31, 2009	$	242

        We file U.S. federal and state income tax returns. During fiscal year 2009, we concluded an audit by the Internal Revenue Service ("IRS") for the fiscal year 2007 tax year, and the IRS proposed no changes to the fiscal year 2007 tax return in connection with the audit. With few exceptions, we are no

46

longer subject to examination of our federal and state income tax returns for years prior to fiscal years 2005 and 2000, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

        See Recently Issued Accounting Pronouncements in Note 1—Organization and Summary of Significant Accounting Policies within the Company's Financial Statements and Supplementary Data commencing on page F-2 herein.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        Market Risk.    The Company's exposure to market risk is principally confined to cash in bank accounts, money market accounts and certificates of deposit, which have short maturities and, therefore, minimal and immaterial market risk.

        Interest Rate Sensitivity.    Changes in interest rates could impact our anticipated interest income on cash, cash equivalents and marketable securities. An adverse change in interest rates in effect at March 31, 2009 would not have a material impact on the fair value of the marketable securities or the Company's net loss or cash flows.

        Changes in interest rates could also impact the amount of interest we pay on borrowings under our line of credit. A 10% adverse change in the interest rates on borrowings under our line of credit would not have a material impact on the Company's interest expense.

        Foreign Currency Exchange Risk.    The Company does not have any material foreign currency transactions.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The consolidated financial statements of New Frontier Media, Inc. and its subsidiaries, including the notes thereto and the report of independent accountants therein, commence at page F-2 of this Report and are incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

        None.

ITEM 9A.    CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

        Based on management's evaluation (with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO")), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

        There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this

47

report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

        Management assessed our internal control over financial reporting as of March 31, 2009, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

        Based on the assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors.

        Our independent registered public accounting firm, Grant Thornton LLP, independently assessed the effectiveness of the Company's internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

        Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

48

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

New Frontier Media, Inc. and Subsidiaries

        We have audited New Frontier Media, Inc. (a Colorado corporation) and Subsidiaries' internal control over financial reporting as of March 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). New Frontier Media, Inc. and Subsidiaries' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on New Frontier Media, Inc. and Subsidiaries' internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, New Frontier Media, Inc. and Subsidiaries maintained, in all material respect, effective internal control over financial reporting as of March 31, 2009 based on criteria established in Internal Control—Integrated Framework issued by COSO.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of New Frontier Media, Inc. and Subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2009 and our report dated June 5, 2009 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Denver, Colorado
June 5, 2009

49

ITEM 9B.    OTHER INFORMATION.

        None.

PART III.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

        Incorporated by reference to "Information about the Nominees" in the definitive proxy statement to be filed with the SEC relating to the registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

        Please see "Executive Officers of the Registrant" in Part I, Item 1 of this form.

        All of our directors, officers and employees are subject to a Code of Business Conduct and Ethics, and our financial management, including our principal executive, financial and accounting officers, are also subject to an additional Code of Ethics for Financial Management, each of which codes are available for review under the Corporate Governance link in the Investor Relations portion of the Company's website: www.noof.com. Any amendments to any of the provisions of the codes that are applicable to our principal executive, financial or accounting officers and are required under applicable laws, rules and regulations to be disclosed publicly will be posted for review in the above identified area of our website, and any waivers of such provisions or similar provisions applicable to our directors will be disclosed on Form 8-K as required by the applicable rules of The Nasdaq Stock Market, LLC.

ITEM 11.    EXECUTIVE COMPENSATION.

        Incorporated by reference to "Compensation Discussion and Analysis," "Compensation Committee Report," "Summary Compensation Table," "Grants of Plan-Based Awards," "Outstanding Equity Awards at 2009 Fiscal Year-End," "Option Exercises and Stock Vested in Fiscal 2009," "Potential Payments Upon Termination" and "Non-management Directors' Compensation for Fiscal 2009" in the definitive proxy statement to be filed with the SEC relating to the registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

        Incorporated by reference to "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance Under Equity Compensation Plans" in the definitive proxy statement to be filed with the SEC relating to the registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

        Incorporated by reference to "Certain Relationships and Related Transactions" and "Director Independence" in the definitive proxy statement to be filed with the SEC relating to the registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

        Incorporated by reference to "Audit Fees and All Other Fees" in the definitive proxy statement to be filed with the SEC relating to the registrant's Annual Meeting of Shareholders expected to be held on or about August 24, 2009.

50

PART IV.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

        The following documents are filed as part of this report:

1)    FINANCIAL STATEMENTS

        The financial statements listed in the Table of Contents to Consolidated Financial Statements are filed as part of this report.

2)    FINANCIAL STATEMENT SCHEDULES

        All schedules have been included in the Consolidated Financial Statements, Notes thereto, or Supplemental Information Schedules.

3)    EXHIBITS

Exhibit No.		Exhibit Description
	3.01	Amended and Restated Articles of Incorporation of the Company(1)
	3.02	Amended and Restated Bylaws of the Company(2)
	4.01	Form of Common Stock Certificate(3)
	4.02	Amended and Restated Rights Agreement between New Frontier Media, Inc. and Corporate Stock Transfer, Inc., as rights agent(4)
	4.03	Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, together with the related Rights Certificate, included as Appendices A and B to the Rights Agreement incorporated by reference herein as Exhibit 4.02
	10.01	Lease Agreement for premises at 5435 Airport Boulevard, Boulder CO(5)
	10.02	Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Transponder Service(6)
	10.03	Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(6)
	10.04	Amendment Number One to Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(6)
	10.05	License Agreement between Colorado Satellite Broadcasting, Inc. and Metro Global Media, Inc.(6)
	10.06	Amendment Number Two to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(7)
	10.07	Amendment Number One to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Transponder Service(8)
	10.08	Amendment Number Four to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(9)
	10.09	Office Lease Agreement between New Frontier Media, Inc. and Northview Properties, LLC(9)

51

Exhibit No.			Exhibit Description
	10.10		Lease Modification Agreement between New Frontier Media, Inc. and LakeCentre Plaza Limited, LLLP(9)
	10.11		Catalog License Agreement between Pleasure Productions, Inc. and Colorado Satellite Broadcasting, Inc.(9)
	10.12		Telecommunications Services Agreement between WilTel Communications, LLC and Colorado Satellite Broadcasting, Inc.(10)
	10.13		Amendment No. 3 to Contract Number T70112100 between Colorado Satellite Broadcasting, Inc. and Intelsat USA Sales Corp.(11)
	10.14	#	Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation(12)
	10.15	*	Summary of Director Compensation Arrangements(2)
	10.16	*	1998 Incentive Stock Plan(13)
	10.17	*	1999 Incentive Stock Plan(14)
	10.18	*	Millennium Incentive Stock Option Plan(15)
	10.19	*	2001 Incentive Stock Plan(16)
	10.20	*	2007 Stock Incentive Plan(17)
	10.21	*	Form of Award Agreements under 2007 Stock Incentive Plan(18)
	10.22	*	Amended and Restated Independent Contractor Agreement, dated November 7, 2007, between New Frontier Media, Inc. and Matthew Pullam(19)
	10.23	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Michael Weiner(2)
	10.24	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Grant Williams(2)
	10.25	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Ira Bahr(2)
	10.26	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Ken Boenish(2)
	10.27	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Marc Callipari(2)
	10.28	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Scott Piper(2)
	10.29	#	Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming by and between Colorado Satellite Broadcasting, Inc. and DirecTV, Inc.(19)
	10.30		Business Loan Agreement, as supplemented (including related Promissory Note and Commercial Security Agreement), dated July 1, 2008 between New Frontier Media, Inc. and First Community Bank(20)
	10.31		Stock Purchase Agreement, dated and effective as of November 13, 2008, by and between New Frontier Media, Inc. and Steel Partners II, L.P.(21)

52

Exhibit No.			Exhibit Description
	10.32	##	Affiliation Agreement, dated January 1, 2000 and as amended to date, between the Company and Time Warner Cable, a division of Time Warner Entertainment Company, L.P.
	10.33	##	Video On Demand License Agreement, dated March 13, 2000 and as amended to date, between the Company and Time Warner Cable, a division of Time Warner Entertainment Company, L.P.
	10.34	##	Adult VOD License Agreement, dated October 18, 2002 and as amended to date, between Colorado Satellite Broadcasting, Inc. and Comcast Cable Communications, Inc.
	10.35	##	Pleasure Service License Agreement, dated November 16, 2000 and as amended to date, between Colorado Satellite Broadcasting, Inc. and Comcast Programming, a division of Comcast Corporation
	10.36		First Amendment to Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation
	10.37	##	Second Amendment to Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation
	21.01		Subsidiaries of the Company
	23.01		Consent of Grant Thornton LLP
	31.01		CEO Certification pursuant to Rule 13a-14(a)/15d-14(a)
	31.02		CFO Certification pursuant to Rule 13a-14(a)/15d-14(a)
	32.01		Section 1350 Certification of CEO
	32.02		Section 1350 Certification of CFO

(1)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on May 9, 2007 (File No. 000-23697).

(2)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2008 (File No. 000-23697).

(3)

Incorporated by reference to the corresponding exhibit included in the Company's Registration Statement on Form SB-2 filed on September 10, 1997 (File No. 333-35337).

(4)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on August 1, 2008 (File No. 000-23697).

(5)

Incorporated by reference to the corresponding exhibit included in the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 (File No. 000-23697).

(6)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 000-23697).

(7)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 000-23697).

(8)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 (File No. 000-23697).

(9)

Incorporated by reference to the corresponding exhibit included in the Company's Annual Report filed on Form 10-K for the fiscal year ended March 31, 2004 (File No. 000-23697).

53

(10)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2004 (File No. 000-23697).

(11)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2005 (File No. 000-23697).

(12)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2006 (File No. 000-23697).

(13)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on August 7, 1998 (File No. 000-23697).

(14)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on September 28, 1999 (File No. 000-23697).

(15)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on August 29, 2000 (File No. 000-23697).

(16)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on July 23, 2001 (File No. 000-23697).

(17)

Incorporated by reference to Appendix A to the Company's definitive proxy statement filed under cover of Schedule 14A on July 16, 2007 (File No. 000-23697).

(18)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on August 24, 2007 (File No. 000-23697).

(19)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2007 (File No. 000-23697).

(20)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended June 30, 2008 (File No. 000-23697).

(21)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on November 14, 2008 (File No. 000-23697).

*

Denotes management contract or compensatory plan or arrangement.

#

Confidential portions of this agreement have been redacted pursuant to a confidential treatment request filed separately with the SEC.

##

Confidential treatment has been requested as to portions of this exhibit. Such portions have been redacted and filed separately with the SEC.

54

SIGNATURES.

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEW FRONTIER MEDIA, INC.
By:	/s/ MICHAEL WEINER
Name:	Michael Weiner
Title:	Chief Executive Officer
Date:	June 12, 2009

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name and Capacity		Date
/s/ MICHAEL WEINER
Name:	Michael Weiner	June 12, 2009
Title:	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
/s/ GRANT WILLIAMS
Name:	Grant Williams	June 12, 2009
Title:	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ MELISSA HUBBARD
Name:	Melissa Hubbard	June 12, 2009
Title:	Director
/s/ ALAN ISAACMAN
Name:	Alan Isaacman	June 12, 2009
Title:	Director
/s/ DAVID NICHOLAS
Name:	David Nicholas	June 12, 2009
Title:	Director
/s/ WALTER TIMOSHENKO
Name:	Walter Timoshenko	June 12, 2009
Title:	Director
/s/ HIRAM WOO
Name:	Hiram Woo	June 12, 2009
Title:	Director

55

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Comprehensive Income (Loss)	F-5
Consolidated Statements of Shareholders' Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-9
SUPPLEMENTAL INFORMATION	F-41
Valuation and Qualifying Accounts—Schedule II	F-41

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

New Frontier Media, Inc. and Subsidiaries

        We have audited the accompanying consolidated balance sheets of New Frontier Media, Inc. (a Colorado corporation) and Subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2009. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Schedule II—Valuation and Qualifying Accounts. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Frontier Media, Inc. and Subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        As discussed in Note 9 to the consolidated financial statements, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 effective April 1, 2007.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), New Frontier Media, Inc. and Subsidiaries' internal control over financial reporting as of March 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 5, 2009, expressed an unqualified opinion thereon.

/s/ GRANT THORNTON LLP

Denver, Colorado
June 5, 2009

F-2

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

		March 31,
		2009			2008
Assets
Current assets:
	Cash and cash equivalents	$	16,049		$	18,325
	Restricted cash		16			38
	Marketable securities		90			930
	Accounts receivable, net of allowance for doubtful accounts of $308 and $169, at March 31, 2009 and 2008, respectively		10,242			13,873
	Taxes receivable		683			—
	Deferred tax assets		358			620
	Prepaid and other assets		1,652			1,899
Total current assets			29,090			35,685
Equipment and furniture, net			5,573			4,774
Prepaid distribution rights, net			10,933			10,381
Recoupable costs and producer advances, net			4,999			2,448
Film costs, net			6,672			7,626
Goodwill			8,599			18,608
Other identifiable intangible assets, net			1,630			3,120
Other assets			1,043			1,019
	Total assets	$	68,539		$	83,661
Liabilities and shareholders' equity
Current liabilities:
	Accounts payable	$	2,144		$	2,937
	Dividend payable		—			2,982
	Taxes payable		—			760
	Producers payable		950			1,012
	Deferred revenue		737			984
	Accrued compensation		1,188			1,817
	Deferred producer liabilities		1,970			2,862
	Short-term debt		4,000			—
	Accrued and other liabilities		2,112			2,257
Total current liabilities			13,101			15,611
Deferred tax liabilities			903			795
Taxes payable			242			216
Other long-term liabilities			718			1,002
Total liabilities			14,964			17,624
Commitments and contingencies
Shareholders' equity:
	Preferred stock, $.10 par value, 4,999 shares authorized, no shares issued and outstanding		—			—
	Common stock, $.0001 par value, 50,000 shares authorized, 19,494 and 23,775 shares issued and outstanding, at March 31, 2009 and 2008, respectively		2			2
	Additional paid-in capital		54,702			61,854
	Retained earnings (accumulated deficit)		(997	)		4,191
	Accumulated other comprehensive loss		(132	)		(10	)
Total shareholders' equity			53,575			66,037
	Total liabilities and shareholders' equity	$	68,539		$	83,661

Refer to Notes to Consolidated Financial Statements.

F-3

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

		Year Ended March 31,
		2009			2008			2007
Net sales		$	52,654		$	55,911		$	63,271
Cost of sales			17,060			17,686			19,631
Gross margin			35,594			38,225			43,640
Operating expenses:
Sales and marketing			8,601			7,239			6,750
General and administrative			17,570			16,748			17,128
Charge for goodwill impairment			10,009			—			—
Charge for restructuring and asset impairments other than goodwill			2,424			1,150			533
	Total operating expenses		38,604			25,137			24,411
	Operating income (loss)		(3,010	)		13,088			19,229
Other income (expense):
Interest income			208			711			1,241
Interest expense			(221	)		(157	)		(229	)
Reversal of interest expense for uncertain tax positions			429			—			—
Other income, net			2			97			64
	Total other income		418			651			1,076
Income (loss) before provision for income taxes			(2,592	)		13,739			20,305
Provision for income taxes			(2,596	)		(5,079	)		(7,996	)
Net income (loss)		$	(5,188	)	$	8,660		$	12,309
Basic income (loss) per share		$	(0.24	)	$	0.36		$	0.51
Diluted income (loss) per share		$	(0.24	)	$	0.36		$	0.51
Dividends declared per share		$	—		$	0.50		$	0.60

Refer to Notes to Consolidated Financial Statements.

F-4

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

			Year Ended March 31,
			2009			2008		2007
Net income (loss)			$	(5,188	)	$	8,660	$	12,309
Other comprehensive income (loss), net of tax:
	Unrealized gain on available-for-sale marketable securities			10			20		44
	Currency translation adjustment			(132	)		—		—
		Total comprehensive income (loss)	$	(5,310	)	$	8,680	$	12,353

Refer to Notes to Consolidated Financial Statements.

F-5

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except per share amounts)

		Common Stock $.0001 Par Value
										Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)
							Additional Paid-In Capital
		Shares			Amounts											Total
Balance at March 31, 2006			23,650		$	2	$	61,488		$	9,829		$	(74	)	$	71,245
	Exercise of stock options/warrants		902			—		2,802			—			—			2,802
	Tax benefit for stock option/warrant exercises		—			—		1,027			—			—			1,027
	Purchases of common stock		(250	)		—		(2,160	)		—			—			(2,160	)
	Share-based compensation		—			—		1,034			—			—			1,034
	Unrealized gain on available-for-sale securities		—			—		—			—			44			44
	Net income		—			—		—			12,309			—			12,309
	Declared dividend ($0.60 per share)		—			—		—			(14,602	)		—			(14,602	)
Balance at March 31, 2007			24,302			2		64,191			7,536			(30	)		71,699
	Exercise of stock options/warrants		94			—		511			—			—			511
	Tax benefit for stock option/warrant exercises		—			—		120			—			—			120
	Purchases of common stock		(621	)		—		(3,874	)		—			—			(3,874	)
	Share-based compensation		—			—		906			—			—			906
	Unrealized gain on available-for-sale securities		—			—		—			—			20			20
	Net income		—			—		—			8,660			—			8,660
	Declared dividend ($0.50 per share)		—			—		—			(12,005	)		—			(12,005	)
Balance at March 31, 2008			23,775			2		61,854			4,191			(10	)		66,037
	Purchases of common stock		(4,281	)		—		(9,058	)		—			—			(9,058	)
	Share-based compensation		—			—		902			—			—			902
	Reversal of tax benefit for stock option forfeitures/cancellations		—			—		(54	)		—			—			(54	)
	Reversal of uncertain tax position for capital transaction		—			—		1,058			—			—			1,058
	Unrealized gain on available-for-sale securities		—			—		—			—			10			10
	Currency translation adjustment		—			—		—			—			(132	)		(132	)
	Net loss		—			—		—			(5,188	)		—			(5,188	)
Balance at March 31, 2009			19,494		$	2	$	54,702		$	(997	)	$	(132	)	$	53,575

Refer to Notes to Consolidated Financial Statements.

F-6

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Year Ended March 31,
				2009			2008			2007
Cash flows from operating activities:
	Net income (loss)			$	(5,188	)	$	8,660		$	12,309
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			9,102			8,285			11,554
		Tax benefit from option/warrant exercises			—			227			268
		Share-based compensation			902			906			1,034
		Deferred taxes			212			(288	)		(1,016	)
		Charge for goodwill impairment			10,009			—			—
		Charges for asset impairments other than goodwill			2,235			1,150			533
		Reversal of uncertain tax positions			(429	)		—			—
		Reversal of interest expense for uncertain tax positions			(429	)		—			—
		Changes in operating assets and liabilities
			Accounts receivable		3,631			(1,624	)		146
			Accounts payable		(458	)		694			(209	)
			Prepaid distribution rights		(4,171	)		(4,553	)		(4,152	)
			Capitalized film costs		(2,762	)		(4,093	)		(2,626	)
			Deferred revenue		(247	)		95			135
			Producers payable		(62	)		(37	)		503
			Taxes receivable and payable, net		182			237			(1,296	)
			Accrued compensation		(629	)		(1,481	)		1,441
			Recoupable costs and producer advances, net		(2,751	)		(1,360	)		(169	)
			Other assets and liabilities		(642	)		1,366			421
		Net cash provided by operating activities			8,505			8,184			18,876
Cash flows from investing activities:
	Payment for business acquisitions, net of cash acquired				—			—			(18	)
	Purchase of marketable securities				(2,011	)		(2,828	)		(26,340	)
	Redemption of marketable securities				2,846			11,201			27,806
	Purchases of equipment and furniture				(2,700	)		(2,058	)		(1,786	)
	Purchase of intangible assets				(810	)		(400	)		—
	Payment of related party note arising from business acquisition				(21	)		(626	)		(603	)
		Net cash provided by (used in) investing activities			(2,696	)		5,289			(941	)
Cash flows from financing activities:
	Purchases of common stock				(9,058	)		(3,874	)		(2,160	)
	Payment of dividends				(2,982	)		(9,023	)		(14,602	)
	Proceeds from line of credit				4,000			—			—
	Proceeds from stock option and warrant exercises				—			511			2,802
	Excess tax (shortfall) benefit from option/warrant exercises				—			(107	)		759
		Net cash used in financing activities			(8,040	)		(12,493	)		(13,201	)
Net increase (decrease) in cash and cash equivalents					(2,231	)		980			4,734
Effect of exchange rate changes on cash and cash equivalents					(45	)		—			—
Cash and cash equivalents, beginning of year					18,325			17,345			12,611
Cash and cash equivalents, end of year				$	16,049		$	18,325		$	17,345

Refer to Notes to Consolidated Financial Statements.

F-7

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

		Year Ended March 31,
		2009		2008		2007
Supplemental cash flow data:
	Interest paid	$	73	$	26	$	1
	Income taxes paid	$	2,452	$	5,533	$	9,285
Noncash investing and financing activities:
	Increase in goodwill for final valuation of purchased intangibles, deferred tax liability and other adjustments	$	—	$	—	$	1,846
	Escrow funds included in restricted cash used to settle liabilities related to business acquisition	$	—	$	1,660	$	904
	Increase in other identifiable intangible assets, net, for the purchase of intellectual property and a patent	$	—	$	661	$	—

Refer to Notes to Consolidated Financial Statements.

F-8

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

        New Frontier Media, Inc. is a publicly traded holding company for its operating subsidiaries which are reflected in the Transactional TV, Film Production, Direct-to-Consumer and Corporate Administration segments.

Transactional TV Segment

        The Transactional TV segment is a leading provider of adult programming to cable multiple system operators ("MSOs") and direct broadcast satellite ("DBS") providers. The Transactional TV segment is able to provide a variety of editing styles and programming mixes to a broad range of consumers. Ten Sales, Inc., which is also reflected within the operating results of the Transactional TV segment, is responsible for selling the segment's services.

Film Production Segment

        The Film Production segment derives its revenue from two principal businesses: a) the production and distribution of original motion pictures known as erotic thrillers, horror movies, and erotic, event styled content (collectively, "owned content") which is provided through MRG Entertainment and b) the licensing of third party films in international and domestic markets where it acts as a sales agent for the product ("repped content") which is provided through Lightning Entertainment Group. This segment also periodically provides contract film production services to major Hollywood studios ("producer-for-hire" arrangements).

Direct-to-Consumer Segment

        The Direct-to-Consumer segment primarily derives revenue by aggregating and reselling adult content through consumer websites. This segment also launched new product test initiatives in early fiscal year 2009 including the development of a set-top box and internet protocol television ("IPTV") business model which allows consumers to access adult content through the internet and view the content on television using a set-top box. Based on lower than expected subscriber additions for the IPTV service and other considerations during the second half of fiscal year 2009, the Company restructured the operations of this segment in March 2009 to reduce the resources allocated to new product offering operations.

Corporate Administration Segment

        Expenses reported as Corporate Administration include all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer segments. These costs include, but are not limited to, legal and accounting expenses, insurance, registration and filing fees with NASDAQ, executive employee costs, and the Securities and Exchange Commission ("SEC"), investor relations and printing costs associated with the Company's public filings and shareholder communications.

F-9

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Significant Accounting Policies

Principles of Consolidation

        The accompanying consolidated financial statements include the accounts of New Frontier Media, Inc. and its wholly owned subsidiaries (collectively herein referred to as "New Frontier Media," the "Company," and other similar pronouns). All intercompany accounts, transactions and profits have been eliminated in consolidation.

Use of Estimates

        The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting estimates that require the Company's most significant, difficult and subjective judgments include:

•

estimated revenue for certain Transactional TV segment pay-per-view ("PPV") and video-on-demand ("VOD") services;

•

the recognition and measurement of income tax expenses, assets and liabilities (including the measurement of uncertain tax positions and valuation of deferred tax assets);

•

the valuation of recoupable costs and producer advances;

•

the assessment of film costs and the forecast of anticipated revenue ("ultimate" revenue), which is used to amortize film costs;

•

the amortization methodology and valuation of prepaid distribution rights;

•

the valuation of goodwill, intangible and other long-lived assets; and

•

the valuation and recognition of share-based compensation.

        The Company bases its estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates.

Reclassifications

        Certain prior year amounts have been reclassified to conform with the current year presentation, including approximately $0.1 million and $0.2 million of certain prepaid distribution rights amortization expense which was reclassified in fiscal year 2008 and 2007, respectively, from the Transactional TV segment's cost of sales to the Direct-to-Consumer segment's cost of sales in connection with a change in those segments' expense composition.

Cash and Cash Equivalents

        Cash and cash equivalents include cash on hand, cash in banks and cash equivalents, which are highly liquid investment instruments with original maturities of less than 90 days.

F-10

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restricted Cash

        Restricted cash during the periods presented includes amounts that are contractually restricted in connection with agreements between the Company and certain film producers.

FDIC Limits

        The Company maintains cash deposits with major banks, which exceed federally insured limits. As of March 31, 2009, the Company exceeded the federally insured limits by approximately $14.9 million. The Company periodically assesses the financial condition of the institutions and estimates that the risk of any loss is low.

Marketable Securities

        Short-term marketable securities are classified as available-for-sale securities and are stated at fair market value. Marketable securities during the periods presented consist of certificates of deposit and municipal debt securities with varying maturity lengths of over 90 days.

Fair Value of Financial Instruments

        The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurement, effective April 1, 2008 for all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value on a recurring basis. There was no material impact on the Company's consolidated financial statements from the adoption of SFAS No. 157. For all other nonfinancial assets and liabilities, SFAS No. 157 is effective for the first quarter of fiscal year 2010. In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position SFAS No. 157-2, Effective Date of FASB Statement No. 157, which defers the application date of the provisions of SFAS No. 157 for all nonfinancial assets and liabilities except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Due to the deferral, the Company has delayed the implementation of the provisions of SFAS No. 157 related to the fair value of goodwill, intangible assets with indefinite lives and nonfinancial long-lived assets. SFAS No. 157 establishes a framework for measuring fair value in accordance with generally accepted accounting principles in the U.S. SFAS No. 157 is intended to enable the readers of financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. SFAS No. 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

        As of March 31, 2009, the Company had $0.1 million of marketable securities. The fair value for these assets was determined through a Level 1 analysis and was based on quoted market prices in active markets. The Company had no other financial assets and liabilities carried at fair value at March 31, 2009.

F-11

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable

        The majority of the Company's accounts receivable are due from customers in the cable and satellite industries and from the film distribution industry. Credit is extended based on an evaluation of a customer's financial condition and collateral is not required. Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. Customer balances that remain outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts on a quarterly basis by considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history, the customer's current ability to pay its obligation to the Company, and the condition of the general economy and the cable, satellite and film distribution industries as a whole. Bad debt is reflected as a component of operating expenses in the consolidated statements of operations. When a specific account receivable is determined to be uncollectible, the Company reduces both its accounts receivable and allowances for uncollectible accounts accordingly.

        Accounts receivable balances associated with the Film Production segment's repped content include the entire license fee due to the Company from the licensee. Amounts collected for these receivables are disbursed to the Company and the producers of the licensed films in accordance with the terms of the related producer agreements.

Inventory

        Inventories are stated at the lower of cost or market, using the average cost method. Inventories at March 31, 2009 and 2008 consisted of IPTV set-top box finished goods. The inventory balance at March 31, 2009 and 2008 was $0.1 million and $0.2 million, respectively, and is reported within prepaid and other assets in the current asset section on the consolidated balance sheet.

Equipment and Furniture

        Equipment and furniture are stated at historical cost less accumulated depreciation. The cost of maintenance and repairs to equipment and furniture is expensed as incurred, and significant additions and improvements are capitalized. The capitalized costs of leasehold and building improvements are depreciated using a straight-line method over the estimated useful life of the assets or the term of the related leases, whichever is shorter. All other equipment and furniture assets are depreciated using a straight-line method over the estimated useful life of the assets. At March 31, 2009, the estimated useful lives of equipment and furniture assets were as follows:

Furniture and fixtures	3 to 5 years
Computers, equipment and servers	3 to 7 years
Leasehold improvements	5 to 10 years

Prepaid Distribution Rights

        The Transactional TV segment's content library consists of movie titles obtained through film licensing agreements. The Company capitalizes the costs associated with the licenses as well as certain editing costs and amortizes these capitalized costs on a straight-line basis over the term of the licensing agreement (generally 5 years). Under the applicable accounting literature, costs associated with such

F-12

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

license agreements should be amortized using a basis that is consistent with the manner in which the related film revenue is expected to be recognized. The Company amortizes the cost of prepaid distribution rights on a straight-line basis because each usage of the film is expected to generate similar revenue and the revenue for the films is expected to be recognized ratably over the related license term. The Company regularly reviews and evaluates the appropriateness of amortizing film costs on a straight-line basis as opposed to an alternative method of amortization such as an accelerated basis. Based on these analyses, the Company has determined that the amortization of the film library costs using a straight-line basis most accurately reflects the manner in which the revenue for the related films will be recognized.

        The Company periodically reviews the content library and assesses whether the unamortized cost is less than the estimated fair market value of the libraries based on expected forecast results. In the event that the unamortized costs exceed the estimated fair market value of the film libraries, the Company will expense the excess of the unamortized costs to reduce the carrying value to the fair market value.

Recoupable Costs and Producer Advances

        Recoupable costs and producer advances represent amounts paid by the Company that are expected to be subsequently recouped through the collection of fees associated with the Company's licensing of repped content. In connection with the Film Production segment's repped content operations, the Company enters into sales agency agreements whereby the Company acts as a sales agent for a producer's film ("Sales Agency Agreements"). These Sales Agency Agreements typically include provisions whereby certain costs that are incurred for promotion related activities will be paid by the Company on behalf of the producer (such as movie trailer and ad material costs). The Company may also pay the producer an advance for the related film prior to the distribution of such film. As the Company subsequently licenses the producer's film and license fees are collected, the recoupable costs and producer advances are recovered by the Company through these license fee collections. License fees typically are not paid to the producer of the related film until such recoupable costs and producer advances have been fully recovered by the Company.

        The Company evaluates recoupable costs and producer advances for impairment on a quarterly basis based on estimates of future license fee collections. An impairment of these assets could occur if Company estimates indicated that it would be unable to collect fees from the licensing of a film sufficient to recover the related outstanding recoupable costs and producer advances. During each fiscal year ended March 31, 2009 and 2008, the Company incurred impairment charges related to recoupable costs and producer advances of $0.2 million. No material impairment charges were incurred during the fiscal year ended March 31, 2007. The impairment charges are recorded in the charge for restructuring and asset impairments other than goodwill line item within the consolidated statements of operations.

Film Costs

        The Company capitalizes film production costs in accordance with Statement of Position ("SOP") 00-2, Accounting by Producers or Distributors of Films. Film costs include costs to develop and produce films, which primarily consist of salaries, equipment and overhead costs, as well as the cost to acquire rights to films. Film costs include amounts for completed films and films still in development.

F-13

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of the films. Interest expense associated with film costs is not capitalized because the duration of productions is short-term. Films are typically direct-to-television in nature. Film costs are stated at the lower of cost, less accumulated amortization, or estimated fair value. Film costs are reviewed for impairment on a title-by-title basis each quarterly reporting period. The Company records an impairment charge when the estimated fair value of the title is less than the unamortized cost. Examples of events or circumstances that could result in an impairment charge for film costs include a) an unexpected less favorable film title or event performance on a cable MSO platform or b) a downward adjustment in the estimated future performance of a film title or event due to an adverse change to the general business climate as was experienced during the third quarter of fiscal year 2009. Future adjustments associated with film cost valuations could have a material impact on the Company's financial position and results of operations.

        Capitalized film costs are amortized as an expense within cost of sales using the film forecast method. Under this method, capitalized film costs are expensed based on the proportion of the film's revenue recognized for such period relative to the film's estimated remaining ultimate revenue, not to exceed ten years. Ultimate revenue is the estimated total revenue expected to be recognized over a film's useful life. Ultimate revenue for new film titles and events is typically estimated using actual historical performance of comparable films that are similar in nature (such as production cost and genre). Film revenue associated with this method includes amounts from all sources on an individual-film-forecast-computation method, as defined by SOP 00-2. Estimates of ultimate revenue are reviewed quarterly and adjusted if appropriate, and amortization is also adjusted on a prospective basis for such a change in estimate. Changes in estimated ultimate revenue could be due to a variety of factors, including the proportional buy rates of the content as compared to competitive content as well as the level of market acceptance of the television product.

Goodwill and Other Intangible Assets

        The Company records goodwill when the purchase price of an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Under SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized but is tested for impairment at the operating segment level on an annual basis (March 31 for the Company) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include, but are not limited to, a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment in the determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using considerations of various valuation methodologies which could include income and market valuation approaches. The income approach involves discounting the reporting unit's projected free cash flow at its weighted average cost of capital, and the market approach considers comparable publicly traded company valuations and recent merger and acquisition valuations. The analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts; estimation of the long-term rate of growth; determination of the weighted average cost of capital; and other similar estimates. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting

F-14

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

unit. The Company allocates goodwill to each operating segment based on the operating segment expected to benefit from the related acquisition and/or combination.

        Other identifiable intangible assets subject to amortization primarily include amounts paid to acquire non-compete agreements with certain key executives, contractual and non-contractual customer relationships, intellectual property rights, patents and websites. These costs are capitalized and amortized on a straight-line basis over their estimated useful lives which is typically five years. Intangible asset balances are removed from the gross asset and accumulated amortization amounts in the period in which they become fully amortized and are no longer in use. Other intangible assets that are subject to amortization are reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as described below within the Long-Lived Assets discussion.

        See Note 5—Goodwill and Other Intangible Assets for additional detail and discussion on goodwill and other intangible asset impairments.

Long-Lived Assets

        The Company continually reviews long-lived assets held and used and certain identifiable intangible assets that are subject to amortization for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144. In evaluating the fair value and future benefits of such assets, the Company considers whether the estimated undiscounted future net cash flows of the individual assets is less than the related assets' carrying value and if so, the Company records an impairment loss for the excess recorded carrying value of the asset as compared to its fair value.

Deferred Producer Liabilities

        Deferred producer liabilities represent outstanding amounts due to the producer or to be retained by the Company upon the collection of license fee amounts related to the sale of repped content by the Film Production segment. In accordance with the Sales Agency Agreements entered into by the Company and repped content producers, when license fees associated with the Company's sale of repped content are collected, the amounts are paid to the producer and/or retained by the Company. Amounts are paid to the Company for its sales agency commission, recoupment of outstanding film costs and producer advances ("Recoupable Costs") or as market fee revenue. The terms of the Sales Agency Agreements provide that collected license fees are distributed to the producer and/or retained by the Company based on a specific allocation order as defined by each agreement. The allocation order is dependent on certain criteria including total license fee collections, outstanding Recoupable Cost balances and certain other criteria as specified by the Sales Agency Agreements. Because these criteria cannot be reasonably determined until the license fees are collected, the appropriate allocation order of uncollected license fees cannot be established. Accordingly, the uncollected license fee amounts are recorded as deferred producer liabilities until such time as the amounts are collected and the allocation order can be reasonably determined.

F-15

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income (Loss) per Share

        Basic income (loss) per share is computed on the basis of the weighted average number of common shares outstanding. Diluted income (loss) per share is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect of outstanding warrants and stock options.

Revenue Recognition

        The Company's revenue consists primarily of fees earned through the electronic distribution of its licensed and owned content through various media outlets including MSOs, DBS providers, the internet and wireless platforms, premium movie channels, and other available media channels. Revenue also consists of fees earned through the licensing of third-party content whereby the Company acts as a sales agent for the film producer. Revenue is recognized when persuasive evidence of an arrangement exists as is typically evidenced through an executed contract, the services have been rendered or delivery conditions as described in the related contract for the completed film have been satisfied, the license period related to Film Production segment arrangements has begun and the customer can begin exploitation of the content, the fee is fixed or determinable and its collection is reasonably assured. The process involved in evaluating the appropriateness of revenue recognition involves judgment including estimating monthly revenue based on historical data and determining collectability of fees.

Transactional TV Segment VOD and PPV Services

        The Transactional TV segment's VOD and PPV revenue are recognized based on buys and monthly subscriber counts reported each month by cable MSOs, DBS providers and hospitality providers. The actual monthly sales information is not typically reported to the Transactional TV segment until approximately 30 - 90 days after the month of service. This practice requires management to make monthly revenue estimates based on the Transactional TV segment's historical experience with each customer. The revenue may be subsequently adjusted to reflect the actual amount earned upon receipt of the monthly sales reports.

Transactional TV Segment Advertising

        Revenue from the advertising of products on the Company's PPV networks is recognized upon sale of the related advertised product, as reported by the Company's third party partners. Revenue from spot advertising is recognized in the month the spot is run on the Transactional TV segment's networks.

Transactional TV Segment C-Band Services

        The Company ceased its C-Band services offering during the third quarter of fiscal year 2008. Prior to removing this product offering, C-Band network services were sold through customer subscriptions that ranged from a one month period to a three month period. Revenue associated with these services was recognized on a straight-line basis over the term of the subscription.

F-16

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Film Production Segment Owned Content Licensing

        Revenue from the licensing of owned content is recognized consistent with the provisions of SOP 00-2. In accordance with that provision, revenue is recognized when persuasive evidence of an arrangement exists as is typically evidenced through an executed contract, the delivery conditions of the completed film have been satisfied as required in the contract, the license period of the arrangement has begun, the fee is fixed or determinable and collection of the fees is reasonably assured. For agreements that involve the distribution of content to the home video market, PPV market and VOD market, the Company is unable to determine or reasonably estimate the fees earned from customers in advance of receiving the reported earnings because the market acceptance varies unpredictably by film and from period to period. As a result, the Company's share of licensing revenue from these arrangements is not recognized until the amounts are reported by the customers.

Film Production Segment Repped Content Licensing

        In accordance with the provisions of Emerging Issues Task Force ("EITF") Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes revenue from represented film licensing activities on a net basis as an agent. The revenue recognized for these transactions represents only the sales agency fee earned by the Company on the total licensing fee. The producers' share of the licensing fee is recorded as a liability by the Company until the balance is remitted to the producer. The agreements entered into with the producers may also provide for a marketing fee that can be earned by the Company. The marketing fee is stated as a fixed amount and is earned by the Company as collections from film licensing fees are received. The Company recognizes marketing fees as revenue when the amounts become determinable and the collection of the fee is reasonably assured.

Direct-to-Consumer Segment Membership Fees

        Revenue from membership fees is recognized over the life of the membership. The Company records an allowance for refunds based on expected membership cancellations, credits and chargebacks.

Contemporaneous Purchases and Sales

        From time to time, the Company enters into multiple-element transactions whereby the customer is also a vendor, such as advertising on customer platforms. These arrangements are documented in one or more contracts. In considering the appropriate method of accounting for these arrangements, the Company considers various authoritative accounting literature including:

•

Accounting Principles Board ("APB") Opinion No. 29, Accounting for Nonmonetary Transactions;

•

SFAS No. 153, Exchanges of Nonmonetary Assets—an amendment of APB Opinion No. 29;

•

EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer;

F-17

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

•

EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor; and

•

EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.

        Consistent with the considered authoritative accounting literature, the Company records each element of contemporaneous purchases and sales transactions based on the respective proportional estimated fair values of the products or services purchased and the products or services sold. Fair value is determined by considering objective, reliable evidence, and the Company typically uses quoted market prices (if available) and comparable transactions executed for individual elements to determine each element's fair value. If the Company were unable to reasonably estimate the fair value of the products or services purchased, then the cash consideration given by the Company to the customer would be characterized as a reduction in revenue.

Purchases of Multiple Products or Services

        From time to time, the Company enters into arrangements that involve the purchase of multiple products and/or services, such as purchasing content and advertising from a vendor. In determining the appropriate accounting treatment for the purchase of multiple products and/or services contemporaneously in one or more contracts, the Company considers the provisions of EITF Issue No. 00-21. Consistent with that literature, the Company accounts for the transactions by first determining the fair value of the individual elements to the transaction through the use of objective, reliable evidence of fair value in the same manner as discussed above. Based on the determined fair value of each element, the Company allocates the total consideration associated with the arrangement to each element based on its fair value.

Producer-for-Hire Arrangements

        The Company's Film Production segment periodically acts as a producer-for-hire for customers. Through these arrangements, the Company provides services and incurs costs associated with the film production, and the Company earns a fee for its services once the film has been delivered to the customer. The Company maintains no ownership rights for the produced content. Revenue for these arrangements is recognized when persuasive evidence of an arrangement exists as evidenced by an executed contract, the film has been delivered to the customer in accordance with the contract terms, the fee is fixed and determinable and collection is reasonably assured. The costs incurred for production in these arrangements are initially recorded as a deferred cost within the current assets section of the balance sheet, and the deferred costs are subsequently recorded as a cost of sales when the Company recognizes revenue for the related services. The Company had no significant producer-for-hire arrangements during the fiscal years ended March 31, 2009 and 2007. During the fiscal year ended March 31, 2008, the Company completed and recognized revenue on a producer-for-hire arrangement. At March 31, 2009, the Company has no material deferred costs recorded in connection with producer-for-hire arrangements.

F-18

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising Costs

        The Company expenses advertising costs, which includes tradeshow and promotional related expenses, as incurred. Advertising costs for the years ended March 31, 2009, 2008 and 2007 were approximately $2.5 million, $1.3 million and $1.6 million, respectively.

Research and Development Costs

        Costs related to the research, design and development of products are charged to research and development expense as incurred. Research and development costs for the year ended March 31, 2009 were approximately $0.3 million. The Company did not incur any material research and development costs during the years ended March 31, 2008 and 2007.

Employee Equity Incentive Plans

        The Company has employee equity incentive plans, which are described more fully in Note 3—Employee Equity Incentive Plans. Effective April 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123(R)"). SFAS No. 123(R) requires employee equity awards to be accounted for under the fair value method. Accordingly, the Company measures share-based compensation at the grant date based on the fair value of the award.

        Under the modified prospective method of adoption for SFAS No. 123(R), the compensation cost that the Company recognized beginning in fiscal year 2007 includes compensation cost for all equity incentive awards granted prior to but not yet vested as of April 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all equity incentive awards granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The Company uses the straight-line attribution method to recognize share-based compensation over the service period of the award.

Income Taxes

        The Company makes certain estimates and judgments in determining its income tax provision expense. These estimates and judgments are used in the determination of tax credits, benefits and deductions, and the calculation of certain tax assets and liabilities which are a result of differences in the timing of the recognition of revenue and expense for tax and financial statement purposes. The Company also uses estimates and judgments in determining interest and penalties on uncertain tax positions. Significant changes to these estimates could result in a material change to the Company's tax provision in subsequent periods.

        The Company is required to evaluate the likelihood that it will be able to recover its deferred tax assets. If the Company's evaluation determines that the recovery is unlikely, it would be required to increase the provision for taxes by recording a valuation allowance against the deferred tax assets equal to the amount that is not expected to be recoverable. The Company currently estimates that its deferred tax assets will be recoverable. If these estimates were to change and the Company's assessment indicated it would be unable to recover the deferred tax assets, the Company would be required to increase its income tax provision expense in the period of the change in estimate.

F-19

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of tax regulations. Effective at the beginning of the first fiscal quarter of 2008, the Company adopted the provisions of Financial Accounting Standards Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax position liabilities accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This process is based on various factors including, but not limited to, changes in facts and circumstances, changes in tax law, settlement of issues under audit, and new audit activity. Changes to these factors and the Company's estimates regarding these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.

Comprehensive Income (Loss)

        In accordance with the provisions of SFAS No. 130, Reporting Comprehensive Income, the Company's comprehensive income (loss) includes all changes in equity (net assets) during the period from non-owner sources. During the periods presented, comprehensive income (loss) includes the Company's net income (loss) and unrealized gains on available-for-sale securities as well as the cumulative translation adjustment from foreign currency translation.

Foreign Currency Translations

        The functional currency for all of the Company's U.S. based subsidiaries is the U.S. dollar. The functional currency for the Company's foreign subsidiaries is the local currency. Assets and liabilities denominated in foreign currencies are translated using the exchange rates on the balance sheet dates. Revenues and expenses are translated using the average exchange rates prevailing during the periods presented. Any translation adjustments resulting from this process are shown separately as a component of accumulated other comprehensive income (loss) within shareholders' equity in the consolidated balance sheets. Foreign currency transaction gains and losses are reported in the operating expense section of the consolidated statements of operations.

Recently Issued Accounting Pronouncements

        In April 2009, the FASB issued Staff Position No. FAS 157-4, Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ("FSP 157-4"). FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased. FSP 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. In addition, FSP 157-4 requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques. FSP 157-4 is effective for the Company beginning July 1, 2009. The Company does not expect the adoption of FSP 157-4 will have a material impact on its results of operations and financial position.

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NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        In April 2009, the FASB issued Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairment ("FSP 115-2/124-2"). FSP 115-2/124-2 amends the requirements for the recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing "intent and ability" indicator. Under FSP 115-2/124-2, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the security is not expected to recover the entire amortized cost basis of the security. FSP 115-2/124-2 is effective for the Company beginning July 1, 2009. The Company does not expect the adoption of FSP 115-2/124-2 will have a material impact on its results of operations and financial position.

        In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosure about Fair Value of Financial Instruments ("FSP 107-1/APB 28-1"). FSP 107-1/APB 28-1 requires interim disclosures regarding the fair values of financial instruments that are within the scope of SFAS No. 107, Disclosures about the Fair Value of Financial Instruments. Additionally, FSP 107-1/APB 28-1 requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes in the methods and significant assumptions from prior periods. FSP 107-1/APB 28-1 is effective for the Company beginning July 1, 2009. The Company does not expect the adoption of FSP 107-1/APB 28-1 will have a material impact on its results of operations and financial position.

        In October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active ("FSP 157-3"). FSP 157-3 clarified the application of SFAS No. 157. FSP 157-3 demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on the Company's results of operations and financial position.

        In April 2008, the FASB issued Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) and other applicable accounting literature. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of FSP 142-3 will have a material impact on its results of operations and financial position.

F-21

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2—INCOME (LOSS) PER SHARE

        The components of basic and diluted income (loss) per share are as follows (in thousands, except per share data):

	Year Ended March 31,
	2009			2008		2007
Net income (loss)	$	(5,188	)	$	8,660	$	12,309
Average outstanding shares of common stock		22,039			24,020		23,920
Dilutive effect of warrants/stock options		—			128		435
Common stock and common stock equivalents		22,039			24,148		24,355
Basic income (loss) per share	$	(0.24	)	$	0.36	$	0.51
Diluted income (loss) per share	$	(0.24	)	$	0.36	$	0.51

        The Company computed basic income (loss) per share using net income (loss) and the weighted average number of common shares outstanding during the period. The Company computed diluted income (loss) per share using net income (loss) and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Potentially dilutive common shares outstanding were approximately 1.0 million and 0.6 million for the years ended March 31, 2008 and 2007, respectively. Inclusion of these options and warrants would be antidilutive. For the year ended March 31, 2009, there was no dilutive effect from options or warrants because the inclusion of options and warrants in the calculation of diluted loss per share would be antidulitive.

NOTE 3—EMPLOYEE EQUITY INCENTIVE PLANS

Equity Plan

        The Company adopted the New Frontier Media, Inc. 2007 Stock Incentive Plan (the "2007 Plan") during fiscal year 2008. The 2007 Plan was approved by the Company's shareholders and the purpose of the 2007 Plan was to replace prior plans with one incentive plan. No awards or grants are available to be made under prior plans. Under the 2007 Plan, employees and directors of the Company may be granted incentive stock options, restricted stock, bonus stock and other awards, or any combination thereof. There were 1,250,000 shares of the Company's common stock originally authorized for issuance under the 2007 Plan and the maximum number of shares of common stock that may be subject to one or more awards granted to a participant during any calendar year is 350,000 shares. Awards granted under the 2007 Plan that are subsequently forfeited or cancelled may be reissued under the provisions of the 2007 Plan. Options have been granted to employees and non-employee directors of New Frontier Media with exercise prices equal to, or in excess of, the fair market value of the underlying common stock at the date of grant. Generally, the stock options vest ratably over a four-year vesting period and expire ten years from the date of grant. As of March 31, 2009, approximately 0.6 million awards were available for issuance under the 2007 Plan.

Stock Options

        In accordance with the provisions of SFAS No. 123(R), the Company accounts for employee and non-employee director stock options under the fair value method which requires the use of an option pricing model for estimating fair value. Accordingly, share-based compensation is measured at grant

F-22

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3—EMPLOYEE EQUITY INCENTIVE PLANS (Continued)

date based on the estimated fair value of the award. The Company uses the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award.

        Share-based compensation is determined using the Black-Scholes option pricing model for estimating the fair value of options granted under the Company's equity incentive plan. The Company uses certain assumptions in order to calculate the fair value of an option using the Black-Scholes option pricing model. The volatility assumptions are derived using historical volatility data. The expected term assumptions are stratified between officers and non-officers and are determined using the estimated weighted average exercise behavior for these two groups of employees. The dividend yield assumption is based on dividends declared by the Company's Board of Directors and estimates of dividends to be declared in the future. The weighted average estimated fair values of stock option grants and the weighted average assumptions that were used in calculating such values for the three years ended March 31 were as follows:

	2009			2008			2007
Weighted average estimated value	$	2.33		$	1.40		$	4.61
Expected term from grant date (in years)		5			5			5
Risk free interest rate		2.7	%		3.5	%		4.8	%
Expected volatility		52	%		53	%		64	%
Expected dividend yield		—	%		8	%		1	%

        Equity-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, which considers estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company recognizes the effect of adjusting the forfeiture rate for all expense amortization in the period that the Company changes the forfeiture estimate. The effect of forfeiture adjustments was not significant during the periods presented.

        The following table summarizes the effects of share-based compensation resulting from the application of SFAS No. 123(R) to options granted under the Company's equity incentive plans. This expense is included in cost of sales and selling, general and administrative expenses (in thousands, except per share amounts):

	Year Ended March 31,
	2009			2008			2007
Equity-based compensation expense before income taxes	$	902		$	906		$	1,034
Income tax benefit		(361	)		(335	)		(407	)
Total equity-based compensation expense after income taxes	$	541		$	571		$	627
Equity-based compensation effects on basic income (loss) per common share	$	0.02		$	0.02		$	0.03
Equity-based compensation effects on diluted income (loss) per common share	$	0.02		$	0.02		$	0.03

F-23

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3—EMPLOYEE EQUITY INCENTIVE PLANS (Continued)

        Stock option transactions during the year ended March 31, 2009 are summarized as follows:

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value(1) (in thousands)
Outstanding at March 31, 2008		1,727,802		$	6.39
Granted		623,500		$	4.76
Forfeited/Cancelled		(359,400	)	$	5.26
Outstanding at March 31, 2009		1,991,902		$	6.08		6.6	$	—
Options Exercisable at March 31, 2009		1,246,727		$	6.67		5.3	$	—
Options Vested and Expected to Vest—Non-Officers		709,795		$	6.67		6.5	$	—
Options Vested and Expected to Vest—Officers		1,156,887		$	5.84		6.3	$	—

(1)

The aggregate intrinsic value represents the difference between the exercise price and the value of New Frontier Media, Inc. stock at the time of exercise or at the end of the period if unexercised.

        At March 31, 2009, the Company had 28,000 warrants outstanding and exercisable with a weighted average exercise price of $5.00 and a weighted average remaining contractual term of approximately 1 year. The aggregate intrinsic value for the warrants outstanding and exercisable at March 31, 2009 was $0.

        The Company issues new shares of common stock upon the exercise of stock options. As of March 31, 2009, there was approximately $0.2 million and $1.0 million of total unrecognized compensation costs for non-officers and officers, respectively, related to stock options granted under the Company's equity incentive plan. The unrecognized compensation cost for non-officers and officers is expected to be recognized over a weighted average period of two years and three years, respectively.

NOTE 4—MARKETABLE SECURITIES

        Marketable securities are required to be categorized as trading, available-for-sale or held-to-maturity. As of March 31, 2009 and 2008, the Company had no trading or held-to-maturity securities. The marketable securities held by the Company at March 31, 2009 and 2008 are categorized as available-for-sale and are reported at fair value. Marketable securities held by the Company at March 31, 2009 were as follows (in thousands):

			Gross Unrealized
	Gross Amortized Cost						Estimated Fair Value
			Gains		Losses
Certificate of deposit securities	$	90	$	—	$	—	$	90

F-24

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4—MARKETABLE SECURITIES (Continued)

        The contractual maturities of these available-for-sale marketable securities as of March 31, 2009, were as follows (in thousands):

Year Ended March 31,	Gross Amortized Cost		Fair Value
2010	$	90	$	90

        Marketable securities held by the Company at March 31, 2008 were as follows (in thousands):

			Gross Unrealized
	Gross Amortized Cost						Estimated Fair Value
			Gains		Losses
Certificate of deposit securities	$	97	$	—	$	—	$	97
Municipal securities		828		5		—		833
Total available-for-sale securities	$	925	$	5	$	—	$	930

        The contractual maturities of these available-for-sale marketable securities as of March 31, 2008, were as follows (in thousands):

Year Ended March 31,	Gross Amortized Cost		Fair Value
2009	$	925	$	930

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

        Goodwill is classified within the segment that employs the goodwill in its operations. Changes in the carrying amount of goodwill for the years ended March 31, 2009 and 2008, by reportable segment, were as follows (in thousands):

	Transactional TV		Film Production			Total
Balance as of March 31, 2007	$	3,743	$	14,865		$	18,608
Balance as of March 31, 2008		3,743		14,865			18,608
Impairment		—		(10,009	)		(10,009	)
Balance as of March 31, 2009	$	3,743	$	4,856		$	8,599

        During the third quarter of fiscal year 2009, the Company determined that continued adverse changes in the business climate and material revisions to the Film Production segment's internal forecasts based on lower than expected revenue for the third quarter of fiscal year 2009 were events that could indicate that the fair value of the reporting unit was less than its carrying amount. In accordance with SFAS No. 142, the Company therefore determined an impairment test as of December 31, 2008 was appropriate and engaged an independent firm to assist in performing the impairment test. The income and market valuation approaches were considered in determining the estimated fair value of the Film Production segment. The income approach involves discounting the reporting unit's projected free cash flow at its weighted average cost of capital. For the market

F-25

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

approach, the Company considered comparable publicly traded company valuations and recent merger and acquisition valuations of comparable companies. The income approach was more heavily weighted than the market valuation approaches primarily because (a) the comparable market valuation approach companies were not profitable which required the Company to estimate enterprise value based on revenue multiples and revenue multiples are considered to be a less accurate measure of fair value as compared to alternative measures such as EBITDA, (b) the difference in the revenue multiples for the comparable companies were material and (c) there was a lack of comparability between the reporting unit and comparable companies.

        The Company determined that the estimated fair value of the Film Production segment was less than its carrying value at December 31, 2008. As required under SFAS No. 142, the Company then performed additional analysis to estimate the implied fair value of goodwill. The Company determined the implied fair value of the goodwill by first allocating the estimated fair value of the Film Production segment to the tangible and identifiable intangible assets and liabilities of the operating segment. The excess of the estimated fair value over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Based on this analysis, the Company recorded a goodwill impairment charge of $10.0 million to reduce the Film Production segment's goodwill from $14.9 million to the implied fair value of goodwill of $4.9 million. The goodwill impairment was primarily due to significantly lower than expected performance of the Film Production segment during the quarter ended December 31, 2008 and a subsequent significant downward revision to the segment's three year internal forecasts. The decline in performance and estimated future internal forecasts is due to the general deterioration in the film production and distribution markets.

        The Company also performed annual goodwill impairment tests for the Transactional TV and Film Production segments at March 31, 2009 using similar valuation methodologies as discussed above. The results of the analysis did not indicate any additional goodwill impairment. Due to the deterioration in the overall stock market during the second half of fiscal year 2009, the Company's market capitalization decreased to a level below its shareholders' equity balance. As an overall test of the reasonableness of the estimated fair value of the reporting segments and consolidated Company, a reconciliation of the fair value estimates for the reporting segments to the Company's market capitalization was also performed as of March 31, 2009. The reconciliation considered a reasonable control premium based on merger and acquisition transactions within the media and entertainment industry and other available information. Based on the reconciliation, the Company's fair value was in excess of its market capitalization and there was no indicator of additional goodwill impairment. A control premium is the amount that a buyer is willing to pay over the current market price of a company as indicated by the traded price per share (i.e. market capitalization), in order to acquire a controlling interest. The premium is justified by the expected synergies, such as the expected increase in cash flow resulting from cost savings and revenue enhancements.

F-26

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

Other Identifiable Intangible Assets

        Intangible assets that are subject to amortization were as follows (in thousands, except useful life):

		March 31, 2009										March 31, 2008
	Useful Life (Years)	Gross Carrying Amounts		Accumulated Amortization			Impairment			Net		Gross Carrying Amounts		Accumulated Amortization			Net
Non-Compete agreement	5	$	2,131	$	(1,325	)	$	(47	)	$	759	$	2,131	$	(899	)	$	1,232
Contractual/Noncontractual relationships	5		1,375		(871	)		—			504		1,375		(596	)		779
Intellectual property	5		540		(126	)		(414	)		—		540		(18	)		522
Websites	5		497		(94	)		(54	)		349		139		(52	)		87
Patent	5		460		(107	)		(353	)		—		460		(15	)		445
Below market leases and other	2.5-15		178		(90	)		(70	)		18		226		(171	)		55
		$	5,181	$	(2,613	)	$	(938	)	$	1,630	$	4,871	$	(1,751	)	$	3,120

        Amortization expense for intangible assets subject to amortization for March 31, 2009, 2008 and 2007 was approximately $1.1 million, $0.8 million and $0.7 million, respectively. Amortization expense for intangible assets subject to amortization in each of the next five fiscal years ended March 31, 2010, 2011, 2012, 2013, and 2014 is estimated to be approximately $0.8 million, $0.7 million, $0.1 million, $0.1 million and $0.0 million, respectively.

        The Direct-to-Consumer segment acquired certain intangible assets in late fiscal year 2008 in an effort to expand the product lines that are delivered directly to consumers. The acquired intangible assets primarily relate to intellectual property rights technology that allow the Company to manufacture a set-top box through which consumers can obtain content directly through the internet and view the content on television. The Company tested the market for the related internet protocol television ("IPTV") set-top box product by establishing a test business model during fiscal year 2009. Based primarily on (a) lower than expected subscriber additions for the IPTV test business model during the second half of fiscal year 2009, (b) the significant downturn in economic conditions and related reduction in consumer spending during the second half of fiscal year 2009, and (c) slower than expected development of new product lines, the Company restructured the Direct-to-Consumer segment operations as it relates to its new product lines. Based on this restructuring, the Company evaluated whether the anticipated undiscounted future net cash flows associated with the related intangible assets was in excess of the assets' carrying value and recorded an impairment expense of approximately $0.9 million for the excess carrying value as compared to its fair value. The intangible assets were recorded within the Direct-to-Consumer segment at March 31, 2009, and the impairment expense is recorded in the charge for restructuring and asset impairments other than goodwill line item within the consolidated statements of operations.

F-27

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6—EQUIPMENT AND FURNITURE

        The components of equipment and furniture as of March 31 were as follows (in thousands):

	2009			2008
Furniture and fixtures	$	594		$	875
Computers, equipment and servers		7,368			6,738
Leasehold improvements		2,736			2,713
Equipment and furniture, at cost		10,698			10,326
Less accumulated depreciation		(5,125	)		(5,552	)
Total equipment and furniture, net	$	5,573		$	4,774

        Depreciation expense was approximately $1.8 million, $1.5 million, and $1.3 million for the years ended March 31, 2009, 2008, and 2007, respectively. During the years ended March 31, 2009 and 2008, the Company retired approximately $2.2 million and $1.3 million, respectively, of fully depreciated equipment and furniture.

        There were no material equipment and furniture asset impairment charges in fiscal year 2009. During the years ended March 31, 2008 and 2007, the Company recorded impairment expenses for equipment and furniture assets to be held and used of approximately $0.3 million and $0.1 million, respectively. The assets were identified in connection with the Company's periodic review of equipment and furniture asset carrying values, and the write-offs are included in the charge for restructuring and asset impairments other than goodwill line item in the consolidated statements of operations. The equipment and furniture assets associated with the year ended March 31, 2008 charge were reported within the Transactional TV segment, and the equipment and furniture assets associated with the March 31, 2007 charge were reported within the Direct-to-Consumer segment.

NOTE 7—PREPAID DISTRIBUTION RIGHTS

        The Company's Transactional TV and Direct-to-Consumer segments' film and content libraries consist of film licensing agreements. The Company capitalizes the costs associated with the licenses and certain editing costs and amortizes these costs on a straight-line basis over the term of the licensing agreement. The components of prepaid distribution rights as of March 31 were as follows (in thousands):

	2009			2008
In release	$	18,458		$	16,619
Acquired, not yet released		944			1,209
Accumulated amortization		(8,469	)		(7,447	)
Total prepaid distribution rights, net	$	10,933		$	10,381

        Amortization expense for the years ended March 31, 2009, 2008 and 2007 was approximately $3.6 million, $3.2 million and $3.5 million, respectively. During the years ended March 31, 2009 and 2008, the Company retired approximately $2.6 million and $4.1 million, respectively, of fully amortized prepaid distribution rights.

F-28

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7—PREPAID DISTRIBUTION RIGHTS (Continued)

        The Company had no write-offs of prepaid distribution rights during the fiscal years ended March 31, 2009 or 2008. During the fiscal year ended March 31, 2007, the Company expensed approximately $0.4 million of unamortized costs associated with the Direct-to-Consumer segment's licensed content library. During a periodic review of the film library and in connection with efforts to increase the quality of the products provided by this segment, the Company determined that certain identified content did not meet the quality standards necessary for future distribution. As a result, the Company determined that the identified content had no future value and accordingly, the Company recorded an impairment expense to write-off the remaining unamortized costs for this content. This write-off is included in the charge for restructuring and asset impairments other than goodwill line item in the consolidated statements of operations.

NOTE 8—FILM COSTS

        The components of film costs, which are primarily direct-to-television, are as follows (in thousands):

	March 31,
	2009			2008
In release	$	17,782		$	14,157
Completed, not yet released		134			246
In production		691			2,504
Accumulated amortization		(11,935	)		(9,281	)
Total film costs, net	$	6,672		$	7,626

        Amortization expense for the years ended March 31, 2009, 2008 and 2007 was approximately $2.7 million, $2.8 million and $6.0 million, respectively. The Company expects to amortize approximately $2.5 million in capitalized film costs during fiscal year 2010. The Company expects to amortize substantially all unamortized film costs for released films by March 31, 2012.

        The Company recorded a non-cash impairment expense during fiscal year 2009 of approximately $1.1 million associated with several Film Production segment owned content films and events. During the third quarter of fiscal year 2009 and as part of the Company's process to continually assess the expected performance of owned content, the Company determined that downward adjustments to the estimated performance of films and events should be recorded as a result of adverse changes to the business climate as discussed above. As a result, the Company recorded an impairment charge of approximately $1.1 million representing the difference in the unamortized film costs and the estimated fair value of the films and events. This expense was recorded in the charge for restructuring and asset impairments other than goodwill line item in the consolidated statements of operations.

        During the third quarter of fiscal year 2008, the Company recorded a non-cash impairment expense of approximately $0.7 million associated with two Film Production segment owned content events. During the quarter ended December 31, 2007, the Company obtained initial revenue data that indicated the actual performance of the events would not meet the original estimates. As a result, the Company lowered its estimate of the expected future benefits to be derived from these events and recorded an impairment charge of approximately $0.7 million representing the difference in the unamortized film costs and the estimated fair value of the events. This expense was recorded in the charge for restructuring and asset impairments other than goodwill line item in the consolidated statements of operations.

F-29

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—INCOME TAXES

        The components of the income tax provision expense for the three years ended March 31 were as follows (in thousands):

				2009			2008			2007
Current
	Federal			$	2,667		$	4,421		$	8,623
	State				528			824			1,065
		Total current			3,195			5,245			9,688
Deferred
	Federal				(550	)		(3	)		(1,422	)
	State				(49	)		(163	)		(270	)
		Total deferred			(599	)		(166	)		(1,692	)
			Total	$	2,596		$	5,079		$	7,996

        A reconciliation of the expected income tax computed using the federal statutory income tax rate to the Company's recorded income tax provision expense is as follows for the three years ended March 31 (in thousands):

		2009			2008			2007
Income tax computed at federal statutory tax rate of 35%		$	(907	)	$	4,809		$	7,107
State taxes, net of federal benefit			235			433			690
Non-deductible goodwill impairment			3,503			—			—
Reversal of uncertain tax positions			(429	)		—			—
Other non-deductible (deductible) differences, net			156			(28	)		69
Other temporary differences, net			38			(135	)		130
	Total	$	2,596		$	5,079		$	7,996

F-30

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—INCOME TAXES (Continued)

        Significant components of the Company's deferred tax liabilities and assets as of March 31 were as follows (in thousands):

			2009			2008
Deferred tax liabilities
	Depreciation		$	(481	)	$	(14	)
	Goodwill			(795	)		(583	)
	Film library			(2,537	)		(1,985	)
	Tax method changes			(199	)		(419	)
	Identifiable intangibles			(222	)		(353	)
	Other			(44	)		(58	)
		Total deferred tax liabilities		(4,278	)		(3,412	)
Deferred tax assets
	Net operating loss carryforward			800			924
	Deferred revenue			70			285
	Asset disposition, impairment and other reserves			804			456
	Allowance for doubtful accounts and reserve for sales returns			121			96
	Share-based compensation			886			699
	Amortization			297			11
	Accruals			290			149
	Identifiable intangibles			361			271
	Other			104			346
		Total deferred tax assets		3,733			3,237
Net deferred tax liability			$	(545	)	$	(175	)

        The Company realized tax benefits from option and warrant exercises of $0.1 million and $1.0 million for the years ended March 31, 2008 and 2007, respectively. These deductions result in an increase in additional paid-in capital. No tax benefits from option and warrant exercises were realized during the year ended March 31, 2009.

        Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. SFAS No. 109, Accounting for Income Taxes, requires the establishment of a valuation allowance when, based on an evaluation of objective evidence, there is a likelihood that some portion or all of the deferred tax assets will not be realized. As of March 31, 2009, the Company determined that it was more likely than not that its deferred tax assets would be recognized and accordingly no valuation allowance has been recorded. Net deferred tax liabilities of approximately $1.9 million pertain to certain temporary differences related to purchased intangibles, the film library and accounting method changes, which arose as part of the MRG acquisition completed during fiscal year 2006.

        The Company has net operating loss carryforwards of approximately $2.1 million for federal income tax purposes, which expire through 2019. For tax purposes, there is an annual limitation of approximately $0.2 million for the remaining 10 years on all of the Company's net operating loss under Internal Revenue Code Section 382. Internal Revenue Code Section 382 also places a limitation on the

F-31

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—INCOME TAXES (Continued)

utilization of net operating loss carryforwards when an ownership change, as defined in the tax law, occurs. Generally, an ownership change occurs when there is a greater than 50 percent change in ownership. When a change occurs, the actual utilization of net operating loss carryforwards is limited annually to a percentage of the fair market value of the Company at the time of such change.

        Effective at the beginning of the first fiscal quarter of 2008, the Company adopted the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon effective settlement. In accordance with the provisions of FIN No. 48, at March 31, 2009 the Company had total unrecognized tax benefits of approximately $0.2 million that are not expected to be settled within one year and have been classified within long-term taxes payable. If the Company was to prevail or the uncertainties were settled in favor of the Company on all uncertain tax positions, the net effect is estimated to be a benefit to the Company's tax expense of approximately $0.2 million. As of March 31, 2009, the Company had accrued immaterial amounts of interest expense related to uncertain tax position liabilities. If the Company was to prevail or the uncertainties were settled in favor of the Company on all uncertain tax positions, the reversal of the accrued interest would result in a benefit to the Company.

        During the third quarter of fiscal year 2009, the statute of limitations expired on approximately $1.6 million of uncertain tax positions resulting in a decline in the uncertain tax position balance as reflected in the current portion of taxes payable. This reversal of the uncertain tax positions resulted in a $0.4 million reduction in the Company's fiscal year 2009 tax expense and a $0.4 million reversal of related interest expense. Approximately $1.1 million of the reversal of the uncertain tax position liabilities was recorded as an increase to additional paid-in capital because the amount was originally recorded as a reduction of additional paid-in capital and had no impact on income tax expense.

        The aggregate change in the balance of the unrecognized tax benefits during the fiscal year ended March 31, 2009 was as follows (in thousands):

Beginning balance at April 1, 2008	$	1,838
Expiration of statute of limitations in the current year		(1,598	)
Other		2
Ending balance at March 31, 2009	$	242

        The Company files U.S. federal and state income tax returns. During the third quarter of fiscal year 2009, the Company concluded an audit by the Internal Revenue Service ("IRS") for its fiscal year 2007 tax year, and the IRS proposed no changes to the Company's fiscal year 2007 tax return in connection with the audit. With few exceptions, the Company is no longer subject to examination of its federal and state income tax returns for years prior to fiscal years 2005 and 2000, respectively.

F-32

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10—STOCK REPURCHASE AND CASH DIVIDENDS

        In June 2008, the Company's Board of Directors extended a share repurchase plan allowing for the repurchase of approximately 1.1 million shares of common stock through June 2010. During the six month period ended September 30, 2008, the Company substantially completed the share repurchase plan and repurchased approximately 1.1 million shares for a total purchase price of approximately $4.3 million.

        On November 14, 2008, the Company entered into a Stock Purchase Agreement pursuant to which a shareholder agreed to sell and the Company agreed to purchase approximately 2.6 million shares of the Company's common stock for a cash purchase price of $1.55 per share or an aggregate purchase price for all of the shares of approximately $4.1 million. The Company funded the acquisition of the shares with available cash.

        On March 11, 2009, the Company purchased through one broker in an unsolicited single block trade approximately 0.5 million shares of its common stock for a cash purchase price of $1.30 per share, or an aggregate purchase price for all of the shares of approximately $0.7 million. The acquisition was funded with available cash. Similar to the repurchase in November 2008, the acquisition was approved by the Company's Board of Directors and was effected in a manner intended to comply with the safe harbor provisions provided by Rule 10b-18 under the Securities Exchange Act of 1934.

        On December 7, 2006, the Company's Board of Directors declared a special dividend of $0.60 per share. The Company paid this dividend in February 2007 to shareholders of record on January 15, 2007. During each of the quarters in fiscal year 2008, the Company's Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock. The Company paid approximately $9.0 million in cash dividends through March 31, 2008. Additionally, as of March 31, 2008, the Company had a dividend payable of $3.0 million that was subsequently paid in April 2008. The Board of Directors did not declare a quarterly dividend during fiscal year 2009, and the payment of future quarterly dividends is at the discretion of the Board of Directors.

NOTE 11—SEGMENT AND GEOGRAPHIC INFORMATION

        The Company presents segment information in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes reporting and disclosure standards for an enterprise's operating segments. Operating segments are defined as components of an enterprise for which separate financial information is available and regularly reviewed by the Company's chief operating decision maker.

        The Company has the following reportable operating segments:

•

Transactional TV—distributes branded adult entertainment programming PPV networks and VOD content through electronic distribution platforms including cable television and DBS operators.

•

Film Production—produces and distributes mainstream films and erotic features and events. These titles are distributed on U.S. and international premium channels, PPV channels and VOD systems across a range of cable and satellite distribution platforms. The Film Production segment also distributes a full range of independently produced motion pictures to markets around the world. Additionally, this segment periodically provides producer-for-hire services to major Hollywood studios.

F-33

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11—SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

•

Direct-to-Consumer—aggregates and resells adult content via the Internet. The Direct-to-Consumer segment sells content to subscribers primarily through its consumer websites. This segment also includes the results of a set-top box IPTV test business model that began incurring costs in the fourth quarter of fiscal year 2008.

•

Corporate Administration—expenses reported as Corporate Administration include all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer segments. These costs include, but are not limited to, legal and accounting expenses, insurance, registration and filing fees with NASDAQ, executive employee costs, and the SEC, investor relations and printing costs associated with the Company's public filings and shareholder communications.

        The accounting policies of the reportable segments are the same as those described in the summary of accounting policies. Segment profit (loss) is based on income (loss) before income taxes. The reportable segments are distinct business units, separately managed with different distribution channels. The selected operating results of the Company's segments during the the three years ended March 31 were as follows (in thousands):

			2009			2008			2007
Net Sales
	Transactional TV		$	42,559		$	40,998		$	47,242
	Film Production			8,584			13,094			13,694
	Direct-to-Consumer			1,511			1,819			2,335
		Total	$	52,654		$	55,911		$	63,271
Segment Profit (Loss)
	Transactional TV		$	21,637		$	21,423		$	27,832
	Film Production			(10,916	)		2,307			2,182
	Direct-to-Consumer			(3,837	)		(165	)		(846	)
	Corporate Administration			(9,476	)		(9,826	)		(8,863	)
		Total	$	(2,592	)	$	13,739		$	20,305
Interest Income
	Transactional TV		$	—		$	2		$	3
	Film Production			5			7			23
	Corporate Administration			203			702			1,215
		Total	$	208		$	711		$	1,241
Interest Expense
	Direct-to-Consumer		$	13		$	2		$	1
	Corporate Administration			208			155			228
		Total	$	221		$	157		$	229
Reversal of interest expense for uncertain tax positions
	Corporate Administration		$	429		$	—		$	—

F-34

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11—SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

			2009		2008		2007
Depreciation and Amortization
	Transactional TV		$	5,015	$	4,404	$	4,313
	Film Production			3,452		3,619		6,818
	Direct-to-Consumer			605		248		411
	Corporate Administration			30		14		12
		Total	$	9,102	$	8,285	$	11,554

        The Company's total identifiable asset balance by operating segment at March 31 was as follows (in thousands):

			2009							2008							2007
Identifiable Assets			Gross		Eliminations			Net		Gross		Eliminations			Net		Gross		Eliminations			Net
	Transactional TV		$	147,693	$	(120,509	)	$	27,184	$	125,500	$	(98,134	)	$	27,366	$	104,444	$	(78,356	)	$	26,088
	Film Production			24,695		(2,242	)		22,453		34,269		(1,075	)		33,194		30,520		—			30,520
	Direct-to-Consumer			18,536		(16,700	)		1,836		17,904		(15,460	)		2,444		16,462		(15,445	)		1,017
	Corporate Administration			49,909		(32,843	)		17,066		47,838		(27,181	)		20,657		56,268		(25,677	)		30,591
		Total	$	240,833	$	(172,294	)	$	68,539	$	225,511	$	(141,850	)	$	83,661	$	207,694	$	(119,478	)	$	88,216

        Net sales, classified by geographic billing location of the customer, during the three years ended March 31 was as follows (in thousands):

				2009		2008		2007
Domestic net sales				$	48,260	$	51,976	$	58,875
International net sales:
	Europe, Middle East and Africa				1,829		1,635		2,385
	Latin America				944		649		1,086
	Canada				939		215		369
	Asia				443		1,207		296
	Other				239		229		260
		Total international net sales			4,394		3,935		4,396
			Total net sales	$	52,654	$	55,911	$	63,271

        Approximately $0.5 million of the Company's total assets are located in Europe. All other assets are located in the U.S.

F-35

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12—MAJOR CUSTOMERS

        The Company's major customers (revenue in excess of 10% of net sales) are Comcast Corporation ("Comcast"), DirecTV, Inc. ("DirecTV"), DISH Network Corporation ("DISH"), and Time Warner, Inc. ("Time Warner"). These customers are included in the Transactional TV and Film Production segments. Net sales from these customers as a percentage of total net sales for the three years ended March 31 was as follows:

	2009			2008			2007
Comcast		24	%		18	%		14	%
DirecTV		15	%		13	%		13	%
DISH		13	%		14	%		21	%
Time Warner		13	%		14	%		12	%

        The Company's outstanding accounts receivable balances due from its major customers as of March 31 are as follows (in thousands):

	2009		2008
Comcast	$	1,735	$	1,882
DirecTV		1,121		2,011
DISH		940		1,817
Time Warner		683		1,015

        The loss of any of the Company's major customers would have a material adverse effect on the Company's results of operations and financial condition.

NOTE 13—COMMITMENTS AND CONTINGENCIES

        The following table reflects the Company's contractual cash obligations as of March 31, 2009 for each of the time periods specified (in thousands):

Year Ended March 31,		Operating Leases		Vendor Obligations		Total
2010		$	2,081	$	4,506	$	6,587
2011			1,840		1,818		3,658
2012			1,092		1,219		2,311
2013			635		1,099		1,734
2014			347		1,000		1,347
Thereafter			—		3,500		3,500
	Total minimum payments	$	5,995	$	13,142	$	19,137

        For the purposes of this table, contractual obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, such as fixed or minimum services to be purchased and the approximate timing of the transaction. Obligations to acquire specified quantities of movie license rights that are subject to the delivery of the related movies are included in vendor obligations because the Company estimates that the movies will be delivered in the specified time periods.

F-36

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13—COMMITMENTS AND CONTINGENCIES (Continued)

        The Company has recorded long-term income taxes payable of approximately $0.2 million for uncertain tax positions, reduced by the associated federal deduction for state taxes. The Company is unable to reliably estimate the timing of future payments, if any, related to these uncertain tax positions. Therefore, the amounts have been excluded from the above table.

Operating Lease Obligations

        The Company maintains non-cancelable leases for office space and equipment under various operating leases. The leases for office space expire through November 2013 and contain annual Consumer Price Index escalation clauses. The Company's Transactional TV segment has entered into direct lease agreements that expire through December 2010 with an unrelated party for the use of transponders to broadcast its channels on satellites. As the lessee of transponders under the transponder agreements, the Company is subject to arbitrary refusal of service by the service provider if that service provider determines that the content being transmitted by the Company is harmful to the service provider's name or business. Any such service disruption would substantially and adversely affect the financial position and results of operations of the Company. The Company also bears the risk that the access of their networks to transponders may be restricted or denied if a governmental authority commences an investigation concerning the content of the transmissions. Additionally, cable operators may be reluctant to carry less edited or partially edited adult programming on their systems. If either of the above scenarios occurred, it could adversely affect the Company's financial position and results of operations. The Company had no equipment under capital lease at March 31, 2009 or 2008.

        Rent expense for the years ended March 31, 2009, 2008 and 2007 was approximately $1.8 million, $1.7 million and $2.1 million, respectively, which includes transponder expenses.

Vendor Obligations

        From time to time, the Company enters into arrangements with movie studios to acquire license rights for a fixed and/or minimum quantity of movies over various purchase periods as defined by the agreements. Additionally, the Company is party to certain uplinking, transport and marketing services that contractually obligate the Company to receive services over specified terms as per these arrangements. The Company is also obligated to make future payments associated with its purchase of intellectual property and patent rights. These contractual obligations are reflected in the above table as vendor obligations.

Employment Contracts

        The Company employs certain key executives under non-cancelable employment contracts in Colorado, California, Florida and Georgia. These employment contracts expire through March 2011.

        Commitments under these obligations at March 31, 2009 were as follows (in thousands):

Year Ended March 31,
2010		$	4,584
2011			3,274
	Total obligation under employment contracts	$	7,858

F-37

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13—COMMITMENTS AND CONTINGENCIES (Continued)

Indemnification

        The Company has agreements whereby it indemnifies officers and directors for certain events or occurrences while the officer or director is, or was, serving in such capacity at the Company's request. The term of the indemnification period is for the officer's or director's lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits exposure and the Company believes that this policy would enable it to recover a portion, if not all, of any future indemnification payments. As a result of its insurance policy coverage, the Company believes that its estimated exposure on these indemnification agreements is minimal.

        The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any claim by any third party, including customers, with respect to the Company's products or services, including, but not limited to, alleged negligence, breach of contract, or infringement of a patent, copyright or other intellectual property right. The term is any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes that its estimated exposure on these agreements is minimal.

Legal Proceedings

        In the normal course of business, the Company is subject to various lawsuits and claims. Management of the Company believes that the final outcome of these matters, either individually or in the aggregate, will not have a material effect on its financial statements.

NOTE 14—BORROWING ARRANGEMENTS

        In July 2008, the Company obtained a $9.0 million line of credit from a third-party financial institution. Amounts borrowed under the line of credit can be used to support the Company's short-term working capital needs. The line of credit is secured by the Company's trade accounts receivable and will mature in July 2009. Per the contractual loan agreement, borrowings under the line of credit are based on the greater of the current prime rate less 0.13% or 5.75%. The terms of the line of credit include certain defined negative and affirmative covenants customary for facilities of this type, and the Company was in compliance with the covenants at March 31, 2009. The Company made borrowings under the line of credit during the third quarter of fiscal year 2009 to support its working capital needs, and the outstanding balance as of March 31, 2009 was $4.0 million.

NOTE 15—DEFINED CONTRIBUTION PLAN

        The Company sponsors a 401(k) retirement plan. The plan covers all eligible employees of the Company. Employee contributions to the plan are elective, and the Company has discretion to match employee contributions. All contributions by the Company are vested over a three-year period. Contributions by the Company during each of the years ended March 31, 2009, 2008, and 2007 were approximately $0.3 million.

F-38

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16—SHAREHOLDER RIGHTS PLAN

        On November 29, 2001, the Company's Board of Directors adopted a Stockholder Rights Plan in which Rights were distributed at the rate of one Right for each share of the Company's common stock held by stockholders of record as of the close of business on December 21, 2001. The Rights generally will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's outstanding common stock after November 29, 2001, or commences a tender offer upon consummation of which the person or group would beneficially own 15% or more of the Company's outstanding common stock. Each Right is initially exercisable at $10.00 and will expire on December 21, 2011. Effective August 1, 2008, pursuant to an Amended and Restated Rights Agreement between the Company and the rights agent made effective as of such date, the Company eliminated the continuing director or so-called "dead hand" provisions included in the originally adopted Shareholder Rights Plan.

NOTE 17—RELATED PARTY TRANSACTIONS

        The Company paid approximately $0.1 million, $0.2 million and $0.4 million to Isaacman, Kaufman & Painter during the fiscal years ended March 31, 2009, 2008 and 2007, respectively, associated with legal services. The Company's board member, Alan Isaacman, is a Senior Member of Isaacman, Kaufman & Painter.

NOTE 18—RESTRUCTURING COSTS

        As described in Note 5—Goodwill and Other Intangible Assets, the Company restructured the Direct-to-Consumer segment's new product operations including the IPTV set-top box initiative during the fourth quarter of fiscal year 2009 as a result of (a) lower than expected subscriber additions for the IPTV test business model during the second half of fiscal year 2009, (b) the significant downturn in economic conditions and related reduction in consumer spending during the second half of fiscal year 2009, and (c) slower than expected development of new product lines. In connection with this restructuring, the Company incurred approximately $0.2 million of early contract termination fees for consulting contracts. In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, these costs are reflected in the charge for restructuring and asset impairments other than goodwill line item in the consolidated statements of operations because the Company terminated the contracts in accordance with the contract terms in the fourth quarter of fiscal year 2009. The Company subsequently paid these fees in April 2009 and does not expect to incur additional restructuring charges in future periods.

F-39

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 19—QUARTERLY INFORMATION (UNAUDITED)

        The consolidated results of operations on a quarterly basis were as follows (net income (loss) per common share may not sum due to rounding; in thousands, except per share amounts):

								Net Income (Loss) Per Common Share
			Gross Margin		Net Income (Loss)
	Net Sales							Basic			Diluted
2009
First quarter	$	13,061	$	9,132	$	1,179		$	0.05		$	0.05
Second quarter		13,375		8,946		1,295			0.06			0.06
Third quarter		12,619		8,499		(8,853	)		(0.42	)		(0.42	)
Fourth quarter		13,599		9,017		1,191			0.06			0.06
Total	$	52,654	$	35,594	$	(5,188	)	$	(0.24	)	$	(0.24	)
2008
First quarter	$	12,940	$	9,143	$	1,497		$	0.06		$	0.06
Second quarter		12,430		8,971		2,145			0.09			0.09
Third quarter		17,921		11,049		3,132			0.13			0.13
Fourth quarter		12,620		9,062		1,886			0.08			0.08
Total	$	55,911	$	38,225	$	8,660		$	0.36		$	0.36

F-40

SUPPLEMENTAL INFORMATION

VALUATION AND QUALIFYING ACCOUNTS—SCHEDULE II

(in thousands)

		Balance, Beginning of Year		Additions (Deductions) Charged to Operations		Additions (Deductions) from Reserve			Balance, End of Year
Allowance for doubtful accounts
	March 31, 2009	$	169	$	169	$	(30	)	$	308
	March 31, 2008	$	41	$	307	$	(179	)	$	169
	March 31, 2007	$	32	$	14	$	(5	)	$	41

		Balance, Beginning of Year		Additions (Deductions) Charged to Operations		Additions (Deductions) from Reserve			Balance, End of Year
Reserve for chargebacks/credits
	March 31, 2009	$	11	$	106	$	(103	)	$	14
	March 31, 2008	$	7	$	40	$	(36	)	$	11
	March 31, 2007	$	9	$	51	$	(53	)	$	7

		Balance, Beginning of Year		Additions (Deductions) Charged to Operations			Additions (Deductions) from Reserve			Balance, End of Year
Accrued restructuring expense
	March 31, 2009	$	—	$	189		$	—		$	189
	March 31, 2008	$	46	$	(46	)	$	—		$	—
	March 31, 2007	$	50	$	—		$	(4	)	$	46

F-41

EXHIBIT INDEX

Exhibit No.			Exhibit Description
	3.01		Amended and Restated Articles of Incorporation of the Company(1)
	3.02		Amended and Restated Bylaws of the Company(2)
	4.01		Form of Common Stock Certificate(3)
	4.02		Amended and Restated Rights Agreement between New Frontier Media, Inc. and Corporate Stock Transfer, Inc., as rights agent(4)
	4.03		Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, together with the related Rights Certificate, included as Appendices A and B to the Rights Agreement incorporated by reference herein as Exhibit 4.02
	10.01		Lease Agreement for premises at 5435 Airport Boulevard, Boulder CO(5)
	10.02		Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Transponder Service(6)
	10.03		Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(6)
	10.04		Amendment Number One to Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(6)
	10.05		License Agreement between Colorado Satellite Broadcasting, Inc. and Metro Global Media, Inc.(6)
	10.06		Amendment Number Two to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(7)
	10.07		Amendment Number One to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Transponder Service(8)
	10.08		Amendment Number Four to the Agreement between Colorado Satellite Broadcasting, Inc. and Loral Skynet Concerning Skynet Space Segment Service(9)
	10.09		Office Lease Agreement between New Frontier Media, Inc. and Northview Properties, LLC(9)
	10.10		Lease Modification Agreement between New Frontier Media, Inc. and LakeCentre Plaza Limited, LLLP(9)
	10.11		Catalog License Agreement between Pleasure Productions, Inc. and Colorado Satellite Broadcasting, Inc.(9)
	10.12		Telecommunications Services Agreement between WilTel Communications, LLC and Colorado Satellite Broadcasting, Inc.(10)
	10.13		Amendment No. 3 to Contract Number T70112100 between Colorado Satellite Broadcasting, Inc. and Intelsat USA Sales Corp.(11)
	10.14	#	Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation(12)
	10.15	*	Summary of Director Compensation Arrangements(2)
	10.16	*	1998 Incentive Stock Plan(13)
	10.17	*	1999 Incentive Stock Plan(14)
	10.18	*	Millennium Incentive Stock Option Plan(15)

Exhibit No.			Exhibit Description
	10.19	*	2001 Incentive Stock Plan(16)
	10.20	*	2007 Stock Incentive Plan(17)
	10.21	*	Form of Award Agreements under 2007 Stock Incentive Plan(18)
	10.22	*	Amended and Restated Independent Contractor Agreement, dated November 7, 2007, between New Frontier Media, Inc. and Matthew Pullam(19)
	10.23	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Michael Weiner(2)
	10.24	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Grant Williams(2)
	10.25	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Ira Bahr(2)
	10.26	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Ken Boenish(2)
	10.27	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Marc Callipari(2)
	10.28	*	Amended and Restated Employment Agreement between New Frontier Media, Inc. and Scott Piper(2)
	10.29	#	Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming by and between Colorado Satellite Broadcasting, Inc. and DirecTV, Inc.(19)
	10.30		Business Loan Agreement, as supplemented (including related Promissory Note and Commercial Security Agreement), dated July 1, 2008 between New Frontier Media, Inc. and First Community Bank(20)
	10.31		Stock Purchase Agreement, dated and effective as of November 13, 2008, by and between New Frontier Media, Inc. and Steel Partners II, L.P.(21)
	10.32	##	Affiliation Agreement, dated January 1, 2000 and as amended to date, between the Company and Time Warner Cable, a division of Time Warner Entertainment Company, L.P.
	10.33	##	Video On Demand License Agreement, dated March 13, 2000 and as amended to date, between the Company and Time Warner Cable, a division of Time Warner Entertainment Company, L.P.
	10.34	##	Adult VOD License Agreement, dated October 18, 2002 and as amended to date, between Colorado Satellite Broadcasting, Inc. and Comcast Cable Communications, Inc.
	10.35	##	Pleasure Service License Agreement, dated November 16, 2000 and as amended to date, between Colorado Satellite Broadcasting, Inc. and Comcast Programming, a division of Comcast Corporation
	10.36		First Amendment to Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation
	10.37	##	Second Amendment to Satellite Capacity Lease between Colorado Satellite Broadcasting, Inc. and Transponder Encryption Services Corporation
	21.01		Subsidiaries of the Company
	23.01		Consent of Grant Thornton LLP
	31.01		CEO Certification pursuant to Rule 13a-14(a)/15d-14(a)

Exhibit No.		Exhibit Description
	31.02	CFO Certification pursuant to Rule 13a-14(a)/15d-14(a)
	32.01	Section 1350 Certification of CEO
	32.02	Section 1350 Certification of CFO

(1)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on May 9, 2007 (File No. 000-23697).

(2)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2008 (File No. 000-23697).

(3)

Incorporated by reference to the corresponding exhibit included in the Company's Registration Statement on Form SB-2 filed on September 10, 1997 (File No. 333-35337).

(4)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on August 1, 2008 (File No. 000-23697).

(5)

Incorporated by reference to the corresponding exhibit included in the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 (File No. 000-23697).

(6)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 000-23697).

(7)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 000-23697).

(8)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 (File No. 000-23697).

(9)

Incorporated by reference to the corresponding exhibit included in the Company's Annual Report filed on Form 10-K for the fiscal year ended March 31, 2004 (File No. 000-23697).

(10)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2004 (File No. 000-23697).

(11)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2005 (File No. 000-23697).

(12)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2006 (File No. 000-23697).

(13)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on August 7, 1998 (File No. 000-23697).

(14)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on September 28, 1999 (File No. 000-23697).

(15)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on August 29, 2000 (File No. 000-23697).

(16)

Incorporated by reference to the Company's definitive proxy statement filed under cover of Schedule 14A on July 23, 2001 (File No. 000-23697).

(17)

Incorporated by reference to Appendix A to the Company's definitive proxy statement filed under cover of Schedule 14A on July 16, 2007 (File No. 000-23697).

(18)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on August 24, 2007 (File No. 000-23697).

(19)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2007 (File No. 000-23697).

(20)

Incorporated by reference to the corresponding exhibit included in the Company's Quarterly Report filed on Form 10-Q for the quarter ended June 30, 2008 (File No. 000-23697).

(21)

Incorporated by reference to the corresponding exhibit included in the Company's Current Report on Form 8-K filed on November 14, 2008 (File No. 000-23697).

*

Denotes management contract or compensatory plan or arrangement.

#

Confidential portions of this agreement have been redacted pursuant to a confidential treatment request filed separately with the SEC.

##

Confidential treatment has been requested as to portions of this exhibit. Such portions have been redacted and filed separately with the SEC.

EX-10.32

Exhibit 10.32

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

AFFILIATION AGREEMENT

THIS AFFILIATION AGREEMENT (the “Agreement”) dated as of January 1, 2000 (the “Effective Date”) is by and between New Frontier Media, Inc., a Colorado corporation (“Network”), and TIME WARNER CABLE, a division of Time Warner Entertainment Company, L.P., a Delaware partnership (“Affiliate”).

The parties, intending to be legally bound, hereby agree as follows:

1.CERTAIN DEFINITIONS AND REFERENCES

(a)Certain Definitions. As used herein, the following terms have the meanings indicated:

“Net Revenue” means [***] provided by a System (“Deductions”), provided that such Deductions shall not exceed [***] percent ([***]%) of the [***] from which it is deducted.

“Operating Area” means that geographic area within which a System (as defined herein) is authorized by the appropriate governmental agency, authority or instrumentality (if required) to operate an audio or video distribution facility and is operating or is obligated to operate or become operational.

“Pay Per View Purchase” means the purchase of the Service by, and broadcast to, a Subscriber via a System on a transactional “[***]” basis, “[***]” basis or a [***] “[***] basis” (i.e., a [***] hour or “safe harbor” block of time, as that term is defined in Section 505 of the Telecommunications Act of 1996, e.g., 10:00 p.m. to 6:00 a.m.).

“Service” means the commercial free encrypted adult entertainment satellite-delivered pay television service known as Pleasure™ which is a twenty four (24) hour per day pay video programming service that consists of, and throughout the Term (as defined herein) shall consist of (i) [***] adult films, events and programs that are [***] (or “[***]”) in the degree of explicitness of programming currently featured on competing adult cable television services such as [***] and [***]; and (ii) promotionals and/or interstitial programming which advertises the Service (such as pay-per-view features and highlights), or the services of Network’s affiliates and joint ventures which it owns or controls, provided, however, that such programming shall not exceed [***] in any [***] period, and provided further that such commercials shall not advertise any other programming or service that is not available in such System to Subscribers.

“Subscriber” means a person or entity to whom the Service is distributed via a System hereunder, excluding any commercial establishment or facility which charges an admission fee, cover charge, minimum or like sum.

“Subscription Purchase” means the purchase of the Service by, and broadcast to, a Subscriber via a System on a [***] basis and/or any other basis that does not constitute a Pay Per View Purchase.

1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

“System” means a cable television system or group of cable television systems (whether designated as a division or otherwise) that is owned or managed by a Time Warner Company (as defined herein) and has executed a Launch Authorization Form substantially in the form as that attached hereto as Exhibit A.

“Term” shall have the meaning set forth in Section 3 of the Agreement.

“Time Warner Company” means Affiliate, Time Warner Inc. (“TWI”), Time Warner Entertainment Company, L.P. (“TWE”), Time Warner Entertainment-Advance/Newhouse, L.P. (“TWEAN”), TWI Cable Inc. (“TWIC”) or Paragon Communications, or any other corporation, partnership, joint venture, trust, joint stock company, association, unincorporated organization (including a group acting in concert) or other entity of which Affiliate, TWI, TWE, TWEAN, TWIC or Paragon Communications, directly or indirectly owns at least 25% of the equity.

(b)Certain References. As used herein, references “person” shall mean an individual or a corporation, partnership, joint venture, trust, joint stock company, association, incorporated organization (including a group acting in concert) or other entity.

2.RIGHTS

(a)Grant of Rights. During the Term (as defined herein), Network hereby grants to Affiliate, and Affiliate hereby accepts from Network:

(i)the non-exclusive right but not the obligation to exhibit and distribute the Service (whether in its current analog format or in any other format, whether digitized, compressed, modified, replaced, or otherwise manipulated) via cable or other transmission service to any person in an Operating Area;

(ii)the non-exclusive right to exhibit and distribute the Service (whether in its current format or in any other format, whether digitized, compressed, modified, replaced or otherwise manipulated) to satellite master antenna television systems (“SMATVs”), multipoint distribution services (“MDSs”), multichannel multipoint distribution services (“MMDSs”), equipment owned or operated by the owners or residents of individual dwelling units for private viewing capable of receiving audio/visual signals and/or programming directly via satellite (including, without limitation, C-Band and Ku-Band signals), as suitably modified, manipulated, compressed or replaced now or in the future (“TVRO”) and all other methods of distributing or receiving audio/visual signals and/or programming in an Operating Area, and in any county adjacent to a System’s Operating Area excluding (x) traditional broadcast television, (y) subject to Section 5(j), VCR cassettes, DVD disks, and similar recorded media, including technological advances or replacements and (z) the Internet (“Other Distribution Methods”); and

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(iii)the non-exclusive right to exhibit and distribute the Service nationwide to TVRO or DBS, including tier-bit access rights.

(b)Sublicense and Bulk Distribution Rights. During the Term, Affiliate shall have the right to sublicense its rights hereunder within an Operating Area and any county adjacent to a System’s Operating Area to third party distributors of cable television programming or services to SMATV, MDS, MMDS, TVRO or Other Distribution Methods. During the Term, each System shall have the right to distribute the Service on a [***] basis to multiple unit dwelling complexes, including, without limitation, apartment complexes, condominiums, cooperatives, hotels and motels.

(c)Addition and Deletion of Systems. Affiliate shall have the unilateral right at any time and from time to time during the Term to add or delete Systems, by giving prior written notice to Network; such deletions shall be effective [***] after the date of such notice to Network and such additions shall be effective as of the date specified in the notice. The division of Affiliate in Chasworth, California, which entered into an agreement with Network on, 1999, may, at its option, terminate its agreement with Network and become a System under this Agreement.

3.TERM

The term of this Agreement shall be [***], commencing upon the Effective Date (the “Term”).

4.CONTENT OF THE SERVICE

(a)Service Description. The Service shall consist at all times solely of [***] adult films, events and programs that depict [***] and [***] situations, and shall not depict [***]. The Service shall, at all times during the Term adhere to and comply with the definition contained in Section 1(a) of this Agreement and with the [***] editing and content standards described in Exhibit B and shall consist of programming similar in all material respects, to that described on the program schedule attached hereto as Exhibit C. The programming included in the Service shall be [***] (or “[***]”) in the degree of explicitness of programming currently featured on competing adult services cable television services such as [***] and [***]. The Service shall not include: (i) any “[***]” or any programming constituting the direct on-air [***]; (ii) any [***]; or (iii) any [***] for [***] or any other similar services. Network agrees that, during each [***] of the Term, it shall send [***] copy of its [***] program schedule, to the extent available, to Affiliate, in care of: Director of Programming.

(b)Vertical Blanking Interval. Network represents that all of the signal distribution capacity contained within the analog bandwidth of the signal for the Service and the appropriate equivalent portion of the digital signal for the Service (including, without limitation, an MPEG private data stream) (other than traditional television video and audio signals), including, without limitation, the vertical blanking interval and audio subcarriers and any other portions of the bandwidth that may be created or made useable as a result of the digitization or compression or other non-analog formatting of the signal (collectively, “Non-Traditional and VBI Signals”), is not essential to or a part of the Service or necessary for the delivery or

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

distribution of the Service. Network agrees that any and all rights in and to any and all Non-Traditional and VBI Signals and the use thereof are and will be held exclusively by Affiliate and the Systems and that nothing contained herein shall restrict Affiliate or the Systems from using any and all Non-Traditional and VBI Signals by any means or for any purpose so long as such use does not degrade or interfere with the quality of the video and audio signal for the Service. Network may use the vertical blanking interval for the purpose of providing closed-captioning for the hearing impaired, one (1) second language audio, programs ratings information or other data required to be embedded by law, provided that there is no charge to Subscribers, Affiliate or any System in connection with the provision or receipt of such information.

(c)Ownership of and Responsibility for the Service. Network represents and warrants that it has and will have the right to grant the licenses granted herein, free and clear of all liens, restrictions, charges, claims and encumbrances, that it has obtained and will maintain all licenses, permits, exemptions, authorizations and consents necessary to fully perform this Agreement and that neither the Service nor any programming contained therein (i) is or will be obscene, or defamatory and unprivileged, or (ii) violates or infringes or will violate or infringe the civil or property rights, copyrights (including, without limitation, music synchronization and performance rights and dramatic and non-dramatic music rights), trademark rights, patent rights or rights of privacy of any person.

(d)Service Provided in its Entirety. During the Term, Network shall provide the Service in its entirety to Affiliate. When the phrase “in its entirety” is used in this Section 4(d), it means that each Subscriber of Affiliate receiving the Service shall be able to receive, at all points in time, programming received at each such point in time by any other subscriber to the Service, and if any subscriber to the Service is receiving, at a given point in time, programming that is different than the programming received by any subscriber of Affiliate receiving the Service at such point in time, Affiliate shall have the unconditional right to elect which of such programming it desires to receive and utilize at any System, which programming it desires to subdistribute as permitted by this Agreement, and/or which programming it will authorize for reception by satellite subscribers who are customers of Affiliate or an affiliate of Affiliate.

(e)Affiliate’s Right to Discontinue Service. If for any reason, including, without limitation, causes beyond the control of Network, Affiliate, in good faith, determines that the Service includes programming prohibited herein and/or does not include programming of at least the quantity, quality, type and content as required herein, [***], Network shall indemnify Affiliate and each System in accordance with Section 12(a) of this Agreement. If, for any reason, (i) Network’s breach of any obligation in this Section 4 is continuing [***], or (ii) Network breaches any obligation in this Section 4 on more than a single occasion, in addition to the indemnification provided by Network hereunder pursuant to Section 12(a), Affiliate may, in its sole discretion, pursue any other rights and remedies it may have hereunder in law or in equity, including, without limitation, (x) terminating this Agreement and ceasing to distribute the Service immediately upon written notice to Network at any time after such second or subsequent violation pursuant to Section 13; (y) discontinuing carriage of the Service on any or all Systems and canceling the Launch Authorization Form(s) for such System or Systems, effective at any time by giving Network [***] prior written notice; or (z) receiving credit against the Fees (as

4

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

defined herein) in the proportion that the [***] of programming each [***] which either is prohibited or deviates from the programming required herein bears to the total [***] the Service is transmitted each [***]; such credit to be applied against the Fees in any [***].

(f)Embedded Material. Subject to Section 4(b), or as otherwise agreed in writing, Affiliate shall not be obligated to distribute any material or information contained or embedded in or around any portion of the feed (whether analog or digital) provided to Affiliate (the “Signal”) for the Service that is not essential to and a part of the Service programming. Network further agrees that it shall not embed any material or information into or around any portion of the Signal that cannot be removed and/or blocked at any System headend. Network further agrees that it shall provide Affiliate with [***] prior written notice of its intention to embed any information in or around such Signal prior to the commencement of such embedding or at the time of execution of this Agreement if it is presently embedding such information.

(g)Other Exhibition and Distribution. Without Affiliate’s prior written consent, Network shall not exhibit or distribute, and shall not grant to any third party the right to exhibit or distribute, in any Operating Area, all or any portion of the Service, or any programming comprising a portion of the Service: (i) via the Internet or over any local or wide area computer network serving more than [***] (unless such computer network is maintained by Network for its own employees), whether for a fee or otherwise, including in multimedia, interactive, three-dimensional or other augmented or enhanced format, (ii) via any broadcast station or cable programming network other than the Service; in either case, whether simulcast, time-shifted, repackaged or distributed through any “video on demand” mechanism; provided, however, that, subject to Section 11, the foregoing (ii) shall not restrict Network from providing the Service to any multi-channel video programming provider. Notwithstanding the foregoing, nothing contained herein shall prevent Network from exhibiting or distributing, or granting any third party the right to exhibit or distribute, in the manner set forth in the immediately preceding sentence: (A) segments of [***] Programming (as defined herein) so long as (1) no such [***] Programming segment is of a duration [***] than [***], and (2) a program or show of [***] Programming is not exhibited or distributed in its [***] as [***] during any [***]; or (B) segments of [***] Programming (as defined herein) so long as (1) no such [***] Programming segment is of a duration [***] than [***], (2) no more than [***] of such [***] Programming segments exhibited or distributed during any [***] are taken from the [***] program, and (3) the total duration of all such [***] Programming segments exhibited or distributed during any [***] does not exceed [***] per [***]. As used herein, “[***] Programming” shall mean programming exhibited or distributed as part of the Service for the first time at least [***] prior to the date on which distribution pursuant to this section is made. As used herein, “[***] Programming” shall mean programming exhibited or distributed as part of the Service within the [***] preceding the date on which distribution pursuant to this section is made.

5.DELIVERY AND DISTRIBUTION OF THE SERVICE

(a)Transmission and Reception. Network shall, [***] (i) transmit analog and digital signals for the Service via a domestic communications satellite(s) commonly used for transmission of cable television programming signals, and (ii) fully encode and scramble the satellite signal for the Service using DigiCipher II Plus Technology, and shall include in such

5

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

satellite signal cue tones and other data, utilizing technology, standards, practices and procedures which are generally accepted throughout the cable television industry, and Affiliate shall provide and operate or cause to be provided and operated all equipment and facilities (including earth stations and decryption devices) necessary as of the date hereof for the reception of such signal and the distribution of such signal to Subscribers. Network represents that no facilities or equipment are necessary for such reception and distribution which a cable television system operator would not otherwise use in connection with the reception and distribution of satellite signals transmitted by a majority of widely distributed cable television programming.

(b)Network’s Signal Quality. Network shall deliver to each System and third party distributor of the Service hereunder a video and audio signal for the Service of a quality [***] as the quality of the video and audio signal delivered with respect to other widely distributed adult entertainment pay cable television programming. Without limiting the generality of the preceding sentence, Network shall deliver to each System and each such third party distributor a video and audio signal for the Service which meets or exceeds all applicable standards under any applicable Federal or State law, rule, regulation or order.

(c)Affiliate’s Signal Quality. Affiliate will cause the Systems to distribute to their Subscribers a video and audio signal for the Service of a quality [***] as the quality of the video and audio signal presently distributed by the Systems with respect to other widely distributed cable television programming, but in no event higher than the technical quality of the video and audio signal received by the Systems from Network.

(d)Digital Signal. Network hereby grants Affiliate, and any affiliate of Affiliate, the right to receive the signal of the Service, to digitize, compress, modify, replace or otherwise technologically manipulate the signal, and to transmit the signal as so altered (the “Altered Signal”) to a satellite, or to locations within the continental United States designated by Affiliate (in its sole and absolute discretion) for redistribution to terrestrial or other reception sites capable of receiving and utilizing the Altered Signal provided that no such alteration, transmission, redistribution, reception or other use will cause a material adverse change in a viewer’s perception of the principal video or principal audio presentation of the Service. Furthermore, Network shall not change the signal of the Service in such a way as to technically or technologically defeat, or otherwise interfere with, Affiliate’s, any affiliate’s of Affiliate, or any System’s rights under this Section 5(d). In the event Network interferes with or otherwise prevents receipt, digitization, compression, modification, replacement, utilization or manipulation of the signal of the Service by Affiliate, any affiliate of Affiliate, or any System pursuant to the terms of this Section 5(d), then in addition to any other rights at law or equity Affiliate shall have the right to cancel the Launch Authorization Form(s) for any or all Systems, immediately, and to discontinue carriage, immediately, of the Service on any or all Systems.

(e)Change in Satellite. If Network proposes to change the satellite via which the signal for the Service is transmitted to a satellite different from that via which it is presently transmitted, Network will give [***] prior written notice to Affiliate, provided however that Affiliate acknowledges that a force majeure event (as described in Section 10) may prevent Network from providing the foregoing [***] notice, in which event Network shall provide as much advance notice as is [***]. If, in order to receive the Service after such change, any System

6

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

would incur expenses for additional satellite transmission reception equipment, the Launch Authorization Form for such System may be cancelled by Affiliate upon notice to Network as of the effective date of such change.

(f)Change in Encryption Method or Digitization. If Network proposes to change the method via which the signal for the Service is encoded, scrambled or to digitize the signal in connection with the satellite transmission thereof to a method different from that via which it is presently encoded, scrambled or digitized, Network will give [***] prior written notice to Affiliate and Network shall provide to each System, [***] any additional decryption equipment, provided however, that if Network fails to provide such additional decryption equipment to a System or a System would incur expenses for additional digitization equipment in order to continue to receive the Service after such change, the Launch Authorization Form for such System may be cancelled by Affiliate upon notice to Network as of the effective date of such change.

(g)Other Technological Changes. Except as otherwise provided in Sections 5(e) and 5(f), Network shall not materially change the technology, standards, practices or procedures utilized in connection with the delivery of the Service unless such change is generally being made in the cable television industry.

(h)Carriage. The Systems and any third party distributor of the Service hereunder may distribute the Service on a [***] or [***] basis on a [***] or [***] basis; provided, however, that, except as otherwise expressly permitted or required hereby, during the time when a System or such a third party distributor distributes the Service, such System or third party distributor must distribute the Service without alteration, editing or delay of any kind. Affiliate (or the Systems or such third party distributors) will have exclusive right to designate the channel(s) over which the Service will be carried and will have the right to change such designation from time to time and at any time.

(i)Packaging. Each System or third party distributor of the Service hereunder may carry the Service in an analog and/or digital format and may package the Service with other premium services.

(j)Reproduction Limitations. Subject to the last sentence of this Section 5(j), Affiliate shall not, and shall not authorize other persons to, copy, tape or otherwise reproduce any part of the Service without Network’s prior written authorization. Neither Affiliate nor any person distributing the Service in accordance herewith shall be responsible or liable for home taping of all or any part of the Service by Subscribers. This Section 5(j) does not restrict the practice of connecting distribution cables to Subscribers’ videotape recorders or other devices intended for home duplication of audio or video programming.

(k)Digital Reception. Network represents that its digital feed shall be provided [***] to Affiliate. Affiliate shall have the option to utilize the digital feed from Network or, if Network has granted a third party the right to transport a digital feed to unaffiliated cable systems, from such third party. It is agreed that if Affiliate elects to receive the feed from said third party, and not Network, that any additional transport fees imposed by such third party shall be the responsibility of Affiliate.

7

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

6.FEES

(a)Fees. For each [***] of each [***] of the Term, commencing on the Effective Date, Affiliate shall pay to Network, in consideration for the license granted herein, the following fees: (i) Subscription Purchase: [***]; or (ii) Pay Per View Purchase: [***] (collectively, the “Fees”), provided, however, that, notwithstanding the foregoing, on a System-by-System basis, [***], provided further that if, as of the [***] anniversary of the Effective Date, the number of Subscribers to which the Service is available (i.e., addressable subscribers) is not [***] or [***] than [***], the Fees set forth in the preceding (i) and (ii) shall be, [***], as follows: Subscription Purchase: [***]; or Pay Per View Purchase: [***]. Despite the foregoing, for each [***] of each [***] of the Term, commencing on the Effective Date, (A) for each System’s distribution of the Service to hotels and motels on a Pay Per View Purchase basis, Network shall be paid in accordance with the Pay Per View Purchase provisions of the preceding sentence of this Section 6(a), and (B) for each System’s distribution of the Service to hotels and motels on a [***] basis, Network shall be paid the [***] of: (x) [***] and (y) [***] percent ([***]%) of the [***] accrued per [***].

(b)Due Date. The Fees and other payments payable hereunder shall be due [***] after the end of such [***].  In the event of a good faith dispute regarding any Fees, no such disputed Fees shall be due or payable by Affiliate to Network nor subject to the recovery of prejudgment interest or the terms or conditions of this Section 6 unless and until such dispute has been resolved to the satisfaction of Affiliate and Network, provided that Network and Affiliate shall use [***] to resolve such disputes within a [***] period, and, if the parties are unable to resolve such dispute within such [***] period, the parties may pursue all available rights and remedies hereunder.

(c)Retroactive Adjustments. If a payment of Fees due hereunder for any [***] has been made and, the amount of such payment exceeds the amount of the Fees which was actually due hereunder for such [***] (regardless of when such adjustment is made), then

Affiliate shall have the right to set off against any amounts then or thereafter due to Network (or, upon demand, Network shall pay to Affiliate) an amount equal to such excess.

(d)Preview. Affiliate shall have the [***] right for each System to preview the Service on any System on a [***] or [***] basis, without any obligation to [***] and without having to add such cable television system to Schedule 1 attached hereto, for a period of up to [***] in order to determine subscriber preferences as long as the preview is offered [***] to Subscribers and prior to the Service being offered to any Subscribers.

8

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

7.REPORTS

(a)Reports. Within [***] after the end of each [***] during the Term, Affiliate shall send to Network a statement which sets forth the [***] who purchased the Service (by Subscription Purchase or Pay Per View Purchase) and such other information as may be reasonably necessary to support the computation of the Fees due to Network for such [***]. Affiliate shall send such statement to Network together with payment of Fees.

(b)Audit Right. During the Term, and for [***] thereafter, Affiliate shall maintain accurate and complete books and records, in accordance with generally accepted accounting principles and practices which contain information sufficient to verify the Fees due Network hereunder. Upon [***] prior written notice, Network shall have the right, during the Term, [***] to examine during normal business hours at a location within the 48 contiguous United States without unreasonably interfering with the operation of Affiliate’s business, the books and records of Affiliate which are related directly to the Service to the extent necessary to verify the Fees due; provided, however, that such examinations shall not be conducted more frequently than [***] in any [***] period and that such examinations shall be limited to Fees payable during the [***] and the [***]. If any such examination reveals a discrepancy in the amount paid to Network, Affiliate shall be paid an amount equal to the amount of such discrepancy, plus interest on the amount of such discrepancy at the rate of [***]% per [***] (or, if lower, the maximum rate permitted by law) from the date on which such amount was paid by or should have been paid to Network through the date on which payment is made to Network. Network will be deemed to have waived any and all claims which it may have with respect to an underpayment of fees due unless it gives written notice of such claims to Affiliate upon the earlier of [***] after the date on which payment of such fees was due or, within [***] after the conclusion of such examination.

(c)Compliance. Network represents, covenants, and warrants that the Service complies, and will continue to comply, in all respects with the commercial matter limitations of the Children’s Television Act of 1990, Public Law 101-437 (October 18, 1990) and the regulations of FCC promulgated thereunder, as the same may apply to cable television systems and cable operators, including 47 C.F.R. §76.225, 76.305, and as the same may be amended from time to time (“Children’s Television Regulations”). Network further represents, covenants and warrants that it will provide to Affiliate all records demonstrating such compliance under the Children’s Television Regulations as are necessary for Affiliate to timely demonstrate its compliance as a cable operator with the commercial matter limitations and record keeping requirements of the Children’s Television Regulations. Network further represents, covenants and warrants that the Service complies, and will continue to comply, with all origination cablecasting regulations of the FCC, including but not limited to 47 C.F.R. §§76.205-76.221 (political equal time, personal attach, lotteries and sponsorship identification), as the same any be amended from time to time (“Origination Cablecasting Requirements”), and that Network shall provide Affiliate all necessary documentation required thereunder for Affiliate to timely meet its documentation and public file requirements under the Origination Cablecasting Requirements. In the event that any other programming offered by the Service shall be among the kind of programming which is regulated by federal, state or local law, as the same may apply to cable television systems and cable operators, or other non-broadcast television distributors, then Network shall provide to Affiliate all statements, records or other documents in the

9

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Network’s possession, custody and control reasonably necessary for Affiliate to demonstrate timely compliance as a cable operator or distributor with such laws and regulations.

8.PROMOTION AND ADVERTISING

(a)Launch and Marketing Support. Network shall provide to each System the launch and marketing support set forth on Exhibit D.

(b)Network’s Names and Marks. Affiliate acknowledges that the name and mark Pleasure™ (and the names of certain programs which appear in the Service) (the “Network Marks”) and the programming provided by the Service, as between Affiliate and Network, are the exclusive property of Network or its suppliers and that Affiliate has not and will not acquire any proprietary rights therein by reason of this Agreement. Affiliate shall not use the Network Marks without the prior written consent of Network, except that Affiliate may use the Network Marks in a manner that is consistent with the criteria and requirements specified on Exhibit D of this Agreement in routine promotional materials, channel line-ups, print and electronic program guides and on the Web sites of Affiliate or any System without the prior written consent of Network. Nothing contained herein shall limit or restrict the right of Affiliate, the Systems or any third party distributors of the Service hereunder to use such names and marks (i) in connection with the exercise of its or their rights hereunder or (ii) as permitted under any other contract or agreement, in connection with any local advertising inserted in any cable television service or programming if the sponsor of such advertisement had the right to use such names and marks therein or otherwise than under this Agreement.

(c)Cross Channel Promotions of Affiliated Services. Except as otherwise expressly authorized in this Agreement, Network shall not promote, market or advertise on the Service any other cable programming service which is affiliated or associated with Network (“Cross Promotions”) unless such other service is then being distributed by the Systems on which such Cross Promotions are to appear. The practice of “nesting” or “incubating” (whether or not for the express purpose of inducing subscriptions to) a cable programming service by showcasing such service within an existing service shall be considered a means to “promote, market or advertise” such service hereunder. Network agrees that the Service will not air any promotional spot (whether alone or in conjunction with any other person) which indicates that any other method of video distribution offers a service not available on the relevant Affiliate System. Affiliate shall have the right to preempt all material which violates the foregoing.

9.REPRESENTATIONS, WARRANTIES AND COVENANTS

(a)Network’s Authorization. Network represents and warrants that: (i) Network is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado; (ii) Network has the requisite power and authority to execute and deliver this Agreement and to fully perform its obligations hereunder; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all corporate and board of directors’ actions necessary on the part of Network; (iv) Network is not subject to any contractual or other legal obligation which will in any way interfere with its full performance of this Agreement; and (v) the individual executing this Agreement on behalf of Network has the authority to do so.

10

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(b)Insurance. Network represents, warrants and covenants that (i) it has obtained broadcaster’s errors and omissions insurance covering the Service and all elements thereof from a nationally recognized insurance carrier and in accordance with industry standards of no less than [***]; (ii) such insurance shall remain in full force and effect throughout the term; (iii) Affiliate shall be named as an additional insured on the insurance policy; (iv) Network shall provide Affiliate with documentation to such effect upon the execution hereof; (v) [***] prior to the expiration of such policy Network shall provide Affiliate with appropriate proof of issuance of a policy continuing in force and effect the insurance covered by the insurance so expiring; and (vi) Network shall provide Affiliate with [***] written notice of any changes in such policy.

(c)Affiliate’s Authorization. Affiliate represents and warrants that: (i) Affiliate is a division of a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) Affiliate has the requisite power and authority to execute and deliver this Agreement and to fully perform its obligations hereunder; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all action necessary on the part of Affiliate; (iv) Affiliate is not subject to any contractual or other legal obligation which will in any way interfere with its full performance of this Agreement; and (v) the individual executing this Agreement on behalf of Affiliate has the authority to do so.

(d)Affiliate’s Trademarks. Network represents and warrants that it shall not use, and no right or license is herein granted to Network to use, any of the trade names, trademarks, copyrights, styles, slogans, titles, logos or service marks of Affiliate, TWI, TWE, TWEAN, TWIC, Paragon Communications, any other System or any other Time Warner Company.

(e)Publicity. Network represents and warrants that it shall not have, and shall not permit its officers, directors, partners, shareholders, employees, agents, representatives or affiliates to have, any oral or written communication (including, without limitation, announcements, correspondence and advertisements) with or directed to any third party (including, without limitation, the press, the public, Subscribers, the trade and governmental and quasi-governmental agencies, authorities and instrumentalities) which (i) concerns (A) the negotiation (or other transactions in contemplation of), termination, renewal, non-renewal or expiration of this Agreement of any other prior, then current or proposed agreement, arrangement or understanding with any Time Warner Company relating to the distribution of the Service or (B) any modification or amendment hereof or thereof or (ii) would or could adversely affect relations between Affiliate, any Time Warner Company or System, on the one hand, and subscribers, potential subscribers or such agencies, authorities or instrumentalities, on the other hand, without the prior written approval of the form and content of such communication by Affiliate; provided, however, that such approval shall not be required if such communication is required by (i) an applicable law, rule or regulation or (ii) an order of a court or governmental agency, authority or instrumentality of competent jurisdiction; provided further, however, that, prior to communication without such approval pursuant to the preceding clause (ii), Network shall have given prompt prior notice to Affiliate of such intended communication and, if requested by Affiliate, shall have used reasonable efforts at Network’s expense to obtain a protective order or similar protection for the benefit of Affiliate. In no event shall Network attempt or permit its officers, directors, partners, shareholders, employees, agents,

11

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

representatives or affiliates to interfere with such relations. Network and Affiliate hereby acknowledge that (i) their interests are often in direct conflict, (ii) their relationship is often adversarial, and (iii) Network could cause Affiliate significant harm by the nature of Network’s communications to Affiliate’s subscribers or to the governmental entities or franchise or licensing authorities whose opinions and actions could adversely affect Affiliate’s cable television systems. Therefore, Network shall not knowingly initiate communications regarding Affiliate or the carriage of the Service with any subscribers or franchise or licensing authorities or governmental entities in the Operating Area of any cable television system owned or managed by a Time Warner Company without Affiliate’s prior written approval, and under no circumstances shall Network knowingly engage in any communications with any subscribers or franchise or licensing authority or governmental entity in the Operating Area of any such system which would, or could, adversely interfere with Affiliate’s relations with subscribers, or Affiliate’s relations with any governmental entity or community in any such Operating Area. This provision shall not apply, (A) to any national advertising or promotion by Network in connection with the Service, (B) to any proceeding before any judicial body, or (C) communications with Congress or with any other branch or agency of the Federal government. This provision shall not prevent Network from cablecasting [***] for such purposes as [***] or [***] to viewers; provided that such activities shall not contain communications or materials which could adversely affect Affiliate. In addition, this Section 9(e) shall not prevent Network from [***] or other communications received from Subscribers; provided that such responses shall not include information or text which could reasonably be construed to adversely affect Affiliate. Affiliate acknowledges that Network’s responding to communications from Subscribers with information specifically requested by such Subscriber about the availability of the Service and/or other programming or services available from the Network or any affiliate of Network shall not be deemed to adversely affect Affiliate. This Section 9(e) shall survive the expiration or termination of this Agreement (regardless of the reason for such expiration or termination) for a period of two (2) years.

10.FORCE MAJEURE

Neither party shall have any liability to the other party for any failure to perform hereunder, if such failure is due to: an act of God; inevitable accident; fire; lockout; strike or other labor dispute; riot or civil commotion; act of government or governmental instrumentality (whether federal, state or local); act of terrorism; failure of performance by a common carrier; failure in whole or in part of technical facilities or satellites; or other cause (excluding financial inability or difficulty of any kind) beyond such party’s reasonable control; provided, however, that, if such failure interrupts (sporadically or continuously) or degrades the quality of the signal for the Service received by the Systems or third party distributors of the Service hereunder, then the [***] fee payable by Affiliate hereunder for the [***] during which such failure occurs shall be reduced to an amount [***] if such failure had not occurred and provided further, that such interruptions or degradation if they continue for [***] consecutive [***] periods [***] periods in any period of [***] Network shall have the right in addition to any other remedies at law or equity to terminate on [***] notice. Network shall use [***] to remedy the cause of such interruptions or degradation as soon as reasonably possible.

12

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

11.[***]; AUDIT RIGHTS

(a)[***]

(b)Audit Right; Damages. During the Term, and for [***] thereafter, Network shall maintain accurate and complete books and records in accordance with generally accepted accounting principles and practices which, at a minimum, shall contain sufficient information to enable an auditor to verify compliance with this Agreement. Upon [***] prior written notice, Affiliate shall have the right, during the term of this Agreement and for [***] thereafter to examine during normal business hours all of the books and records of Network to the extent necessary to verify compliance with this Agreement; provided, however, that any such audit shall be conducted by a public accounting firm or an auditing firm selected by Affiliate who has executed a written non-disclosure agreement which includes confidentiality provisions at least as strict as those set forth in this Agreement and provides that information reviewed during an audit shall not be disclosed to third parties (the “Auditor”), and provided further that such examinations shall not be conducted more frequently than [***]. If, as a result of an audit or examination, the Auditor determines that Network has complied with Section 11(a), then the Auditor shall provide notice to the parties stating only that Network has complied. If, as a result of an audit, the Auditor determines that Network has failed to comply with Section 11(a), then the Auditor shall commence good faith discussions with Network regarding such non-compliance. In the event that after such good faith discussions, the Auditor concludes that Network, in fact, has complied with Section 11(a), then the Auditor shall provide notice to the parties stating only that Network has complied. In the event that after such good faith discussions, the Auditor concludes that Network has not complied with Section 11(a), then Network shall have the option, at Network’s sole election, to either (i) grant to Affiliate the Provision which is the subject of Section 11(a) effective as of the date on which such Provision was granted to the third party, or (ii) authorize the Auditor to provide to Affiliate only that limited information acquired during the course of the audit as is necessary for Affiliate to pursue its claim or claims related to Network’s non-compliance; any information that is not so necessary shall not be disclosed to Affiliate by the Auditor and shall remain strictly confidential. Under no circumstances, other that the limited circumstance set forth in clause (ii) above, shall any information acquired during the course of the audit be disclosed to Affiliate by the Auditor. In the event that either (x) Network agrees pursuant to clause (i) above to grant to Affiliate the Provision, or (y) it is determined by a court of law that Network violated Section 11(a), Network agrees to (a) [***]. Within [***] of the end of each [***] of the Term, Network shall certify, in a writing signed by [***] executive officers of Network, that Network is compliant with Section 11(a).

(c)No Conflicting Provision. During the Term and for [***] thereafter, Network shall not enter into any agreement or contract (whether oral or written) which limits or restricts, or has the effect of limiting or restricting, Affiliate’s rights under Section 11(b) by reason of provisions regarding confidentiality or non-disclosure or otherwise.

12.INDEMNIFICATION AND OTHER REMEDIES

(a)Indemnification by Network. Network shall indemnify Affiliate and each other Time Warner Company, each System, the persons which directly own the Systems and their respective affiliates (including controlling persons and related companies), officers,

13

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

directors, shareholders, employees and agents (each, an “Indemnitee”) for, and shall hold them harmless from and against, any and all losses, settlements, claims, actions, suits, proceedings, investigations, judgments, awards, damages and liabilities (collectively, “Losses” and, individually, a “Loss”) which are sustained or incurred by or asserted against any of them and which arise out of or relate to (i) any breach of this Agreement by Network or (ii) the Service, the content thereof or programming contained therein or the delivery or distribution thereof (including, without limitation, any Loss arising out of libel, slander, defamation, indecency, obscenity, invasion of right of privacy or infringement or violation of copyrights, music synchronization or performance rights, dramatic or non-dramatic music rights, trademark rights, patent rights or other contractual or proprietary rights) to the extent that such Losses do not arise directly from Affiliate’s gross negligence or willful misconduct and shall reimburse them for any and all legal, accounting and other fees, costs and expenses (collectively, “Expenses”) reasonably incurred by any of them in connection with investigating, mitigating or defending any such Loss; provided, however, that Network will not have any obligation or liability under this Section 12(a) to the extent that Affiliate has an obligation or liability with respect to the same Loss under Section 12(b).

(b)Indemnification by Affiliate. Affiliate shall indemnify Network and its affiliates (including controlling persons and related companies), officers, directors, shareholders, employees and agents for, and shall hold them harmless from and against, any and all Losses which are sustained or incurred by or asserted against any of them and which (i) arise out of any breach of this Agreement by Affiliate or (ii) arise directly out of the addition of material to or the deletion of material from the content of the Service by Affiliate or the Systems and shall reimburse them for any and all Expenses reasonably incurred by any of them in connection with investigating, mitigating or defending any such Loss; provided, however, that Affiliate will not have any obligation or liability under this Section 12(b) to the extent that Network has an obligation or liability with respect to the same Loss under Section 12(a).

(c)Notice; Defense. Promptly after receipt by a party of notice of the commencement of any action, suit, proceeding or investigation in respect of which a claim for indemnification may be made hereunder by it or its affiliates, officers, directors, shareholders, employees or agents, such party will give prompt written notice thereof to the other party; but the failure to so notify the other party will not relieve the other party from any liability or obligation which the other party may have to any indemnified person (i) otherwise than under this Agreement or (ii) under this Agreement except to the extent of any material prejudice to the other party resulting from such failure. If any such action, suit, proceeding or investigation is brought against an indemnified person, the indemnifying party will be entitled to participate therein and, if it wishes to assume the defense thereof with counsel satisfactory to the indemnified person (who shall not, except with the consent of the indemnified person, be counsel to the indemnified person) and gives written notice to the indemnified person of its election so to assume the defense thereof within [***] after notice shall have been given to it by the indemnified person pursuant to the preceding sentence, will be entitled to assume the defense thereof. Each indemnified person will be obligated to cooperate reasonably with the indemnifying party, at the expense of the indemnifying party, in connection with such defense and the compromise or settlement of any such action, suit, proceeding or investigation.

14

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(d)Overdue Payments. If any amount due hereunder is not paid when due or within [***] thereafter, the payor shall pay, in addition to such amount, interest on such amount at a rate of [***]% per [***] (or, if lower, the maximum rate permitted by law) from the date on which such amount was due through the date on which payment of such amount is made.

(e)Consequential Damages. Neither Affiliate nor any other Time Warner Company, or any System, or third party distributor of the Service on the one hand, nor Network, on the other hand, shall, for any reason or under any legal theory, be liable to the other or any third party for any special, indirect, incidental or consequential damages or for loss of profits, revenues, data or services, regardless of whether such damages or loss was foreseeable and regardless of whether it was informed or had direct or imputed knowledge of the possibility of such damages or loss in advance.

(f)Cumulative Remedies. All rights, powers and remedies afforded to a party hereunder, by law, in equity or otherwise shall be cumulative (and not alternative) and shall not preclude assertion or seeking by a party of any other rights or remedies.

13.TERMINATION

In addition to the other rights of termination set forth in this Agreement, the parties shall have the right to terminate this Agreement as follows.

(a)Bankruptcy. If a party (i) becomes bankrupt or insolvent, however evidenced, (ii) admits in writing its inability to pay its debts when due, (iii) makes a general assignment for the benefit of creditors, (iv) has appointed, voluntarily or involuntarily, any trustee, receiver, custodian or conservator with respect to it or a substantial part of its property, (v) files, or has filed against it, a voluntary or involuntary petition in bankruptcy or (vi) makes any arrangement or otherwise becomes subject to any proceedings under the bankruptcy, insolvency, reorganization or similar laws of the United States or any state, then the other party shall have the right at any time thereafter to terminate this Agreement by giving written notice to such party.

(b)Breach. Either party shall have the right to terminate this Agreement by giving written notice to the other party if the other party has materially breached this Agreement

and such breach cannot be fully cured; provided, however, that if such breach is fully curable, such party shall not have the right to terminate this Agreement unless such party shall have given written notice to the other party of such breach and the other party shall have failed to fully cure such breach within 30 days after such notice shall have been given.

(c)Effective Date of Termination. If a party exercises any option or right to terminate this Agreement as provided herein, such termination shall become effective on the date on which notice of exercise of such option or right shall have been given (or on such later date as may be specified in such notice).

(d)Survival. Sections 4(e), 5(j), 6(a), 7(a), 7(b), 8(b), 9(a), 9(c), 9(d), 9(e), 15(a), 15(b), 15(c), 15(g) and 15(1), and Articles 11 and 12 shall survive the expiration or termination of this Agreement for any reason.

15

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

14.NOTICES

All notices required or permitted to be given pursuant to this Agreement shall be given in writing, shall be transmitted by personal delivery, by registered or certified mail, return receipt requested, postage prepaid, or by a nationally recognized overnight delivery service and shall be addressed as follows:

When Network is the intended recipient:

New Frontier Media, Inc.

5435 Airport Boulevard, Suite 100

Boulder CO 80301

Attention: Senior Vice President, Sales

with a copy to:

New Frontier Media, Inc.

5435 Airport Boulevard, Suite 100

Boulder CO 80301

Attention: Director of Legal Affairs

When Affiliate is the intended recipient:

Time Warner Cable

290 Harbor Drive

Stamford, Connecticut 06902

Attention: Senior Vice President, Programming

with a copy to:

Time Warner Cable

290 Harbor Drive

Stamford, Connecticut 06902

Attention: Senior Vice President and General Counsel

A party may designate a new address to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted by giving written notice to the other party. Each notice transmitted in the manner described in this Section 14 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), the affidavit of the messenger (if transmitted by personal delivery), the records of the overnight delivery service (if transmitted by such service) or the answer back or call back (if transmitted by telecopier) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason.

16

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

15.MISCELLANEOUS

(a)Relationship. Neither party shall be or hold itself out as the agent of the other party under this Agreement. Nothing contained herein shall be deemed to create, and the parties do not intend to create, any relationship of partners or joint venturers as between Affiliate and Network, and neither party is authorized to or shall act toward third parties or the public in any manner which would indicate any such relationship. Likewise, no supplier of advertising or programming or anything else included in the Service by Network shall be deemed to have any privity of contract or direct contractual or other relationship with Affiliate by virtue of this Agreement or Affiliate’s carriage of the Service hereunder. Network disclaims any present or future right, interest or estate in or to the transmission facilities of Affiliate and any affiliate of Affiliate and the parents, subsidiaries, partnerships or joint venturers controlling the Systems on which the Service is transmitted, such disclaimer being to acknowledge that neither Affiliate nor the transmission facilities of the Systems (nor the owners thereof) are common carriers.

(b)Governing Law. The validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of New York (without giving effect to the laws, rules or principles of the State of New York regarding conflicts of laws). The respective obligations of the parties under this Agreement are subject to all applicable federal, state and local laws, rules and regulations (including, without limitation, the Communications Act of 1934, as amended, the Cable Communications Policy Act of 1984, as amended, and the rules and regulations of the Federal Communications Commission thereunder).

(c)Forum; Jury Trial. Each party agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach of this Agreement may be commenced and prosecuted in a court in the State of New York. Each party consents and submits to the non-exclusive personal jurisdiction of any court in the State of New York in respect of any such proceeding. Each party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable laws and rules. Each party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of New York and any claim that it may now or hereafter have that any such proceeding in any court in the State of New York has been brought in an inconvenient forum. Each party waives trial by jury in any such proceeding.

(d)Entire Agreement. This Agreement together with the Schedules and Exhibits attached hereto constitute the entire contract between the parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous contracts, representations, warranties and understandings (whether oral or written) by, between or among the parties with respect to the subject matter hereof.

(e)Binding Effect; Assignment. This Agreement shall be binding upon the parties and their respective successors and assigns and shall inure to the benefit of the parties and their respective successors and permitted assigns. Neither party shall assign any of its rights or delegate any of its duties under this Agreement (by operation of law or otherwise) without the prior written consent of the other party.  Notwithstanding the foregoing, no such consent shall be required in connection with any such assignment or delegation by (i) Affiliate to any Time Warner Company or any person which controls, is controlled by or is under common control

17

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

with Affiliate or any Time Warner Company or any partner of Paragon Communications; (ii) Network to any affiliate of Network; or (iii) Network to any other entity in connection with a merger, consolidation or sale by Network of all or substantially all of its assets, provided however, that upon an assignment by Network pursuant to the foregoing (iii), Affiliate shall have the right to terminate this Agreement immediately upon written notice to Network without any further liability or obligation of any kind under this Agreement. Any assignment of rights or delegation of duties under this Agreement by a party without the prior written consent of the other party, if such consent is required hereby, shall be void. Except as otherwise provided herein, no person shall be a third party beneficiary of this Agreement.

(f)Headings. The headings set forth in this Agreement have been inserted for convenience of reference only, shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement.

(g)Survival of Representations. All representations and warranties set forth herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(h)Amendments; Modifications; Consents; Waivers. Except as otherwise contemplated herein no addition to, and no cancellation, renewal, extension, modification or amendment of, this Agreement shall be binding upon a party unless such addition, cancellation, renewal, extension, modification or amendment is set forth in a written instrument which states that it adds to, amends, cancels, renews, extends or modifies this Agreement and which is executed and delivered on behalf of each party by, in the case of Network, an officer of Network and, in the case of Affiliate, by its Senior Vice President, Programming, Senior Executive Vice President, President or Chairman (each an “Authorized Person”); provided, however, that any Authorized Person may, by written authorization, designate another person to execute and deliver such an instrument. Unless authorized in writing pursuant to the preceding proviso, the employees and officers of Affiliate’s regional divisions and Systems are not Authorized Persons. Without in any way limiting either party’s right to withhold any consent or waiver contemplated by this Agreement or requested by the other party, or to reject any proposed modification to or amendment of this Agreement, each party agrees that the other party shall have the right to condition its grant of any requested consent hereunder, its grant of any requested waiver of any provision hereof or its acceptance of any proposed modification hereof or amendment hereto on receipt of such commissions, compensation or other financial accommodation or consideration as it may, in its sole discretion, determine appropriate.

(i)Waivers Limited. No waiver of any provision of this Agreement shall be binding upon a party unless such waiver is set forth in a written instrument which is executed and delivered on behalf of such party by, in the case of Network, an officer of Network and, in the case of Affiliate, by an Authorized Person. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time and at any time) by a party of, nor the delay or failure (at any time or for any period of time) to exercise, any right, power or remedy shall constitute a waiver of the right to exercise, or impair, limit or restrict the exercise of, such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a party

18

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

shall be deemed to be a waiver of any other right, power or remedy of such party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy.

(j)No Inference Against Author. Each party acknowledges that this Agreement was fully negotiated by the parties and agrees, therefore, that no provision of this Agreement shall be interpreted against any party because such party or its counsel drafted such provision.

(k)Counterparts. This Agreement may be signed in any number of counterparts, each of which (when executed and delivered) shall constitute an original instrument, but all of which together shall constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by both of the parties at such time as counterparts shall have been executed and delivered by each of the parties, regardless of whether each of the parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the parties.

(l)Confidentiality. The terms and conditions, other than the existence and duration, of this Agreement shall be kept confidential by the parties hereto and shall not be disclosed by either party to any third party, without the prior written consent of the other party except: (i) as may be required by any court of competent jurisdiction, governmental agency, law or regulation (in such event, the disclosing party shall notify the other party before disclosing the Agreement); (ii) as may be required or necessary in any SEC or regulatory filings; (iii) as part of the normal reporting or review procedure to a party’s accountants, auditors, agents, legal counsel, and employees of parent and subsidiary companies, provided such accountants, auditors, agents, investors and potential investment partners, legal counsel, and employees of parent and subsidiary companies agree to be bound by this Paragraph; (iv) to enforce any of a party’s rights pursuant to this Agreement; (v) in connection with due diligence conducted in connection with a merger, consolidation or acquisition provided that any person to whom Confidential Information is so disclosed shall have executed, prior to receiving any Confidential Information, written non-disclosure agreements which include confidentiality provisions at least as strict as those set forth in this Agreement; (vi) in connection with audits conducted at the behest of third parties for purposes similar to that set forth in Section 11(b), provided that any such third parties shall have executed (prior to their review of any Confidential Information) written confidentiality agreement which include provisions at least as strict as the provisions set forth in this Agreement regarding the confidentiality of information reviewed in connection with such audits; and (vii) to any prospective or existing lender provided that any such lender shall have executed (prior to their review of any Confidential Information) a written confidentiality agreement which includes provisions at least as strict as the provisions set forth in this Agreement regarding the confidentiality of information reviewed.

19

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first above written.

TIME WARNER CABLE, a division of TIME WARNER ENTERTAINMENT COMPANY, L.P.		NEW FRONTIER MEDIA, INC.
By:	[Illegible]	By:	/s/ Michael Weiner
Name:		Name:	Michael Weiner
Title:	SVP	Title:	VP

20

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT A

LAUNCH AUTHORIZATION FORM

“CABLE/SMATV” System

System Name: _______________________________________

Address:____________________________________________

City:__________________ State:__________________ Zip:____________________

Contact:________________________ Phone:________________________________

Billing Address, if different:_________________________________________________________

Headend Contact:___________________________  Phone:________________________________

Headend Location, if different:_______________________________________________________

Major Community Served: _______________________________________________

Units Passed:________________________ Service Subs:____________________________

Launch Date:________________________ Channel Assigned:________________________

Service Required:_____________________________________

Start Date:___________________

Residential Unit ID#:__________________

OR

Commercial Unit ID#:_________________

Serial #:_____________________

A-1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT B

EDITING AND CONTENT STANDARDS

All programming comprising the Service shall comply at all times with the following [***] editing and content standards:

[***] - [***], or [***] versions of adult entertainment are known as [***] programming. All shots of [***] and [***] have been removed from [***] programming, [***] and [***] are limited, and sometimes (for productions), activities are [***]. [***] programming depicts [***] and [***] situations and [***], but does not depict [***] and is [***] (or [***]) to the degree of explicitness of programming featured on [***].

Although not submitted for MPAA ratings, [***] programming would likely receive an [***] or [***]. Standard adult entertainment, especially [***] programs, operate mostly within [***].

The Service shall not include any [***] or [***] programming, defined as follows:

[***] - [***] programming incorporates most of the elements shown in [***] features, including [***]. However, [***] excludes certain [***] and [***] that the adult industry had determined may violate some acceptable community standards.

[***] - Like adult video stores, [***] programming includes movies and other features that have not been altered from their original master version.

[Table Illustrating Differences between Editing Standards Omitted.]

B-1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT C

SAMPLE PROGRAM SCHEDULE

[Programming Schedule by Time and Title Omitted]

[***]

C-1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT D

LAUNCH AND MARKETING SUPPORT

Network make the following available each System:

[***]

D-1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT E

NETWORK NAMES AND MARKS USE GUIDELINES

Affiliate’s use of the Network Marks shall be limited to the advertising and promotion of its carriage of the Service over the Systems pursuant to this Agreement. Network shall provide Affiliate with samples of the network Marks which Affiliate shall use in their entirety (including all service mark and trademark notices) whenever the Network Marks are used by Affiliate.

Network shall have the right at any time upon reasonable notice to Affiliate to review and require modifications to Affiliate’s advertising, promotional, marketing and/or sales materials concerning the Service and all other uses of the Network Marks by Affiliate.

E-1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

AMENDMENT TO THE AFFILIATION AGREEMENT

This Amendment (“Amendment”), effective as of June 17, 2003 (“Effective Date”) hereby amends the Affiliation Agreement regarding carriage of the adult entertainment pay television service known as PleasureTM that was entered into by and between COLORADO SATELLITE BROADCASTING, INC. f/k/a NEW FRONTIER MEDIA, INC. (“Network”) and TIME WARNER CABLE INC. (“Affiliate”) as of the 1st day of January, 2000.  Such Affiliation Agreement, as amended prior to the Effective Date hereof, is hereinafter referred to as the “Pleasure Agreement”.  Any terms not otherwise defined herein shall have the meaning set forth in the Pleasure Agreement.  If there are any conflicts between the terms of this Amendment and the Pleasure Agreement, the terms of this Amendment shall prevail.

1.Services.  The parties hereby agree that each of the following satellite-delivered, commercial-free, encrypted, adult entertainment pay television programming services shall, as of the Effective Date, be considered a “Service” for all purposes under the Pleasure Agreement:

(a)           the television programming service known as The Erotic NetworkTM (or TeNTM), as more fully described in Section 2(a) of this Amendment;

(b)           the television programming service known as The Erotic Network ClipsTM (or TeNClipsTM), as more fully described in Section 2(b) of this Amendment;

(c)           the television programming service known as The Erotic Network BlueTM (or TeN BlueTM), as more fully described in Section 2(c) of this Amendment; and

(d)           the television programming service known as The Erotic Network BloxTM (or TeN BloxTM), as more fully described in Section 2(d) of this Amendment.

The foregoing television programming services are collectively referred to herein as the “Services”.

2.Content of the Services.  The parties hereby agree that, with respect solely to the Services addressed by this Amendment, Section 4(a) of the Pleasure Agreement [“Service Description”] shall not apply.  Rather, for such purposes, each of the Services will comply at all times with the following content descriptions, as applicable:

(a)           TeNTM Description.  The Service known as “The Erotic Network” or “TeN” shall be a 24-hour per day, 7-day per week, satellite-delivered, commercial-free, encrypted, pay video programming service, which at all times shall, in each [***] programming block, on a daily average basis, consist solely of:  (i) [***] of [***] or [***] feature length premieres (“TeN Premieres”) of adult films, events, specials, compilations and programs, all of which shall depict [***] and [***] situations among consenting adults, and shall not depict [***], (ii) no more than [***] of promotionals and/or interstitial programming that advertises only TeN (such as pay-per-view features and highlights) or the pay-per-view services of Network’s affiliates and joint ventures which it owns and controls; provided, however, that such programming shall not advertise any other television programming or service that is not

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

available in such System to Subscribers, and (iii) no more than [***] of advertisements for products designed specifically to enhance the Subscribers’ experience while viewing the Service.  All of the programming on TeN, including without limitation all promotionals, interstitials and advertisements, shall, at all times during the Term, adhere to and comply with the [***] or [***] editing and content standards described in sub-section (a)(ii) above and shall consist of programming similar in all material respects to that described on the program schedule attached hereto as Exhibit A-1.  Network agrees that, during each quarter of the Term, it shall send [***] copy of its monthly programming schedule for TeN to Affiliate in care of:  Vice President of Programming.

(b)           TeNClipsTM Description.  The Service known as “The Erotic Network Clips” or “TeNClips” shall be a 24-hour per day, 7-day per week, satellite-delivered, commercial-free, encrypted, pay video programming service, which at all times shall, in each [***] programming block, on a daily average basis, consist solely of:  (i) at least [***] of [***] or [***] clips from TeN Premieres, as well as other adult events, specials, compilation and programs, all of which shall be bundled in [***] blocks and shall depict [***] and [***] situations among consenting adults, and shall not depict [***], (ii) no more than [***] of promotionals and/or interstitial programming that advertises only TeNClips (such as pay-per-view features and highlights) or the pay-per-view services of Network’s affiliates and joint ventures which it owns and controls; provided, however, that such programming shall not advertise any other television programming or service that is not available in such System to Subscribers, and (iii) no more than [***] of advertisements for products designed specifically to enhance the Subscribers’ experience while viewing the Service.  All of the programming on TeNClips, including without limitation all promotionals, interstitials and advertisements, shall, at all times during the Term, adhere to and comply with the [***] or [***] editing and content standards described in sub-section (b)(ii) above and shall consist of programming similar in all material respects to that described on the program schedule attached hereto as Exhibit A-2.  Network agrees that, during each quarter of the Term, it shall send [***] copy of its monthly programming schedule for TeNClips to Affiliate in care of:  Vice President of Programming.

(c)           TeN BlueTM Description.  The Service known as “The Erotic Network Blue” or “TeN Blue” shall be a 24-hour per day, 7-day per week, satellite-delivered, commercial-free, encrypted, pay video programming service, which at all times shall, in [***] programming block, on a daily average basis, consist solely of:  (i) at least [***] of [***] or [***] feature length [***] adult films, events, specials and programs (collectively, the “Blue Programming”), all of which shall depict [***] and [***] situations among consenting adults, and shall not depict [***], (ii) no more than [***] of promotionals and/or interstitial programming that advertises only TeN Blue (such as pay-per-view features and highlights) or the pay-per-view services of Network’s affiliates and joint ventures which it owns and controls; provided, however, that such programming shall not advertise any other television programming or service that is not available in such System to Subscribers and (iii) no more than [***] of advertisements for products designed specifically to enhance the Subscribers’ experience while viewing the Service.  All of the programming on TeN Blue, including without limitation all promotionals, interstitials and advertisements, shall, at all times during the Term, adhere to and comply with the [***] or [***] editing and content standards described in sub-section (c)(ii) above and shall consist of programming similar in all material respects to that described on the

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

program schedule attached hereto as Exhibit A-3.  Network agrees that, during each quarter of the Term, it shall send [***] copy of its monthly programming schedule for TeN Blue to Affiliate in care of:  Vice President of Programming.

(d)           TeNBloxTM Description.  The Service known as “The Erotic Network Blox” or “TeNBlox”) shall be a 24-hour per day, 7-day per week, satellite-delivered, commercial-free, encrypted, pay video programming service, which at all times shall, in each [***] programming block, on a daily average basis, consist solely of:  (i) at least [***] of [***] or [***] clips from Blue Programming, which shall be bundled in [***] blocks and shall depict [***] and [***] situations among consenting adults, and shall not adult films, events and programs that depict [***] and [***] situations among consenting adults, and shall not depict [***], (ii) no more than [***] of promotionals and/or interstitial programming that advertises only TeNBlox (such as pay-per-view features and highlights) or the pay-per-view services of Network’s affiliates and joint ventures which it owns and controls; provided, however, that such programming shall not advertise any other television programming or service that is not available in such System to Subscribers and (iii) no more than [***] of advertisements for products designed specifically to enhance the Subscribers’ experience while viewing the Service.  All of the programming on TeNBlox, including without limitation all promotionals, interstitials and advertisements, shall, at all times during the Term, adhere to and comply with the [***] or [***] editing and content standards described in sub-section (d)(ii) above and shall consist of programming similar in all material respects to that described on the program schedule attached hereto as Exhibit A-4.  Network agrees that, during each quarter of the Term, it shall send [***] copy of its monthly programming schedule for TeNBlox to Affiliate in care of:  Vice President of Programming.

3.Other Exhibition and Distribution.  The parties hereby agree that, with respect solely to the Services addressed by this Amendment, Section 4(g) of the Pleasure Agreement [“Other Exhibition and Distribution”] shall not apply.  Rather, with respect to each of the Services described in this Amendment, Network agrees that if, during the Term, Network exhibits or distributes, or grants or agrees to grant to any third party the right to exhibit or distribute all or any portion of any of the Services via the Internet, any online service, any broadband, wireline or wireless service or any local or wide area network, in any format (including multimedia, interactive, three dimensional or other augmented or enhanced format, e.g., “video-streaming”) to customers in the franchise area of any System within the United States, its territories or possessions (“More Expansive Rights”), then Network shall promptly give written notice thereof to Affiliate and, at Affiliate’s election, this Amendment shall be deemed to have been modified so that, from the date on which such More Expansive Rights are first in effect (or, if such More Expansive Rights are now in effect, from the date hereof) and thereafter during the Term for so long as such More Expansive Rights continue to remain in effect, Affiliate shall have the right to enjoy the benefit of such More Expansive Rights with respect to the applicable Service on the most favorable terms and conditions of any distributor with respect to such More Expansive Rights

4.Fees.  The parties hereby agree that, with respect solely to the Services addressed by this Amendment, Section 6(a) of the Pleasure Agreement [“Fees”] shall not apply.  Rather,

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

the parties hereby agree to the following fee arrangement relating to the Services covered by this Amendment:

(a)For each [***] of each [***] of the Term, commencing on the Effective Date, Affiliate shall pay to Network, in consideration for the license granted herein, the following fees, on a System-by-System basis:

(i)For a System that carries [***] of the Services:

(A)          Subscription Purchases:  [***]; and (B) Pay Per View Purchases:  [***] (collectively, the “[***] Channel Fees”).

(ii)For a System that carries [***] of the Services on separate channels:

(A)          Subscription Purchases:  [***]; or (B) Pay Per View Purchases:  [***] (collectively, the “[***] Channel Fees”).

(iii)For a System that carries [***] of the Services on separate channels:

(A)          Subscription Purchases:  [***]; or (B) Pay Per View Purchases:  [***] (collectively, the “[***] Channel Fees”).

(iv)“Fees” shall mean, collectively, the [***] Channel Fees, the [***] Channel Fees and the [***] Channel Fees.

(v)If a System carries the PleasureTM service (“Pleasure”) and launches, on [***], on a [***] basis, any [***] of the Services described in this Amendment then, beginning with the launch date of such Service(s), Affiliate shall [***] for such System for Pleasure for a period of [***] continuous [***].  If, however, any such System deletes the applicable Service prior to the [***] anniversary of the launch of such Service in such System, or

4

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

if any System distributing the applicable Service is sold, transferred, or otherwise disposed of and the applicable Service is subsequently deleted from such System prior to the end of the applicable [***] period, Affiliate will [***] Network a [***] for Pleasure attributable to the System in which such applicable Service was deleted using the following calculation to determine the amount of [***]:

[***]

Such [***] will be paid by Affiliate to Network within [***] after the deletion of the applicable Service.  It is agreed that such [***] obligation shall not apply where the subsequent owner or transferee has in turn sold, transferred or otherwise disposed of the System and the applicable Service is then deleted by the second subsequent owner or transferee.  Irrespective of any other provision of the Pleasure Agreement or this Amendment, this Section 4(a)(v) shall survive the expiration or termination of the Pleasure Agreement in accordance with its terms.

5.Except as expressly set forth herein, all terms and conditions of the Pleasure Agreement remain unmodified and are incorporated herein by reference.  This Amendment shall be governed by the laws of the State of New York, without regard to its conflict of law principles.  By signing below, the parties agree to the terms of this Amendment.  This Amendment may not be modified or amended except in a writing signed by a duly authorized representative of each party.

ACCEPTED AND AGREED
COLORADO SATELLITE BROADCASTING, INC.		TIME WARNER CABLE INC.
By:	/s/ Ken Boenish	By:	/s/ Lynne Costantini
Name:	Ken Boenish	Name:	Lynne Costantini
Title:	President	Title:	VP Programming

5

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHBIT A

PROGRAMMING SCHEDULES

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Exhibit A-1

TeNTM

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT A-2

TeNClipsTM

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT A-3

TeNBlueTM

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT A-4

TeNBloxTM

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

SECOND AMENDMENT TO THE AFFILIATION AGREEMENT

This Second Amendment to the Affiliation Agreement, effective as of this 27th day of December 2006, hereby amends the Affiliation Agreement that was entered into by and between NEW FRONTIER MEDIA, INC. a Colorado Corporation (“Licensor”) and TIME WARNER CABLE LLC (successor in interest to Time Warner Cable, a division of Time Warner Entertainment Company, LP., a Delaware partnership) (“TWC”) dated as of the 1st day of January 2000, as amended as of June 17, 2003 (the “Agreement”).  Licensor and TWC hereby agree as follows:

1.Term.  Section 3 of the Agreement is hereby deleted in its entirety and replaced with the following: “The initial term of this Agreement shall be [***], commencing on the Effective Date (“Initial Term”), and shall automatically renew thereafter on a [***] basis (each such [***] a “Renewal Period”) (the Initial Term and any Renewal Period(s) together, the “Term”).  Either party may terminate this Agreement for any or no reason by giving written notice to the other party at least [***] prior to the last day of any Renewal Period.”

2.All of the terms and conditions set forth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this Amendment, in which case this Amendment shall prevail.  Subject to the foregoing, this Amendment and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one in the same document.

ACCEPTED AND AGREED:

Time Warner Cable LLC		New Frontier Media, Inc.
By:	[Illegible]	By:	/s/ Karyn L.Miller
Name:		Name:	Karyn Miller
Title:		Title:	Chief Financial Officer
			12-28-06

EX-10.33

Exhibit 10.33

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

VIDEO ON DEMAND
LICENSE AGREEMENT

This VIDEO ON DEMAND LICENSE AGREEMENT (this “Agreement”), dated as of March 13, 2000 between New Frontier Media, Inc. a Colorado corporation (“Licensor”), and TIME WARNER CABLE, a division of Time Warner Entertainment Company, L.P., a Delaware partnership (“TWC”).

WHEREAS, TWC owns or manages certain cable television systems and wishes to make motion pictures available to its subscribers on a “video on demand” basis; and

WHEREAS, Licensor owns the rights to distribute certain motion pictures and wishes to grant TWC a license to make them available to its subscribers on such a basis.

NOW, WHEREFORE, in light of the foregoing and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Definitions.

(a)“Buy”.  Has the meaning set forth in Section 3(a).

(b)“Concurrent Compatible”.  Meeting the MPEG-2 encoding specifications set forth in Exhibit A.

(c)“Program”.  Each motion picture listed on a Schedule delivered to TWC in accordance with Section 4(a).  Unless the context requires otherwise, references to Programs in this Agreement shall be deemed also to refer to any Supplemental Program Material relating thereto.

(d)“Satellite Delivery”.  Has the meaning set forth in Section 2(e).

(e)“SeaChange Compatible”.  Meeting the MPEG-2 encoding specifications set forth in Exhibit A.

(f)“Subscriber”.  A residential location or other private dwelling unit (including, without limitation, any hotel or motel room, hospital room, nursing home room or dormitory room) within the Territory that receives cable television service from any TWC Cable System.  Subscribers shall not include prisons, military bases or mining camps, public places (including common areas of hotels, motels, hospitals, nursing homes or dormitories) or commercial establishment (including restaurants, bars or theatres).

(g)“Supplemental Program Material”.  Has the meaning set forth in Section 4(f).

(h)“Term”.  Has the meaning set forth in Section 2.

(i)“Territory”.  The United States of America (including its territories and possessions).

1

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(j)“TWC Cable System”.  A cable television system (i) which is managed by a Time Warner Company or (ii) of which TWC, Time Warner Inc. (“TWI”), Time Warner Entertainment Company, L.P. (“TWE”), Time Warner Entertainment-Advance/Newhouse, L.P. (“TWEAN”), TWI Cable Inc. (“TWIC”), or Paragon Communications directly or indirectly owns at least 25% of the equity, and that in either case provides Video on Demand to its subscribers.

(k)“Time Warner Company”.  TWC, TWI, TWE, TWEAN, TWIC or Paragon Communications, or any other corporation, partnership, joint venture, trust, joint stock company, association, unincorporated organization (including a group acting in concert) or other entity of which TWC, TWI, TWE, TWEAN, TWIC or Paragon Communications, directly or indirectly own at least 25% of the equity.

(l)“Video on Demand”.  The cable transmission of a Program to, and the exhibition of a Program on the television set or other receiving equipment of, a Subscriber, at such Subscriber’s request in a manner such that the transmission may occur immediately or almost immediately upon such Subscriber’s request.

2.Term.  The term of this Agreement shall be [***] commencing as of the date hereof.  This Agreement shall automatically renew for successive [***] periods unless either party provides the other with at least [***] prior written notice of such party’s intention to terminate the Agreement at the end of the initial term or then-current renewal term.  The initial term and any renewal terms are herein referred to as the “Term.”

3.Rights Granted.

(a)Licensor hereby grants TWC the non-exclusive right (but not the obligation) to offer each Program to TWC’s Subscribers on a Video on Demand basis and, upon the request of a Subscriber to view a Program, to transmit and exhibit the video and accompanying audio portion of such Program to such Subscriber (such request and delivery, a “Buy”).  The license granted hereby shall permit TWC to deliver multiple feeds of a Program from a single copy thereof.

(b)The license granted hereby in respect of each Buy shall permit the Subscriber to view such Program at least [***] and, at TWC’s sole discretion, to view the Program more than [***] up to [***] number of times within a [***] period.  The license granted hereby shall permit TWC, in its sole discretion, to make available to its Subscribers, either through equipment located at TWC’s transmission facilities or through the Subscriber’s set-top box, the ability to “pause,” “rewind,” “fast forward” or use similar VCR-like features while viewing the Program.

(c)Licensor hereby grants TWC the non-exclusive right to compress or otherwise technologically manipulate the Programs as required (in TWC’s sole judgment) to make such Programs available to requesting Subscribers.  TWC’s compression or other technological manipulation of a Program shall not have a material adverse impact on a viewer’s perception of such Program.  Programs compressed in a manner such that they are SeaChange Compatible or Concurrent Compatible (or

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

compatible with any similar MPEG-2 profile) shall be deemed not to result in a material adverse impact on a viewer’s perception of such Program.

(d)Licensor hereby grants TWC the non-exclusive right to copy and store the Programs in digital form on any medium now or hereafter available (including on one or more sever hard drives) as required (in TWC’s sole judgment) to make such Programs available to requesting Subscribers.  TWC agrees, within a reasonable period of time after it ceases to make a Program available on a VOD basis or the expiration or termination of this Agreement, whichever date is sooner, to return or destroy all copies of Programs made or stored by it hereunder.

(e)Licensor hereby grants TWC the non-exclusive right to transmit the Programs via an uplink facility to one or more satellites for distribution to the TWC Cable Systems (“Satellite Delivery”).

4.Programs.

(a)At least [***] prior to the commencement of each [***] during the Term, Licensor shall provide TWC with a schedule containing at least [***] adult feature films that will be available to the TWC Cable Systems during such [***] for distribution on a Video on Demand basis (each a “Schedule”).  Licensor shall notify TWC as promptly as practicable of any changes in any Schedule.  The Schedule for the first [***] of the Term is attached hereto as Exhibit B.  TWC may, on [***] notice, require that Licensor increase the number of films included on each Schedule delivered thereafter, subject to a limit of [***] films.

(b)Within [***] of receipt of each Schedule, TWC will notify Licensor of the Programs TWC intends to make available on a Video on Demand basis in the TWC Cable Systems, and for which TWC requires delivery as contemplated by Section 7(a).  If TWC provides no such notice, Licensor shall deliver all such films.  TWC shall not be obligated to offer any Program in any TWC Cable System(s).

(c)Each Program provided by Licensor hereunder shall depict [***] and [***] situations, and shall not depict [***].  The Programs shall be [***] edited (sometimes known as “[***] edited”) adult films that are [***] (or “[***]”) in the degree of explicitness of programming currently featured on adult cable television services such as [***] (“[***] Standards”).  Upon [***] notice to Licensor by TWC, Licensor shall provide TWC with [***] versions of each Program to be delivered hereunder, [***] edited pursuant to “[***] Standards” and [***] edited for a degree of explicitness similar to that currently featured on adult services such as [***] (“[***] Standards”).

5.Fees.

(a)TWC shall pay Licensor a license fee (the “License Fee”) for each Buy of a Program, such License Fee to equal [***].

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

TWC shall, in its sole discretion, determine the [***] to subscribers.

(b)TWC shall pay the License Fee in respect of each Buy even if the exhibition is treated as a [***] or [***].  Notwithstanding the foregoing, TWC shall be entitled to a credit in respect of any Buy if TWC, in good faith, issues the relevant Subscriber a credit due to such Subscriber’s inability to receive such Program (e.g., as a result of reception or other technical difficulties) or due to such Subscriber having received such Program in error.

6.Payments; Reports.

(a)License Fees shall be payable on a [***] basis and shall be due [***] after the end of each [***].  In the event of a good faith dispute regarding any fees, no such disputed fees shall be due or payable by TWC to Licensor nor subject to the recovery of prejudgment interest unless and until such dispute has been resolved to the satisfaction of TWC and Licensor; provided that Licensor and TWC shall use [***] to resolve such dispute within a [***] period, and, if the parties are unable to resolve such dispute within such [***] period, the parties may pursue all available rights and remedies hereunder.

(b)A statement of the number of Buys during the relevant [***] shall accompany each payment of License Fees, together with any other information necessary for the computation of the License Fees due to Licensor in respect of such [***].

(c)If any amount due hereunder is not paid when due or within [***] thereafter, the payor shall pay, in addition to such amount, interest on such amount at a rate of [***] percent ([***]%) per [***] (or, if lower, the maximum rate permitted by law) from the date on which such amount was due through the date on which payment of such amount is made.

(d)During the Term, and for [***] thereafter, TWC shall maintain accurate and complete books and records, in accordance with generally accepted accounting principles and practices which contain information sufficient to verify the Fees due Licensor hereunder.  Upon not less than [***] prior written notice, Licensor shall have the right, during the Term, [***], to examine during normal business hours at a location within the 48 contiguous United States without unreasonably interfering with the operation of TWC’s business, the books and records of TWC which are related directly to the Video on Demand offering of the Programs to the extent necessary to verify the License Fees due; provided, however, that such examinations shall not be conducted more frequently than [***] and that such examinations shall be limited to License Fees payable during the [***] and the [***] (not to include any period in respect of which an examination has been concluded).  If any such examination reveals a discrepancy in the amount paid to Licensor, TWC shall pay Licensor an amount equal to the amount of such discrepancy, plus interest on the amount of such discrepancy at the rate of [***]% per [***] (or, if lower, the maximum rate permitted by law) from the date on

4

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

which such amount was paid by or should have been paid to Licensor through the date on which payment is made to Licensor.  Licensor will be deemed to have waived any and all claims which it may have with respect to an underpayment of fees due unless it gives written notice of such claims to TWC upon the earlier of [***] after the date on which payment of such fees was due or, within [***] after the conclusion of such examination.

7.Delivery of Programs; Content.

(a)No later than [***] prior to the first date of the [***] to which a particular Schedule applies, Licensor shall deliver to TWC’s agent (as listed on Exhibit C, as same may be amended from time to time by TWC upon reasonable notice to Licensor) a single high-resolution digital format “source file” (i.e., a Digital Beta or “DigiBeta” file) of each Program listed on such Schedule.

(b)Licensor shall not insert any [***] or [***] before, during or after any Program.  TWC shall be entitled to delete any material that violates the foregoing restriction.

(c)Without limiting Section 7(b), Licensor represents, warrants and covenants that each copy of a Program delivered to TWC hereunder shall contain no material other than the video and principal audio portion of such Program (including titles, credits, etc.); provided that such Program may contain closed captioning and second language audio, in each case relating to such Program (collectively, “Supplemental Program Material”).  Licensor shall not [***] on, or [***] by, TWC, any TWC Cable System or any Subscriber in connection with the provision of Supplemental Program Material.  TWC may block any data or material included in any Program that does not comport with the preceding.

(d)Each Program delivered to a requesting Subscriber by TWC shall be in the form received by TWC (except as compressed or otherwise technologically manipulated in accordance with this Agreement), and TWC shall not edit or alter such Program in any way.  Licensor acknowledges that the Subscriber’s use of TWC’s electronic program guide, remote control device or navigator may cause certain information to be super-imposed over the Program from time to time.

(e)Except as otherwise permitted hereunder, TWC shall not, and shall not authorize other persons to, copy, tape or otherwise reproduce any part of any Program without Licensor’s prior written authorization.  Neither TWC nor any TWC Cable System shall be responsible or liable for any Subscriber’s home recording of all or any portion of any Program.  This Section 7(e) shall not restrict TWC’s practice of connecting distribution cables to Subscribers’ videotape recorders or other devices intended for home duplication of audio or video programming, including TWC set-top boxes with recordable hard-drives.

5

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

8.Promotion.

(a)TWC will cause the TWC Cable Systems to use [***] to promote the sale of the Programs on a Video on Demand basis.  Licensor will provide to TWC, upon request, at [***] cost, reasonable quantities of Licensor’s then available promotional, marketing and sales material for the Programs.

(b)TWC acknowledges that, as between TWC and Licensor, certain names and marks included in the Programs, as well as the names of certain of the Programs, are the exclusive property of Licensor (or its suppliers) and that TWC has not and will not acquire any proprietary rights therein by reason of this Agreement.  Subject to compliance with the terms of Exhibit D hereto, use of such names and marks in the form supplied by Licensor in routine promotional materials (such as print or electronic (including interactive) program guides, web sites, program listings and bill stuffers), on-screen promotions and billing statements shall be deemed approved unless Licensor specifically gives written notice to TWC to the contrary.  Nothing contained herein shall limit or restrict the right of TWC to use such names and marks in connection with the exercise of its rights hereunder.

(c)Licensor shall not use, and no right or license is herein granted to Licensor to use, any of the trade names, trademarks, copyrights, styles, slogans, titles, logos or service marks of TWC, any TWC cable television system or any affiliate of TWC.

9.Representations and Warranties.

(a)Licensor represents and warrants that:  (i) Licensor is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado; (ii) Licensor has the requisite power and authority to execute and deliver this Agreement and to fully perform its obligations hereunder; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all actions necessary on the part of Licensor; (iv) Licensor is not subject to any contractual or other legal obligation which will in any way interfere with its full performance of this Agreement; and (v) the individual executing this Agreement on behalf of Licensor has the authority to do so.

(b)Licensor represents and warrants that it has and will have the right to grant the licenses granted herein, free and clear of all liens, restrictions, charges, claims and encumbrances, that it has obtained and will maintain all licenses, permits, exemptions, authorizations and consents necessary to fully perform this Agreement and that no Program (i) is or will be obscene or defamatory (unless privileged) or (ii) violates or infringes or will violate or infringe the civil or property rights, copyrights, music synchronization rights, trademark rights, patent rights or rights of privacy or publicity or any other rights of any person.  Notwithstanding anything else in this Agreement, TWC shall have the right to cease offering any Program if the representations contained in this Section 9(b) are breached in respect thereof.

(c)TWC represents and warrants that:  (i) TWC is a division of a limited partnership duly organized, validly existing and in good standing under the laws of the State

6

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

of Delaware; (ii) TWC has the requisite power and authority to execute and deliver this Agreement and to fully perform its obligations hereunder; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all action necessary on the part of TWC; (iv) TWC is not subject to any contractual or other legal obligation which will in any way interfere with its full performance of this Agreement; and (v) the individual executing this Agreement on behalf of TWC has the authority to do so.

(d)The terms and conditions, other than the existence and duration, of this Agreement, as well as any technical data (including MPEG-2 encoding specifications) that are exchanged by the parties (“Confidential Information”), shall be kept confidential by the parties hereto and shall not be disclosed by either party to any third party, without the prior written consent of the other party except: (i) as may be required by any court of competent jurisdiction, governmental agency, law or regulation (in such event, the disclosing party shall notify the other party before disclosing the Agreement) (ii) as may be required or necessary in any SEC or regulatory filings (redacted to the greatest extent permitted under SEC “confidential treatment” regulations); (iii) as part of the normal reporting or review procedure to a party’s accountants, auditors, agents, legal counsel, partners and employees of parent and subsidiary companies, provided such accountants, auditors, agents, legal counsel, partners and employees of parent and subsidiary companies agree to be bound by this Paragraph; (iv) to enforce any of a party’s rights pursuant to this Agreement; (v) in connection with due diligence conducted in connection with a merger, consolidation or acquisition provided that any person to whom Confidential Information is so disclosed shall have executed, prior to receiving any Confidential Information, written non-disclosure agreements which include confidentiality provisions at least as strict as those set forth in this Agreement; and (vi) to any prospective or existing lender provided that any such lender shall have executed (prior to their review of any Confidential Information) a written confidentiality agreement which includes provisions at least as strict as the provisions set forth in this Agreement regarding the confidentiality of information reviewed.

10.Force Majeure. Neither party shall have any liability to the other party for any failure to perform hereunder, if such failure is due to an act of God, inevitable accident, fire, lockout, strike or other labor dispute, riot or civil commotion, act of government or governmental instrumentality (whether federal, state or local), act of terrorism, failure of performance by a common carrier, failure in whole or in part of technical facilities, or other cause (excluding financial inability or difficulty of any kind) beyond such party’s reasonable control.

11.Indemnification and Other Remedies.

(a)Licensor shall indemnify TWC, the TWC Cable Systems, the persons who directly own the TWC Cable Systems and each of their respective affiliates

7

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(including controlling persons and related companies), officers, directors, shareholders, employees and agents (“TWC Indemnitees”) for, and shall hold them harmless from and against, any and all losses, settlements, claims, actions, suits, proceedings, investigations, judgments, awards, damages and liabilities (collectively, “Losses” and, individually, a “Loss”) which are sustained or incurred by or asserted against any of them and which arise out of (i) any breach of this Agreement by Licensor or (ii) the Programs (including, without limitation, any Loss arising out of libel, slander, defamation, indecency, obscenity, invasion of right of privacy or publicity, or infringement or violation of copyrights, music synchronization rights, trademark rights or patent rights) ), to the extent that such Losses do not arise directly from the TWC lndemnitees’ gross negligence or willful misconduct, and shall reimburse them for any and all legal, accounting and other fees, costs and expenses (collectively, “Expenses”) reasonably incurred by any of them in connection with investigating, mitigating or defending any such Loss; provided, however, that Licensor will not have any obligation or liability under this Section 11(a) to the extent that (A) TWC has an obligation or liability with respect to the same Loss under Section 11(b) or (B) the relevant Loss relates to violation of obscenity laws and would not have arisen but for TWC delivering Programs that Licensor identified as having been edited for Partial Editing Cable Standards to subscribers in states listed on Exhibit E (as such Exhibit may be amended from time to time by Licensor upon reasonable advance written notice to TWC).  Licensor shall not be required to indemnify TWC hereunder to the extent that TWC is in breach of this Agreement, provided that Licensor is not in breach of this Agreement.

(b)TWC shall indemnify Licensor and its affiliates (including controlling persons and related companies), officers, directors, shareholders, employees and agents (the “Licensor Indemnitees”) for, and shall hold them harmless from and against, any and all Losses which are sustained or incurred by or asserted against any of them and which arise out of any breach of this Agreement by TWC, to the extent that such Losses do not arise directly from the Licensor Indemniteers’ gross negligence or willful misconduct, and shall reimburse them for any and all Expenses reasonably incurred by any of them in connection with investigating, mitigating or defending any such Loss.  TWC shall not be required to indemnify Licensor hereunder to the extent that Licensor is in breach of this Agreement, provided that TWC is not in breach of this Agreement.

(c)Promptly after receipt by a party of notice of the commencement of any action, suit, proceeding or investigation in respect of which a claim for indemnification may be made hereunder by it or its affiliates, officers, directors, shareholders, employees or agents, such party will give written notice thereof to the other party; but the failure to so notify the other party will not relieve the other party from any liability or obligation which the other party may have to any indemnified person (i) otherwise than under this Agreement or (ii) under this Agreement except to the extent of any material prejudice to the other party resulting from such failure.  If any such action, suit, proceeding or investigation is brought against an

8

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

indemnified person, the indemnifying party will be entitled to participate therein and, if it wishes to assume the defense thereof with counsel satisfactory to the indemnified person (who shall not, except with the consent of the indemnified person, be counsel to the indemnified person) and gives written notice to the indemnified person of its election so to assume the defense thereof within fifteen (15) days after notice shall have been given to it by the indemnified person pursuant to the preceding sentence, will be entitled to assume the defense thereof.  Each indemnified person will be obligated to cooperate reasonably with the indemnifying party, at the expense of the indemnifying party, in connection with such defense and the compromise or settlement of any such action, suit, proceeding or investigation.

(d)Neither party shall, for any reason or under any legal theory, be liable to the other for any special, indirect, incidental or consequential damages or for loss of profits, revenues, data or services, regardless of whether such damages or loss was foreseeable and regardless of whether it was informed or had direct or imputed knowledge of the possibility of such damages or loss in advance.

(e)All rights, powers and remedies afforded to a party hereunder, by law, in equity or otherwise shall be cumulative (and not alternative) and shall not preclude assertion or seeking by a party of any other rights or remedies.

12.Termination.

(a)If a party (i) becomes bankrupt or insolvent, however evidenced, (ii) admits in writing its inability to pay its debts when due, (iii) makes a general assignment for the benefit of creditors, (iv) has appointed, voluntarily or involuntarily, any trustee, receiver, custodian or conservator with respect to it or a substantial part of its property, (v) files, or has filed against it, a voluntary or involuntary petition in bankruptcy or (vi) makes any arrangement or otherwise becomes subject to any proceedings under the bankruptcy, insolvency, reorganization or similar laws of the United States or any state, then the other party shall have the right at any time thereafter to terminate this Agreement by giving written notice to such party.

(b)Either party shall have the right to terminate this Agreement by giving written notice to the other party if the other party has materially breached this Agreement and such breach shall not have been fully cured; provided, however, that, if such breach is fully curable, such party shall not have the right to terminate this Agreement unless such party shall have given written notice to the other party of such breach and the other party shall have failed to fully cure such breach within thirty (30) days after such notice shall have been given.

(c)This Section 12(c) and Sections 5, 6, 9(a), 9(b), 9(d), 11, 14(b) and 14(c) shall survive the expiration or termination of this Agreement for any reason.

13.Notices.  All notices required or permitted to be given pursuant to this Agreement shall be given in writing, shall be transmitted by personal delivery, by registered or certified

9

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

mail, return receipt requested, postage prepaid, by an overnight delivery service or by telecopier or other electronic means and shall be addressed as follows:

When Licensor is the intended recipient:

New Frontier Media, Inc

5435 Airport Blvd., Suite 100

Boulder, CO 80301

Attention: Senior Vice President, Sales

Telecopy No.: (303) 938-8388

with a copy to:

New Frontier Media, Inc

5435 Airport Blvd., Suite 100

Boulder, CO 80301

Attention: Director, Legal Affairs

Telecopy No.: (303) 413-1553

When TWC is the intended recipient:

Time Warner Cable

290 Harbor Drive

Stamford, Connecticut 06902

Attention: Senior Vice President, Programming

Telecopy No.: (203) 328-4040

with a copy to:

Time Warner Cable

290 Harbor Drive

Stamford, Connecticut 06902

Attention: Senior Vice President and General Counsel

Telecopy No.: (203) 328-0692

A party may designate a new address to which notices shall thereafter be transmitted by giving written notice to the other party.  Each notice transmitted in the manner described in this Section 13 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), the affidavit of the messenger (if transmitted by personal delivery), the records of the overnight delivery service (if transmitted by such service) or the answer back or call back (if transmitted by telecopier or other electronic means) and printing of the transmission confirmation report by the sending machine or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason.

10

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

14.Miscellaneous.

(a)Neither party shall be or hold itself out as the agent of the other party under this Agreement.  Nothing contained herein shall be deemed to create, and the parties do not intend to create, any relationship of partners or joint venturers as between TWC and Licensor, and neither party is authorized to or shall act toward third parties or the public in any mariner which would indicate any such relationship.

(b)The validity, interpretation, performance and enforcement of this Agreement shall be governed by the law of the State of New York (without giving effect to the laws, rules or principles of the State of New York regarding conflicts of laws).  The respective obligations of the parties under this Agreement are subject to all applicable federal, state and local laws, rules and regulations (including, without limitation, the Communications Act of 1934, as amended, the Cable Communications Policy Act of 1984, as amended, and the rules and regulations of the Federal Communications Commission thereunder).

(c)Each party agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach of this Agreement may be commenced and prosecuted in a court in the State of New York.  Each party consents and submits to the non-exclusive personal jurisdiction of any court in the State of New York in respect of any such proceeding.  Each party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable laws and rules.  Each party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of New York and any claim that it may now or hereafter have that any such proceeding in any court in the State of New York has been brought in an inconvenient forum.  Each party waives trial by jury in any such proceeding.

(d)This Agreement together with the Exhibits attached hereto constitute the entire contract between the parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous contracts, representations, warranties and understandings (whether oral or written) between the parties with respect to the subject matter hereof.

(e)This Agreement shall be binding upon the parties and their respective successors and assigns and shall inure to the benefit of the parties and their respective successors and permitted assigns.  Neither party shall assign any of its rights or delegate any of its duties under this Agreement (by operation of law or otherwise) without the prior written consent of the other party.  Notwithstanding the foregoing, no such consent shall be required in connection with any such assignment or delegation by (i) TWC to any Time Warner Company or any person which controls, is controlled by or is under common control with TWC or any Time Warner Company or any partner of Paragon Communications; (ii) Licensor to any affiliate of Licensor; or (iii) Licensor to any other entity in connection with a merger, consolidation or sale by Licensor of all or substantially all of its assets, provided however, that upon an assignment by Licensor pursuant

11

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

to the foregoing (iii), TWC shall have the right to terminate this Agreement immediately upon written notice to Licensor without any further liability or obligation of any kind under this Agreement.  Any assignment of rights or delegation of duties under this Agreement by a party without the prior written consent of the other party, if such consent is required hereby, shall be void.  Except as otherwise provided herein, no person shall be a third party beneficiary of this Agreement.

(f)The headings set forth in this Agreement have been inserted for convenience of reference only, shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement.

(g)Except as otherwise contemplated herein no amendment of this Agreement shall be binding upon a party unless in writing and executed and delivered on behalf of each party by, in the case of Licensor, an officer of Licensor and, in the case of TWC, by its Senior Vice President, Programming, Senior Executive Vice President, President or Chairman (each an “Authorized Person”); provided, however, that any Authorized Person may, by written authorization, designate another person to execute and deliver such an instrument.  Unless authorized in writing pursuant to the preceding proviso, the employees and officers of TWC’s regional divisions and the cable systems are not Authorized Persons.

(h)No waiver of any provision of this Agreement shall be binding upon a party unless in writing and executed and delivered on behalf of such party by, in the case of Licensor, an officer of Licensor and, in the case of TWC, by an Authorized Person.  Such waiver shall be effective only to the extent specifically set forth in such written instrument and no waiver of any breach or provision hereunder shall be deemed to be a waiver of a preceding or subsequent breach of the same or any other provision of this Agreement.

(i)This Agreement may be signed in any number of counterparts, each of which (when executed and delivered) shall constitute an original instrument, but all of which together shall constitute one and the same instrument.

12

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first above written.

TIME WARNER CABLE, a division of
TIME WARNER ENTERTAINMENT COMPANY, L.P.
By:	[Illegible]
Name:
Title:	SVP
NEW FRONTIER MEDIA, INC.
By:	/s/ Michael Weiner
Name:	Michael Weiner
Title:	VP

13

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT A

MPEG Encoding Specifications

[Technical Specifications Omitted]

[***]

14

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Exhibit B

Movie Schedule

[Movie Schedule by Date and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT C

iN Demand LLC
345 Hudson Street
17th Floor
New York NY 10014

16

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT D

Use of Network Names and Marks

Affiliate’s use of the Marks shall be limited to the advertising and promotion of its carriage of the Service over the Cable Systems pursuant to this Agreement.  Network shall provide Affiliate with samples of each of the Marks which Affiliate shall use in their entirety (including all service mark and trademark notices) whenever a Mark is used by Affiliate.

17

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

EXHIBIT E

[***] Standard States

[States Requiring [***] Standard Omitted]

18

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

AMENDMENT TO THE VIDEO ON DEMAND LICENSE AGREEMENT

This Amendment, effective as of April 30, 2007 (“Effective Date”) hereby amends the Video on Demand License Agreement regarding carriage of motion pictures on a “video on demand” basis that was entered into by and between NEW FRONTIER MEDIA, INC. a Colorado Corporation (“Licensor”) and TIME WARNER CABLE, a division of Time Warner Entertainment Company, L.P., a Delaware partnership (“TWC”) as of the 13th day of March, 2000 (the “Agreement”).  Licensor and TWC hereby agree as follows:

1.Amendments to Agreement.  The following provisions amend certain provisions set forth in the Agreement and such provisions shall govern the parties’ relationship with respect to the Programs provided to TWC by Licensor under the Agreement and this Amendment.

A.Programs.  Section 4(a) of the Agreement is hereby modified by adding “(each, an “Adult Feature Film”) and at [***] Events” after the phrase “[***] adult feature films” in the first sentence of such Section.

B.Programs.  The following shall be added as a new Section 4(d) to the Agreement: “Without limiting the generality or applicability of Section 4(c), an “Event” shall mean a [***] program which focuses on [***] in [***] or [***] situations licensed by Licensor.  The depiction of [***] in these episodes may be [***] or [***]; however, the level of depicted explicitness shall be [***] (or “[***]” than) movies shown on premium channels as [***] and [***].

C.Fees.  Section 5(a) of the Agreement is hereby modified by replacing the word “Program” with the phrase “Adult Feature Film” and by adding to the end of such first sentence the phrase “and a License Fee for each Buy of an Event equal to [***].”

D.Payments; Reports.  Section 6(b) of the Agreement is hereby modified by adding the following at the end of such Section, “Such statement shall include, without limitation, the number of Buys during the relevant [***] of all Events and Adult Feature Films licensed to TWC pursuant to this Amendment.”

E.Definitions.  Section 1(c) of the Agreement (the definition of “Program”) is hereby modified by replacing the phrase “motion picture” with the phrase “Adult Feature Film and Event.”

2.All of the terms and conditions set forth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this Amendment, in which case the provisions of this Amendment shall prevail.  Subject to the foregoing, this Amendment and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one and the same document, and references in the Agreement to the “Agreement” shall be deemed to refer to the Agreement as amended by this Amendment.

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Signature Page to Follow

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

ACCEPTED AND AGREED:

Time Warner Cable		New Frontier Media, Inc.
By:	/s/ Melinda C. Witmer	By:	/s/ Ken Boenish
Name:	Melinda C. Witmer	Name: Ken Boenish
Title:	SVP and Chief Programming Officer	Title: President

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

SECOND AMENDMENT TO THE
VIDEO ON DEMAND LICENSE AGREEMENT

This Second Amendment, effective as of May 17, 2007 (“Effective Date”) hereby amends the Video on Demand License Agreement regarding carriage of motion pictures on a “video on demand” basis that was entered into by and between NEW FRONTIER MEDIA, INC. a Colorado corporation (“Licensor”) and TIME WARNER CABLE, a division of Time Warner Entertainment Company, L.P., a Delaware partnership (“TWC”) as of the 13th day of March, 2000 (as amended, the “Agreement”).  Licensor and TWC hereby agree as follows:

1.Amendments to Agreement.  The following provisions amend certain provisions set forth in the Agreement and such provisions shall govern the parties’ relationship with respect to the Programs provided to TWC by Licensor under the Agreement and this Amendment.

A.Programs.  Section 4(a) of the Agreement is hereby modified by adding “and [***] or more [***]” after the phrase “[***] Events” in the first sentence of such Section.

B.Programs.  The following shall be added as a new Section 4(e) to the Agreement:  “Without limiting the generality or applicability of Sections 4(c) and 4(d), a “[***]” shall mean a feature length film, which is at least [***] in length, which contains [***] and which may depict [***] situations containing [***]; provided that any depiction of [***] is [***] and [***] occurs, and the level of depicted [***] explicitness shall be [***] (or “[***]” than) movies shown on premium channels such as [***] and [***].”

C.Fees.  Section 5(a) of the Agreement is hereby modified by adding to the end of such first sentence the phrase “and a License Fee for each Buy of a [***] equal to [***].”

D.Payments; Reports.  Section 6(b) of the Agreement is hereby modified by adding “,[***],” after the phrase “Such statement shall include, without limitation, the number of Buys during the relevant [***] of all Events.”

E.Definitions.  Section 1(c) of the Agreement (the definition of “Program”) is hereby modified by adding “, [***]” after the phrase “Adult Feature Film.”

2.All of the terms and conditions set forth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this Second Amendment, in which case the provisions of this Second Amendment shall prevail.  Subject to the foregoing, this Second Amendment and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one and the same document, and references in the Agreement to the “Agreement” shall be deemed to refer to the Agreement as amended by this Second Amendment.

Signature Page to Follow

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

ACCEPTED AND AGREED:

Time Warner Cable	New Frontier Media, Inc.
By:	By:	/s/ Karyn L.Miller
Name:	Name:	Karyn Miller
Title:	Title:	Chief Financial Officer

EX-10.34

Exhibit 10.34

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Adult VOD License Agreement

This VOD License Agreement (this “Agreement”) dated as of October 18, 2002 between Colorado Satellite Broadcasting, Inc., a subsidiary of New Frontier Media, Inc. (“CSB”), and Comcast Cable Communications, Inc., a Delaware holding company, on behalf of its operating subsidiaries (“Comcast”), shall govern all terms and conditions relating to the distribution of adult-oriented on-demand programming content supplied by CSB over Comcast cable systems (the “Systems”).

Whereas, Comcast desires to make available, to its subscribers in certain Systems, adult-oriented programming content from CSB via video-on-demand (“VOD”) (i.e., the exhibition of video programming chosen by a subscriber for display on that subscriber’s television set on an on-demand basis, such that a subscriber can start such programming upon the subscriber’s selection and thereafter control the playback of such programming in a manner similar to that of a VCR); and

Whereas, CSB desires to license to Comcast adult-oriented programming content via VOD.

Now, therefore, CSB and Comcast in consideration of the mutual covenants set forth herein, and for other valuable consideration, the sufficiency and receipt of which is hereby acknowledged, agree as follows:

1.Grant of Rights.  CSB grants to Comcast, and Comcast accepts, a non-exclusive license to exhibit and distribute the VOD Content (as hereinafter defined) via VOD over the Systems to subscribers during the Term and in accordance with this Agreement.  Those Systems actually distributing the VOD Content to subscribers via VOD, as determined by Comcast, shall be referred to as the “VOD Systems,” and subscribers capable of accessing the VOD Content via VOD shall be referred to as “VOD Subscribers.”  Comcast shall not add to, delete from and/or otherwise alter any part of any of the VOD Content as supplied by CSB to Comcast’s VOD Server (i.e., a disk array storage device that accepts and stores video and data input and provides streaming media output including MPEG video) and made available via VOD.  For purposes hereof, the “VOD Content” shall mean all Program(s) actually delivered by CSB (or a third party engaged by CSB) to Comcast’s VOD Server.  A “Program” shall mean an individual feature film, direct-to-video programming (including a movie), extended-length video, live performance or production or other audio-visual program, made available by CSB as part of the VOD Content; provided, however, that each such Program shall be (i) exclusively targeted to adult consumers because of its [***] content; and (ii) [***] in duration.

2.Term.  This Agreement shall be effective as of the date hereof and shall terminate upon the [***] of this Agreement (the “Term”), unless earlier terminated in accordance with the terms and conditions of this Agreement.

3.Royalties and Fees.

(a)Royalties.  CSB shall be responsible for any and all royalties and/or other fees payable to any applicable programming licensor(s) for content included in the

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

VOD Content (including, without limitation, residuals or other payments to guilds or unions, rights for music clearances, including but not limited to performance rights, synchronization rights, and mechanical rights, and all other fees, payments, or obligations arising out of the activities contemplated by the Agreement), and Comcast shall have no responsibility or liability for any such royalties or fees, including any royalties or fees associated with distribution of the VOD Content via VOD.

(b)Fees.  In each VOD System in which Comcast determines to distribute the VOD Content, Comcast shall make the VOD Content available to VOD Subscribers on a VOD basis for [***] fee to be determined by Comcast in its sole discretion.  Comcast shall, within [***] after the last day of each [***], (i) provide to CSB, with respect to such [***], a report showing the Systems over which the Programs were made available, the number of VOD Subscribers that have access to the Programs, the Programs distributed by Comcast during such [***], the respective prices charged for such Programs, the number of orders for such Programs; and (ii) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] (as defined herein) for such month; with a minimum [***] payment of [***] ($[***]); and (iii) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] for such [***]; with a minimum [***] payment of [***] ($[***]).  For purposes hereof, “[***]” shall mean the total amount of [***] fees billed by Comcast from VOD Subscribers for viewing of the Programs.  Any [***] shall be charged to VOD Subscribers on the basis of [***].  Comcast shall not have the right to offer any person, including VOD Subscribers, any “[***],” “[***]” or other incentives without paying CSB the minimum [***] payments set forth above.  For payments that are more than [***] past due, Comcast will pay CSB interest on the overdue amount at a rate of [***] percent ([***]%) computed on a [***] basis (or the maximum rate allowed by law, whichever is less).  During the Term hereof and for [***] thereafter, Comcast’s specific books and records shall be available for inspection and audit by CSB, its employees or agents, at its expense and at Comcast’s offices.  Such inspection or audit will be conducted no more than [***] during any [***] period with reasonable advance written notice to Comcast, the scope of which shall be specifically limited to items materially relevant to the economic terms of this Agreement.  If, as a result of any audit, a deficiency is shown in an amount [***] than [***] percent ([***]%) of the total amount of fees payable to CSB for the period covered by such audit, Comcast shall promptly pay any such deficiency, along with CSB’s reasonable out-of-pocket cost of the audit.

4.Transmission and Distribution.

(a)Delivery to Comcast.  Comcast, at its own expense, shall obtain and install equipment necessary to distribute the VOD Content to subscribers from the VOD Server in each VOD System’s headend.  CSB, at its own expense, shall deliver [***] encoded master copy of the media for the VOD Content to Comcast or

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

another mutually agreeable third-party via satellite (or via other mutually agreed-upon commercially feasible mode of delivery, as and when same may become available [e.g., terrestrial]) to points of presence designated by Comcast that have sufficient bandwidth to ensure timely distribution of the VOD Content.  All VOD Content shall be delivered, in a “server-ready” format (i.e., including all applicable digitally encoded non-video data attributes [“Meta Data”]).  The maximum MPEG 2 encoding data rate shall be 3.75 mbps or as otherwise agreed between the parties.  CSB shall cooperate with Comcast’s third-party vendors, as applicable, to ensure that the VOD Content is supported by such third-party vendors, including but not limited to VOD equipment vendors, transport vendors, and asset management vendors.  Notwithstanding the foregoing, it is understood that CSB shall have no obligation to deliver the VOD Content to a System if such System does not have the equipment necessary to receive the VOD Content from CSB or the third party designated to deliver the VOD Content to Comcast.

(b)Distribution of VOD Content.  Comcast shall distribute on a VOD basis to VOD Subscribers on each VOD System either the [***] Standard or [***] Standard programming package of Programs.  Unless Comcast notifies CSB in writing that a VOD System intends to distribute the [***] Standard package of Programs, the package of Programs delivered by CSB to such VOD System shall be the [***] Standard package of Programs.  Notwithstanding anything to the contrary contained in this Agreement or otherwise, Comcast shall have the right at any time to cease distribution of any and/or all of the VOD Content on any VOD System, it being understood that Comcast is not required to distribute any of the Programs on any VOD System.  The definition of each of the editing standards for [***] Standard and [***] Standard is set forth on Schedule A attached hereto.

5.Intellectual Property:  With respect to any intellectual property interests residing in the content of the VOD Content or in any software or hardware provided to Comcast by CSB, regardless of whether CSB owns or asserts ownership in such intellectual property, CSB shall ensure that Comcast has all rights to use, on a [***] basis, such intellectual property in connection with the distribution of the VOD Content pursuant to this Agreement.  Notwithstanding the foregoing, nothing contained herein shall act as a transfer to Comcast of ownership in such intellectual property, even during such time as a copy of such programming may reside on a VOD Server owned or used by Comcast in connection with the distribution of the VOD Content pursuant to the terms hereof, and Comcast shall not acquire any proprietary or other rights therein in connection with such distribution except as specifically set forth in this Agreement.

6.Program Content:  Provided that Comcast has begun to distribute the VOD Content to VOD Subscribers, CSB shall be responsible for supplying each of the [***] Standard and [***] Standard programming packages of Programs, such that each such programming package contains a minimum of [***] of VOD Content at any given time, and each of which shall be [***] on a [***] basis such that at least [***] percent ([***]%) of the VOD Content is [***] each [***]; provided, however, that CSB shall make [***] to accommodate Comcast’s requests concerning (i) [***]; and (ii) [***].  Notwithstanding anything to the contrary in this

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Agreement, Comcast shall have the nonexclusive right to digitize and/or compress any VOD Content and to transmit such VOD Content as so altered directly to VOD Subscribers on a VOD basis.

7.Editing Standard:  The package of [***] Standard programs shall consist only of Programs conforming to that standard, consistent with the definition set forth in Schedule A attached hereto.  The package of [***] Standard programs shall consist only of Programs conforming to that standard, consistent with the definition set forth in Schedule A attached hereto.  CSB acknowledges that Comcast may upon sufficient advance written notice, direct CSB not to include as part of the VOD Content any particular Programs.  COMCAST HEREBY ACKNOWLEDGES THAT ALL VOD CONTENT IS INTENDED FOR DISTRIBUTION EXCLUSIVELY TO CONSENTING ADULTS IN LOCATIONS WHERE SUCH CONTENT DOES NOT VIOLATE ANY COMMUNITY STANDARDS OR ANY FEDERAL, STATE OR LOCAL LAW OR REGULATION OF THE UNITED STATES OR ANY OTHER COUNTRY.  COMCAST SHALL USE [***] TO ALLOW VOD SUBSCRIBERS TO RESTRICT ACCESS TO VOD CONTENT IN ORDER SO THAT NO PERSONS UNDER THE AGE OF EIGHTEEN (18) YEARS NOR PERSONS WHO MAY BE EASILY OFFENDED BY THE VIEWING OF SUCH VOD CONTENT MAY DIRECTLY OR INDIRECTLY VIEW OR POSSESS ANY OF THE VOD CONTENT OR PLACE ANY ORDERS FOR ANY PROGRAMS OFFERED BY COMCAST HEREUNDER.

8.Sponsorship and Advertising:  The VOD Content shall not contain any [***] or [***], but may contain [***] for current and future Programs, provided, however that no single Program ordered by any VOD Subscriber shall be accompanied by more than [***] of [***] in the aggregate, and further provided that no [***] for any Program that is part of the [***] Standard programming package shall be contained in any VOD Content that is in the [***] Standard programming package.

9.Security:  Comcast shall use [***] to ensure that any VOD Server on which the Programs are stored shall be secure and not accessible by any unauthorized third parties.  Except as otherwise permitted herein, Comcast shall not record, copy, or duplicate any Program included in the VOD Content, other than for the purpose of implementing the authorized distribution of the VOD Content to VOD Subscribers, it being understood that Comcast’s assistance in connecting subscribers’ home recording devices such as VCRs is not prohibited and that Comcast is not responsible for subscribers’ home recording.  Upon written notice by CSB that CSB no longer has the rights to include any particular Program as part of the VOD Content, Comcast shall erase and permanently delete all copies of such Program that are stored in Comcast’s VOD Servers.

10.Representations.  CSB represents and warrants that it has and will maintain during the Term, at its sole expense, all necessary rights for Comcast to exhibit and distribute vie VOD the VOD Content through to Comcast’s subscribers (including, without limitation, all copyrights, performance rights, synchronization rights, mechanical rights, and other applicable rights, authorizations, and licenses, covering all transmissions of copyrighted content contained in the VOD Content) in accordance with this Agreement.  EXCEPT AS STATED IN THIS

4

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

AGREEMENT, ALL VOD CONTENT IS PROVIDED BY CSB ON AN “AS IS” BASIS AND CSB MAKES NO REPRESENTATIONS OF ANY KIND WITH RESPECT TO THE VOD CONTENT, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

11.Indemnification.  Comcast and CSB each agrees to hold the other party, its parent, subsidiary and affiliated companies and entities and their officers, directors, employees and agents harmless form and against any and all damages, liabilities, costs, and expenses (including reasonable attorneys’ fees) arising out of any breach or alleged breach of any of its respective representations or obligations pursuant to this Agreement.  Furthermore, CSB will indemnify and hold harmless Comcast, its parent, subsidiary, and affiliated companies and entities and their officers, directors, employees, and agents from and against any and all claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees) arising out of the VOD Content, the Programs and/or any material included therein.  Additionally, Comcast will indemnify and hold harmless CSB, its parent, subsidiaries, and affiliated companies and entities and their officers, directors, employees, attorneys and agents from and against any and all claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees) with respect to all third party claims arising out of Comcast’s exhibition and distribution of the VOD Content via VOD Systems other than in accordance with the terms and conditions of this Agreement.  The provisions of this paragraph shall survive the termination or expiration of this Agreement.

12.Ownership of Marks and Co-Branding:  Comcast acknowledges that the names and marks “The Erotic Network,” “TEN,” and “Pleasure,” and any logos and variations incorporating the same, are the exclusive property of CSB, and that Comcast has not and will not acquire any proprietary rights thereto by reason of this Agreement.  Similarly, CSB acknowledges that the name “Comcast,” Comcast’s “concentric c” logo and any other mark or logo used by Comcast in connection with providing cable service are the exclusive property of Comcast, and CSB has not and will not acquire any proprietary rights thereto by reason of this Agreement.  Neither party shall have the right to use the other party’s names, marks, or logos or variations thereof except at the times and in a manner expressly approved in writing by the owner of such names, marks, or logos.  Comcast shall submit to CSB for CSB’s prior approval, which shall not be unreasonably withheld, all promotional and/or advertising material (other than materials prepared by CSB) relating to the VOD Content before Comcast exhibits, publishes, or otherwise disseminates such material, and CSB shall reply in a timely manner.  Notwithstanding the foregoing, Comcast’s listings and descriptions with respect to the VOD Content in VOD menus and/or interaction program guide menus shall not require prior approval.  In addition, Comcast’s use of names, marks, or logos associated with the VOD Content in routine promotional materials, such as bill stuffers, channel line-up cards, printed program guides, or video advertising, shall not require prior approval as long as such names, marks, or logos have been taken from logo sheets or other materials supplied by CSB.

13.Termination and Default:  If either party defaults in the performance of any of its material obligations hereunder or breaches any representation or warranty, and such default is not cured within [***] after written notice thereof (or, in the case of a default that is not capable of being cured within [***], then if the defaulting party fails to take all reasonable steps to

5

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

commence curing such default within such [***] period and thereafter diligently proceed to cure such default), then the other party may terminate this Agreement by giving written notice thereof to the defaulting party.  Termination of this Agreement shall not terminate Comcast’s obligations to remit any payments to which CSB may be entitled as a result of accrual of such payments prior to the date of such termination.  In the event that such default in the performance of a party’s material obligations includes Comcast’s failure to remit any fees due to CSB as and when due, in addition to any other rights or remedies which CSB may have at its disposal, Comcast shall be responsible for any and all costs of collection, including, without limitation, any legal fees and/or other costs incurred by CSB in it connection with its attempt to collect any such fees.

14.Confidentiality.  Neither CSB nor Comcast shall disclose to any third party (other than their respective employees, agents or representatives in their capacity as such), any information with respect to the financial or other terms of this Agreement except:  (i) to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event, the party making such disclosure shall so notify the other, in writing, within [***], and shall seek confidential treatment of such information, (ii) as part of its normal reporting or review procedure to its parent company, its auditors and its attorneys, provided, however, that such parent company, auditors and attorneys agree to be bound by the provisions of this Section 14, (iii) in order to enforce its rights pursuant to this Agreement, or (iv) to any bona fide prospective purchaser of the stock or assets of such party.

15.Press Releases:  Neither party shall issue any press release regarding the business relationship of the parties as set forth herein without the advance written consent of the other party.

16.Limitation of Liability.  Subject to Section 11 hereof, neither Party shall have any liability to the other party for any incidental, punitive, indirect, or consequential damages.

17.Assignment.  Neither party may assign the rights and obligations under this Agreement, except to an entity that controls, is controlled by, or is under common control with such party, without the prior written consent of the other party, such consent not to be unreasonably withheld.

18.Force Majeure:  CSB shall not be liable to Comcast for failure to supply the VOD Content or any part thereof, nor shall Comcast be liable to CSB for failure to provide the VOD Content or any part thereof to subscribers, by reason of any act of God, labor dispute, breakdown of facilities, legal enactment, governmental order or regulation, or any other cause beyond its respective control.

19.Choice of Law.  This Agreement will be construed in accordance with the laws of the State of New York without regard to its conflict of law provisions.

20.No Relationship:  This Agreement does not create any partnership or joint venture between Comcast and CSB.  Neither Comcast nor CSB will be, or hold itself out as, the agent of the other party in connection with, or as a result of, this Agreement.

6

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

21.No Reliance:  The parties acknowledge that (i) nothing contained in this Agreement or otherwise shall obligate the parties to enter into any further business relationship or agreement, (ii) neither party is entering into this Agreement in reliance upon any term, condition, representation or warranty not stated in this Agreement, and (iii) neither party is relying on the other party in operating and/or developing its respective businesses.  Except as expressly set forth in this Agreement, there shall be no obligation whatsoever on the part of either party, unless agreed to in writing by the parties.

22.Interpretation:  No provision of this Agreement may be interpreted against any party because such party or its counsel drafted the provision.  Headings used in this Agreement are provided for convenience only, and will not be interpreted to have independent meaning or to modify any provision of this Agreement.

23.Bankruptcy:  In the event of a bankruptcy or insolvency of either party, or if either party makes an assignment for the benefit of creditors, or takes advantage of any act or law for relief from debtors, the other party shall have the right to terminate this Agreement without further obligation or liability.

24.Notices:  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given as of the date of confirmed delivery or confirmed facsimile transmission.  To be effective, Notices must be delivered to the address set forth on the signature page of this Agreement.

25.Entire Agreement; Amendments.  This Agreement constitutes the entire understanding between CSB and Comcast concerning the subject matter of this Agreement.  This Agreement supersedes any and all other prior and contemporaneous agreements, whether oral or written, pertaining to the subject matter of this Agreement.  This Agreement shall not be deemed to amend or modify in any way any other agreement, if any, between CSB and Comcast that do not pertain to the subject matter hereof.  This Agreement may not be modified or amended, and no provision of this Agreement may be waived, except in a writing executed by each of the parties to this Agreement.  No failure to exercise or delay in the exercise of, a party’s rights under this Agreement will constitute a waiver of such rights.  No waiver of a provision of this Agreement will constitute a waiver of the same or any other provision of this Agreement other than as specifically set forth in such waiver.

AGREED:

COLORADO SATELLITE BROADCASTING, INC.		COMCAST CABLE COMMUNICATIONS, INC.
Signature:	/s/ Ken Boenish	Signature:	/s/ Alan S. Dannenbaum
		Name:	Alan S. Dannenbaum
Name:	Ken Boenish	Title:	Vice President, Programming
Title:	President

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Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Schedule A

“[***] Standard” means versions of Programs which (i) depict [***] and [***] situations and [***] among consenting adults; but (ii) do not depict [***]; (iii) do not include [***].

“[***] Standard” means versions of Programs which (i) depict [***] and [***] situations and [***] among consenting adults; (ii) may depict [***]; but (iii) do not depict [***]; (iv) do not include [***].

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

February 28, 2005

Comcast Cable Communications, LLC
1500 Market Street
Philadelphia, PA 19102
Attn:  Alan Dannenbaum

Re:Colorado Satellite Broadcasting, Inc.

Dear Alan:

We refer to VOD License Agreement (as amended from time to time, the “Agreement”) dated as of October 18, 2002 between Colorado Satellite Broadcasting, Inc. (“CSB”) and Comcast Cable Communications, LLC. (f/k/a Comcast Cable Communications, Inc.) (“Comcast”).  Capitalized terms used in this letter agreement and not otherwise defined have the meanings set forth in the Agreement.

1.Section 3(b) shall be amended and restated as follows:

2.“Fees.  In each VOD System in which Comcast determines to distribute the VOD Content, Comcast shall made the VOD Content available to VOD Subscribers on a VOD basis for [***] fee to be determined by Comcast in its sole discretion.  Comcast shall, within [***] after the last day of each [***]:  (i) provide to CSB, with respect to such month, a report showing the Systems over which the Programs were made available, the Programs distributed by Comcast during such [***], the respective prices charged for such Programs, the number of orders for such Programs; and (ii) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] (as defined herein) for such [***], with a minimum [***] payment to CSB of [***] ($[***]); and (iii) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] (as defined herein) for such [***], with a minimum [***] payment to CSB of [***] ($[***]); and (iv) for Programming Blocks (as defined herein), pay to CSB [***] percent ([***]%) of [***] (as defined herein) for such [***], with a minimum [***] payment to CSB of [***] ($[***]).  For purposes hereof, “[***]” shall mean the total amount of [***] fees billed by Comcast from VOD Subscribers for viewing of the Programs.  Any [***] shall be charged to VOD Subscribers on the basis of [***].  Comcast shall not have the right to offer any person, including VOD Subscribers, any “[***],” “[***]” or other incentives without paying CSB the minimum [***] payments set forth above.  For payments that are more than [***] past due, Comcast will pay CSB interest on the overdue amount at a rate of [***] percent ([***]%) computed on a [***] basis (or the maximum rate allowed by law, whichever is less).  During the Term hereof and for [***] thereafter, Comcast’s specific books and records relating to this Agreement shall be available for inspection and audit by CSB, its employees or agents, at [***] and at Comcast’s offices.  Such inspection or audit will be conducted no more than [***] during any [***] period with reasonable advance written notice to Comcast, the scope of which

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

shall be specifically limited to items materially relevant to the economic terms of this Agreement.  In the event that CSB’s external auditor reasonably determines that audit of additional items is necessary to verify CSB’s compliance with the Sarbanes-Oxley Act, Comcast shall not unreasonably withhold consent to audit of such additional items.  If, as a result of any audit, a deficiency is shown in an amount greater than [***] percent ([***]%) of the total amount of fees payable to CSB for the period covered by such audit, Comcast shall promptly pay any such deficiency, along with CSB’s reasonable out of pocket cost of the audit.”

Section 6 shall be amended and restated as follows:

“Program Content:  Provided that Comcast has begun to distribute the VOD Content to VOD Subscribers, CSB shall be responsible for supplying [***] Standard programs such that CSB delivers an aggregate of [***] of VOD Content at any given time (which amount may be increased from time to time as requested by Comcast in its sole discretion), and which shall be [***] on a [***] basis such that at least [***] percent ([***]%) of the VOD Content is changed [***]; provided, however, that (a) approximately [***] of the VOD Content shall be made up of programming blocks of [***] movie titles (approximately [***] aggregate duration) (“Programming Blocks”), which shall be [***] at least [***] percent ([***]%) each week; (b) in addition to supplying [***] Standard VOD Content as above, CSB shall continue to deliver via TVN [***] Standard VOD Content until August 31, 2005, or earlier if notified by Comcast that such delivery may be discontinued; and (c) CSB shall make [***] to accommodate Comcast’s requests concerning (i) [***]; and (ii) [***].  Notwithstanding the foregoing, Comcast may request that CSB deliver [***] Standard programming packages of programs instead of or in combination with the [***] Standard programming packages; provided that, except as set forth above, CSB shall not be required to deliver more than [***] of VOD Content at any given time unless so notified by Comcast.  Notwithstanding anything to the contrary in this Agreement, Comcast shall have the nonexclusive right to digitize and/or compress any VOD Content to transmit such VOD Content as so altered directly to VOD Subscribers on a VOD Basis.”

3.Miscellaneous.  Each reference in this Agreement to “this Agreement” or words of similar meaning will mean and be a reference to the Agreement as amended by this letter agreement.  Except as specifically amended in this letter agreement, the agreement is, and will continue to be, in full force and effect.  This letter agreement will not operate as a waiver of any provision of the Agreement.

If the foregoing is acceptable, please indicate your agreement by signing and delivering both enclosed copies of this letter agreement.  This letter agreement may be executed in separate counterparts, each of which when executed and delivered (including via facsimile) will be deemed an original and all of which together will constitute the same agreement and will be binding upon the parties.

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Sincerely,

COLORADO SATELLITE BROADCASTING, INC.
By:	/s/ Karyn Miller
Name:	Karyn Miller
Title:	CFO
Acknowledged and Agreed to by:
COMCAST CABLE COMMUNICATIONS, LLC
By:	/s/ Alan S. Dannenbaum
Name:	Alan S. Dannenbaum
Title:	Senior Vice President Programming

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Amendment Three to Adult VOD License Agreement

This Amendment (“Amendment Three”) to Adult VOD License Agreement, dated effective as of December 5, 2006 (“Effective Date”), is entered into by and between Colorado Satellite Broadcasting, Inc., a subsidiary of New Frontier Media, Inc. (“CSB”), and Comcast Cable Communications, LLC, a Delaware limited liability company, on behalf of its operating subsidiaries (“Comcast”).  Except as otherwise indicated, defined terms in this Amendment Three shall have the same meaning as in the Agreement (as defined below).  For purposes of this Amendment Three, CSB and Comcast are each a “party” and collectively, the “parties”.

Recitals

Whereas, CSB and Comcast entered into the Adult VOD License Agreement dated October 18, 2002 (the “Original Agreement”) pursuant to which CSB licensed to Comcast certain VOD Content as more specifically defined in the Original Agreement;

Whereas, CSB and Comcast entered into the Amendment to the Original Agreement that was effective February 28, 2005 (“Amendment One”), pursuant to which the parties modified the fees for the VOD Content licensed by CSB to Comcast under the Original Agreement;

Whereas, CSB and Comcast entered into the Letter Agreement Amendment to the Original Agreement dated February 4, 2005 (“Amendment Two” and, together with the Original Agreement and Amendment One, the “Agreement”), pursuant to which the parties modified the fees and the program content licensed by CSB to Comcast under the Original Agreement and Amendment One;

Whereas, CSB and Comcast desire to enter into a further amendment to the Agreement whereby CSB will license to Comcast, on the terms and conditions set forth herein, certain additional VOD [***];

Now, therefore, CSB and Comcast, in consideration of the mutual covenants set forth herein, and for other valuable consideration, the sufficiency and receipt of which is hereby acknowledge, agree as follows:

1.Amendments to Agreement.  The following provisions amend certain provisions set forth in the Agreement and shall govern the parties’ relationship with respect to the VOD Content provided to Comcast by CSB under the Agreement and this Amendment Three.

A.Previews.  Section 1 of the Agreement is hereby amended by adding the following immediately after the end of such section:

“A “Preview” shall mean a [***] lasting [***] to [***] in duration of [***] from each of the other Programs that are or will be available at the same time as the Preview is available; provided that each such [***] shall not contain content that would cause it to receive a rating more restrictive than “[***]” pursuant to the

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Motion Picture Association of America or “[***]” pursuant to the TV Parental Guidelines, as applicable.  Each Preview shall be deemed to be a “Program” for all purposes under this Agreement.”

B.Fees.  Section 3(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

“Fees.  In each VOD System in which Comcast determines to distribute the VOD Content, Comcast shall make the VOD Content available to VOD Subscribers on a VOD basis for [***] fee to be determined by Comcast in its sole discretion.  Comcast shall, within [***] after the last day of each [***], (i) provide to CSB, with respect to such [***], a report showing the Systems over which the Programs were made available, the Programs distributed by Comcast during such [***], the respective prices charged for such Programs, and the number of orders for such Programs; and (ii) for VOD Content that is a Preview, pay to CSB [***] percent ([***]%) of [***] (as defined herein) attributed to such VOD Content for such [***], with a minimum [***] payment of [***] ($[***]); and (iii) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] attributed to such VOD Content for such [***], with a minimum [***] payment of [***] ($[***]); and (iv) for VOD Content that conforms to the [***] Standard (as defined in Schedule “A” attached), pay to CSB [***] percent ([***]%) of [***] attributed to such VOD Content for such [***], with a minimum [***] payment of [***] ($[***]); and (v) for VOD Content within the [***] pay to MRG Entertainment, Inc., a subsidiary of New Frontier Media, Inc. (“MRG”) [***] percent ([***]%) of [***] attributed to such VOD Content for such [***], with a minimum [***] payment of [***] ($[***]).  For purposes hereof, “[***]” shall mean the total amount of [***] fees billed by Comcast to VOD subscribers for viewing of the Programs.  Any [***] shall be charged to VOD Subscribers on the basis of [***].  Comcast shall not have the right to offer any person, including VOD subscribers, any “[***],” “[***]” or other incentives without paying CSB or MRG, as applicable, the minimum [***] payments set forth above.  For payments more than [***] past due, Comcast will pay CSB or MRG, as applicable, interest on the overdue amount at a rate of [***] percent (1%) computed on a [***] basis (or the maximum rate allowed by law, whichever is less).  During the Term hereof and for [***] thereafter, Comcast’s specific books and records shall be available for inspection and audit by CSB, its employees or agents, [***] and at Comcast’s offices.  Such inspection or audit will be conducted no more than [***] during any [***] period with reasonable advance written notice to Comcast, the scope of which shall be specifically limited to terms materially relevant to the economic terms of this Agreement.  If, as a result of any audit, deficiency is shown in an amount greater than [***] percent ([***]%) of the total amount of fees payable to CSB for the period covered by such audit, Comcast shall promptly pay any such deficiency, along with CSB’s reasonable out-of-pocket cost of the audit.”

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

C.Transmission and Distribution.  Section 4(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

“Distribution of VOD Content.  Comcast may distribute on a VOD basis to VOD Subscribers on each VOD System (i) either the [***] Standard or [***] Standard programming package of Programs; and (ii) the [***] programming package of Programs.  Unless Comcast notifies CSB in writing that a VOD System intends to distribute the [***] Standard package of Programs pursuant to (i) of this subsection, the package of Programs delivered by CSB to such VOD System shall be the [***] Standard package of Programs.  Notwithstanding anything to the contrary contained in this Agreement or otherwise, Comcast shall have the right at any time to cease distribution of any and/or all of the VOD Content on any VOD System, it being understood that Comcast is not required to distribute any of the Programs on any VOD System.  The definition of each of the editing standards for [***] Standard, [***] Standard, and [***] is set forth on Schedule A attached hereto.”

D.Program Content.  Section 6 of the Agreement is hereby deleted in its entirety and replaced with the following:

“Provided that Comcast has begun to distribute the VOD Content to VOD Subscribers, CSB shall be responsible for (i) supplying each of the [***] Standard and [***] Standard programming packages of Programs, such that each package contains a minimum of [***] of VOD Content at any given time (which amount may be increased or decreased from time to time as requested by Comcast in its sole discretion), and each of which shall be [***] on a [***] basis such that at least [***] percent ([***]%) of the VOD Content is [***] each [***]; and (ii) supplying the [***] programming package of Programs, such that each package contains a minimum of [***] Programs at any given time, and which shall be [***] on a [***] basis such that at least [***] percent ([***]%) of the VOD Content, or a minimum of [***] Programs, are [***] each [***].  CSB shall make [***] to accommodate Comcast’s requests concerning (i) [***]; and (ii) [***].  Notwithstanding anything to the contrary in this Agreement, Comcast shall have the nonexclusive right to digitize and/or compress any VOD Content and to transmit such VOD Content as so altered directly to VOD Subscribers on a VOD Basis.”

E.Editing Standard.  Section 7 of the Agreement is hereby deleted in its entirety and replaced with the following:

“The package of [***] Standard programs shall consist only of Programs conforming to that standard, consistent with the definition set forth in Schedule A attached hereto.  The package of [***] Standard programs shall consist only of Programs conforming to that standard, consistent with the definition set forth in Schedule A attached hereto.  The package of [***] programs shall consist only of Programs conforming the [***] standard, consistent with the definition set forth in

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Schedule A attached hereto.  CSB acknowledges that Comcast may upon sufficient advance written notice, direct CSB not to include as part of the VOD Content any particular Programs.  COMCAST HEREBY ACKNOWLEDGES THAT ALL VOD CONTENT IS INTENDED FOR DISTRIBUTION EXCLUSIVELY TO CONSENTING ADULTS IN LOCATIONS WHERE SUCH CONTENT DOES NOT VIOLATE ANY COMMUNITY STANDARDS OR ANY FEDERAL, STATE OR LOCAL LAW OR REGULATION OF THE UNITED STATES OR ANY OTHER COUNTRY.  COMCAST SHALL USE COMMERCIALLY REASONABLE EFFORTS TO ALLOW VOD SUBSCRIBERS TO RESTRICT ACCESS TO VOD CONTENT IN ORDER SO THAT NO PERSONS UNDER THE AGE OF EIGHTEEN (18) YEARS NOR PERSONS WHO MAY BE EASILY OFFENDED BY THE VIEWING OF SUCH VOD CONTENT MAY DIRECTLY OR INDIRECTLY VIEW OR POSSESS ANY OF THE VOD CONTENT OR PLACE ANY ORDERS FOR ANY PROGRAMS OFFERED BY COMCAST HEREUNDER.”

F.Schedule A.  The following shall be added as new language at the end of the current language of Schedule A of the Agreement:

““[***]” means versions of programs more restrictive than [***] Standard which focus on [***] in [***] or [***] situations.  The depiction of [***] in these episodes may be [***] or [***], however the level of depicted explicitness shall be [***] explicit than the movies shown on [***] and premium channels such as [***] and [***].”

2.All the terms and conditions set froth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this Amendment Three, in which case this Amendment Three shall prevail.  Subject to the foregoing, this Amendment Three and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one and the same document.

AGREED:

Comcast Cable Communications, LLC		Colorado Satellite Broadcasting, Inc.
By:	/s/ Alan Dannenbaum	By:	/s/ Ken Boenish
Name: Alan Dannenbaum			Name: Ken Boenish
Title: Senior Vice President, Content Acquisition			Title: President

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EX-10.35

Exhibit 10.35

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

PLEASURE SERVICE
LICENSE AGREEMENT

This Agreement (“Agreement”) is made as of November 16, 2000 between COLORADO SATELLITE BROADCASTING, INC., a Colorado corporation (“CSB” or “Network”), with offices located at 5435 Airport Boulevard, Suite 100, Boulder, Colorado, 80301 and COMCAST PROGRAMMING, a division of COMCAST CORPORATION, a Pennsylvania corporation with offices at 1500 Market Street, Philadelphia, Pennsylvania 19102-2148 (“Affiliate”).  Network and Affiliate agree as follows:

Subject to the terms hereof, Network hereby grants to Affiliate a non-exclusive license to distribute the Pleasure Service in the United States or to a United States territory solely as a cable, SMATV, MMDS, LMDS, or OVS service on Systems to Affiliate’s Basic Subscribers.  Basic Subscribers may order the Pleasure Service on a Demand Purchase basis as a pay-per-programming block event.  Affiliate is also given a non-exclusive license to use the Network Marks as set forth below.

1.THE SYSTEMS.  The systems listed in Attachment “A” (the “Systems” or the “Pleasure Systems”) are hereby authorized to distribute the Pleasure Service in accordance with this Agreement.  Affiliate represents and warrants that all Systems are at least [***] percent ([***]%) owned by or are managed by Affiliate.  Additional Systems may be added to Attachment A by Affiliate on written notice supplied to Network.  Affiliate may delete any System from Attachment A upon notice to Network.

2.ADDITIONAL DEFINITIONS.  As used in this Agreement, the following terms shall have the respective meanings indicated below.

a.Basic Subscriber:  Any single family dwelling which is receiving any level of programming services, which may be purchased from any Pleasure System.  If the single-family dwelling happens to be a Unit in a larger multiple dwelling (e.g., an apartment or condominium unit) each such Unit shall be deemed to be a separate Basic Subscriber.

b.Billing Period:  Any calendar month during which the Pleasure Service is offered to Affiliate’s Demand Purchasers.  Only the initial Billing Period or the last month of carriage may be a partial month.

c.Cable Technology:  The means of delivering video programming by coaxial, fiber-optic or other type of cable.

d.Demand Purchase:  Each individual purchase of the Pleasure Service from Affiliate by a Basic Subscriber, which, at the conclusion of the period so purchased (be it a [***] time block, a [***] time block, a [***] time block, a “safe harbor” time block between the hours of [***] and [***], or a full programming [***]) requires a further transactional decision by the Basic

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Subscriber to continue receiving the Pleasure Service.  The Basic Subscribers who purchase the Pleasure Service in such a manner shall be known as “Demand Purchasers.”

e.LMDS Systems:  The means of delivering of video programming by direct broadcasts to single family or multiple dwellings containing Units by the use of microwave frequencies, including only those frequencies classified by the FCC as Local Multipoint Distribution Service, Multipoint Distribution Service, Instructional Television Fixed Service, and Operational Fixed Service.

f.Marks:

(i)Network Marks:  The service marks, trademarks, trade names and logos owned or licensed by Network and used as part of the Pleasure Service, all of which are being licensed to Affiliate solely for use in accordance with this Agreement for the distribution and the promotion, marketing and sale of the Pleasure Service.

(ii)Comcast Marks:  The name “Comcast” and Affiliate’s “concentric c” logo and any other authorized marks used by Affiliate in connection with its service, all of which are the exclusive property of Affiliate, and Network has not and will not acquire any proprietary rights thereto by reason of this Agreement.  Network shall not use any of the Comcast Marks or any variation thereof except at the times and in a manner expressly approved in writing by Affiliate in each instance.  Nothing contained in this subparagraph shall prohibit Network from using the name of Affiliate in factual disclosures authorized by Section 16 of this Agreement.

g.MMDS Technology:  The means of delivering analog or digital video programming by direct broadcasts to single family or multiple dwellings containing Units by the use of microwave frequencies, including only those frequencies classified by the FCC as Multichannel Multipoint Distribution Service, Multipoint Distribution Service, Instructional Television Fixed Service, and Operational Fixed Service.

h.OVS:  Open Video Systems meeting the requirements promulgated by the FCC with respect thereto.

i.Pleasure Service:  Subject to the assignment provisions set forth in paragraph 14 hereof, the adult-oriented pay television programming service to be provided to Affiliate hereunder whether such service is identified as “Pleasure” and/or any other service mark designated by Network.

2

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

j.SMATV Technology:  The means of delivering video programming by satellite to a master antenna which then utilized co-axial, fiber-optic or other type of cable to Basic Subscribers provided no such cable cross public rights of way.

k.Unit:  Each individual dwelling unit in any form of multiple dwelling, including without limitation intended, apartment building, condominium, hotel, motel, fraternity house, and any other commercial residential establishment respectively.

3.CONTENT OF THE PLEASURE SERVICE.

a.Subject to Section 3.d. and the other provisions of this Agreement, Network shall, in its sole discretion, include such programming in the Pleasure Service as it deems appropriate from time to time to deliver an adult-oriented pay television service.  Affiliate shall have no right to alter, substitute or delete or otherwise modify the Pleasure Service as provided by Network except to achieve band-width efficiencies, provided that Affiliate may limit carriage of the Pleasure Service in analog form to the hours between 10:00 p.m. to 6:00 a.m. or any other carriage period required by law or deemed appropriate by Affiliate.  Any System distributing the Pleasure Service in digital format may carry the Pleasure Service on a [***] basis with the consent of Network which consent shall not be unreasonably withheld.  Network shall have the exclusive right to extend, reduce or otherwise change the hours during which the Pleasure Service is being delivered to all distributors.  Network will continue to provide programming of substantially the type and quality described in the programming schedule attached hereto as Attachment “B.”

b.If a System, in the System’s reasonable business judgment, considers that the Pleasure Service, as delivered, is threatening or detrimental to the System’s franchise or business operations, then such System may drop the Pleasure Service immediately, and/or such System may amend the carriage hours of the Pleasure Service immediately.

c.Affiliate may not in any way imply that any non-Pleasure Service programming is a part of or is connected in any way with the Pleasure Service.  Affiliate shall not exhibit or transmit any Pleasure Service programming at any time other than as scheduled by Network.  Affiliate hereby acknowledges that from time to time Network may modify the programming to be supplied as part of the Pleasure Service without prior notice, subject to the type and quality provisions as set forth in Section 3.a. above.

d.Affiliate shall not use any channel that distributes the Pleasure Service to broadcast or otherwise distribute any adult programming except:  (i) the Pleasure Service; (ii) any other programming provided by Network or any

3

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

of Network’s affiliated entities; (iii) On-Air Promotions and Network Commercials provided by Network in accordance with this Section 3.d.; and (iv) the System advertising authorized in Section 3.f. below.  Network shall not, as part of the Pleasure Service, include any [***] provided, however, that the Pleasure Service may contain:  (i) commercials for merchandise offered by Network (collectively “Network Commercials”) if such Network Commercials do not exceed [***] during any [***] block of programming, excluding for purposes of this limitation On-Air Promotions (as defined below); and (ii) On-Air Promotions; provided further that in no instance shall the aggregate of Network Commercials and On-Air Promotions exceed [***] in any [***] period.  “On-Air Promotions” shall mean advertising for:  (i) programming on the Pleasure Service; (ii) other adult programming provided by Network which is available on the applicable System; and (iii) any website sponsored or maintained by Network.  Network agrees that in the event Network includes any Network Commercials on the Pleasure Service aggregating in excess of [***] per [***] block of programming, Network shall pay Affiliate [***] percent ([***]%) of [***] (“Affiliate’s Commercial Share”) on all revenues from merchandise or services (excluding revenues from websites), sold by Network Commercials to respondents who are Basic Subscribers in the Pleasure Systems’ [***] areas.  Network further agrees that in the event Network includes any website commercials or promotions on the Pleasure Service, Network shall pay Affiliate [***] percent ([***]%) of [***] (“Affiliate’s Web Share”) of all revenues from merchandise or services (including memberships in websites) sold by the websites to respondents who are Basic Subscribers in the Pleasure Systems’ [***] areas.  If Affiliate shares a service area with another provider(s) of the Pleasure Service, then the Affiliate’s Commercial Share and the Affiliate’s Web Share shall be pro-rated according to the percentage of the [***] by the Affiliate and the other provider(s).  “[***]” shall mean [***].

e.In addition, for each month during the Term, Network shall pay to Affiliate [***] percent ([***]%) of the [***] (as defined herein) attributable to any customer accessing or using any of Network’s (and/or any of Network’s parent’s, subsidiary’s or affiliate’s) Internet Websites, including, without limitation, the website currently know as “TeN.com” (each, a “Network Website”), provided that:  (i) the Network Website is promoted on the Pleasure Service distributed by a System serving the [***] area of such customer; and (ii) such customer is a cable television subscriber within the service area of such System.  “[***]” means, for each customer, the [***] billed to such customer for access to, or use of, the Network Website, whether on a [***] basis, on a [***] basis, on a [***] basis or any other basis of charging a fee to customers for access to, or use of, the Network Website.  For customers residing in a [***] area where there are [***] or more distributors of the Pleasure Service,

4

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Network shall allocate [***] pursuant to this Section 3.e. between or among such distributors based on the percentage of the aggregate number of subscribers to the Pleasure Service that are served by each such distributor in the [***] area.  Network represents and warrants that all Internet customers will be required to sign-on to any Network Website through a “Join Page” prior to being granted access to any content on any Network Website.  Such Join Page shall require any new customer desiring access to the Network Website to provide certain identifying information, including, without limitation, a request for such customer to indicate whether the customer is a cable television subscriber, direct-to-home satellite subscriber or neither.

f.Each System shall have the right to include advertising inserted by the System (“Local Advertisements”) on the Pleasure Service in an aggregate amount not exceeding [***] of advertising in every [***] block of programming.  The Pleasure Service shall include appropriate cues to give the Systems the opportunity to insert their advertising at appropriate junctures within the Pleasure Service programming, provided, however Local Advertisements may not promote [***] other than those provided by CSB and/or New Frontier Media, Inc.  In addition, Local Advertisements may not promote [***].

4.TRANSMISSION AND DISTRIBUTION OF THE PLEASURE SERVICE.

a.Network shall use [***] to transmit the Pleasure Service by means of a commonly used cable television communications satellite as may be designated by Network to Affiliate, and/or Affiliate may elect to receive the Pleasure Service from a third party to whom Network has made the signal available (the “Digital Provider”).  The delivery of the Pleasure Service to, and the authorization and deauthorization of the Pleasure Service on, any System is the sole responsibility of Network at no cost to Affiliate other than the Pleasure Service Charge set forth in this Agreement.  Should Network change satellite(s) to a location which would cause Affiliate to incur any expense in order to continue to receive the Pleasure Service in any System, then Affiliate shall have the right to terminate this Agreement unless Network agrees to provide reception equipment to receive the signal from the new location.

(i)Should Affiliate wish to receive the Pleasure Service from a Digital Provider, then Affiliate shall notify Network in writing of Affiliate’s choice and of the identity of the Digital Provider from whom Affiliate plans to receive the digital signal of the Pleasure Service.  Network shall not have any liability or obligations which may result from Affiliate’s Digital Provider.  In no event shall any breach or default or other failure to perform resulting for any reason caused by the Digital Provider relieve Affiliate of

5

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Affiliate’s obligations under this Agreement, including to pay the Pleasure Service Charge and to provide reports and records as specified in this Agreement below.  In the event Affiliate notifies a Digital Provider of a breach or other failure to perform by the Digital Provider, Affiliate promptly shall notify Network in writing, setting forth in reasonable detail the specifics of such breach or failure to perform.

(ii)In the event Affiliate receives the Pleasure Service from a Digital Provider, it is expressly understood that, in the event this Agreement is terminated, Network may de-authorize the signals comprising the Pleasure Service without liability to Affiliate or the Digital Provider.  However Network shall make reasonable efforts to provide Affiliate with [***] prior written notice of such de-authorization.

b.Subject to the other provisions of this Agreement, Network shall be permitted to scramble the signals comprising the Pleasure Service as Network deems fit.  Network represents that such scrambling technology will be of a type commonly used for cable television signals.  Should Network change to a scrambling technology which would cause Affiliate to incur any expense in order to continue to receive the Pleasure Service on any System then Affiliate may terminate this Agreement unless Network agrees to provide the necessary equipment to receive such alternate scrambled signal.

c.Subject to Sections 4.a. and 4.b. above, Affiliate shall, at its own expense, obtain and install such earth station receivers and other equipment as shall be necessary to enable the Systems to receive, descramble and transmit and deliver to Demand Purchasers the signals comprising the Pleasure Service.  The video signals delivered to Demand Purchasers shall be securely scrambled by the Systems.

d.Network shall comply with all applicable law, including without limitation intended, all law applicable to the content of the Pleasure Service.

5.USE OF THE PLEASURE SERVICE.

a.Affiliate shall market, transmit and deliver the Pleasure Service solely as a [***] service, in an analog and/or digital format.  Distribution of the Pleasure Service by Affiliate as a [***] service is expressly prohibited.

b.Affiliate shall not sell, broadcast or otherwise authorize distribution of the Pleasure Service by any person or entity for which Affiliate does not have a street address.

6

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

c.Affiliate shall comply with all applicable law with respect to content inserted by Affiliate on the Pleasure Service.

d.Affiliate shall not knowingly permit, and shall take reasonable precautions to prevent, any use of the Pleasure Service by (i) subject to the provisions of Section 8 below, any party which is not paying as a [***] or (ii) any party which [***], or to a commercial establishment or non-residential building (including, without limitation, any restaurant, tavern, bar, club, fraternal organization, hospital or correctional facility), other than a hotel or motel, or to any communal room in an otherwise residential building (including without limitation, any lobby or social room in an apartment house, dormitory or similar place).

e.Affiliate shall not knowingly permit, and shall take reasonable precautions to prevent, any unauthorized or unlawful use, reproduction, exhibition or distribution of any part of the Pleasure Service or the Network Marks.  It shall be deemed an unauthorized exhibition to knowingly allow the Pleasure Service to be exhibited in a hotel or motel room on a [***] basis or on a [***] basis or to the occupants of an apartment or other Unit which is not being charged a [***] fee for exhibition of the Pleasure Service.

6.PAYMENT TO NETWORK.

a.Affiliate shall pay to Network, with respect to each Billing Period, no later than [***] following the expiration of such Billing Period, the “Pleasure Service Charge” calculated as set forth below in this Agreement.

b.Subject to Sections 7 and 8, the Pleasure Service Charge for Demand Purchases, including hotel/motel carriage, shall equal [***].

c.The Pleasure Service Charge for cable, MMDS, LMDS, OVS, and SMATV carriage shall be calculated as set forth in this Agreement.  Affiliate shall provide the Pleasure Service to [***] locations on a Demand Purchase basis only.

d.Revenues shall be considered “earned” regardless of whether Affiliate collects payments due Affiliate from any Demand Purchaser provided that Affiliate may issue consumer credits in accordance with standard industry practices, which will not be considered as part of earned revenue.

e.Any amounts not paid by Affiliate within [***] after the date due shall accrue interest at the lesser rate of [***] percent ([***]%) per [***] or at the highest lawful rate, compounded [***] from the date such amounts were first due until they are paid.

7

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

f.All payments required under this paragraph 6 shall be via a check drawn on a United States bank account and sent to Colorado Satellite Broadcasting at 5435 Airport Blvd., Boulder Colorado 80301.

7.[***]

a.[***]

b.[***]

c.Network shall provide on [***] basis, within [***] of the end of each [***], during the term of this Agreement, a certification executed by an executive officer of Network certifying Network’s compliance with the provisions of this Section 7 for such [***].

8.[***] SUBSCRIPTIONS AND CARRIAGE.

a.Effective with the commencement of the term of this Agreement, Affiliate is granted [***] Pleasure Service subscriptions for its [***] and/or [***] (but not to [***] or [***]) each [***]; provided, [***] such subscriptions.

b.On a System by System basis, whenever a System distributes the Pleasure Service throughout [***] to any Basic Subscribers in such System (“[***] Addressable Subscribers”), then no Pleasure Service Charges shall be payable for Demand Purchases made by the [***] Addressable Subscribers during the [***] of each such [***] period.  The benefits conferred by the preceding sentence shall not accrue for more than [***] in any [***] period.

9.REPORTS AND RECORDS (REGARDING THE PLEASURE SERVICE).

a.Affiliate shall provide, from either its corporate, regional or System offices as determined by Affiliate, the following information on a [***] basis during the entire term of this Agreement (and thereafter for reports due after the term but relating to periods during the term) within [***] after the conclusion of each [***] under this Agreement:

(i)the total number of such Basic Subscribers who are capable of making a Demand Purchase on the first and last [***] of each such [***]; and

(ii)the total number of Demand Purchases made by Affiliate’s Basic Subscribers during such entire [***].

b.For each delivery method of the Pleasure Service (cable, SMATV, MMDS, LMDS, and OVS) Affiliate shall supply to Network, with

8

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

payment of the Pleasure Service Charge and on a form provided by Network, any information regarding the number of Demand Purchases, Basic Subscribers, Units or other information reasonably necessary to determine the amounts due Network from the Demand Purchases of the Pleasure Service.  Notwithstanding the immediately preceding sentence, it is agreed that Affiliate may use its standard form instead of the Network form provided all of the information requested in this Section 9 is contained in said form.

c.All of Affiliate’s and the Systems’ records and accounts relating to the Pleasure Service shall be available for inspection and copying and for audit by Network and its representatives during normal business hours upon [***] prior written notice, during the term of this Agreement and for [***] thereafter.  Any audit shall be limited to the [***] in which the audit commences and the [***] immediately preceding that [***].  In addition, any claim arising from such audit must be asserted by giving notice of the claim within [***] after completion of the audit or is deemed waived.

d.The Affiliate and each System shall keep or cause to be kept at its address in the contiguous 48 States full, true, and accurate records from which the Pleasure Service Charges payable by Affiliate may be accurately determined by an audit conducted in accordance with generally accepted auditing principles (“Audit Records”).  All Audit Records shall be kept by the Affiliate for at least [***] from the delivery to Network of the pertinent [***] statements under Section 9 of this Agreement.

e.If either (i) the amount of the Pleasure Service Charge properly payable by the Affiliate, in any period covered by such examination or audit, shall be found to be greater by [***] percent ([***]%) or more than the Pleasure Service Charge shown due in the Affiliate’s [***] statements under Section 9 of this Agreement for such period of time, or (ii) the Affiliate fails to timely provide Network with the required [***] statements for the period of time covered by an examination or audit; then the reasonable costs and expenses of such examination or audit (including reasonable travel and accommodation costs and all reasonable disbursements) shall be payable by Affiliate within [***] after a demand by Network, but otherwise such expenses shall be borne by Network.  Forthwith after Affiliate’s receipt of an examination or audit report and in accordance therewith the Affiliate shall pay to Network the difference between the Pleasure Service Charge paid and the Pleasure Service Charge which should have been paid, together with interest thereon from the date payment should have been made until the date payment is made at the rate of interest provided for in Section 6(e) of this Agreement.

9

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

10.PROMOTION, MARKETING AND SALES AND TRADEMARK APPROVALS.

a.Network shall provide marketing and promotional advice and information as it deems necessary.

b.Network shall have the right to review and approve, in advance, any of Affiliate’s publicity about the Pleasure Service.

c.Affiliate has not and will not acquire any proprietary rights in any of the Network Marks, the Pleasure Service, the Pleasure Service programming or any trade names, trademarks, service marks or logos associated with the Pleasure Service or its programming by reason of this Agreement.  Affiliate further acknowledges the great value of the goodwill associated with the Network Marks, and that any additional goodwill in the Network Marks which may be created through the use of the Network Marks by Affiliate shall inure to the sole benefit of Network.  Affiliate may use the Network Marks only if it is clear that the Network Marks used are service marks for the programs and program services of Network which Affiliate distributes and such use shall be in accordance with any further instructions that may be issued by Network from time to time; provided, however, any use of any Network Mark that is not consistent with prior approved uses requires the prior express written approval of Network.  Affiliate shall submit any initial use of the Network Marks to Network for Network’s prior written approval at least [***] prior to their intended distribution; however, routine materials such as channel line-up cards and billing inserts are deemed approved provided they comply with Network’s reasonable written instructions and Network does not express any reasonable objection to the use of the Network Marks.  Affiliate will not disseminate any material that has not been approved by Network in accordance with the terms hereof.  Any such approval must be granted or withheld within [***] of Network’s receipt of materials for approval.  Failure by Network to respond within [***] of Network’s receipt of materials for approval will be deemed to constitute approval of such materials, although any response for purposes of this paragraph may be given telephonically.

11.REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.

a.Network and Affiliate each represent and warrant to the other that each has the requisite power and authority to enter into this Agreement and to perform fully its respective obligations hereunder, and that this Agreement has been duly executed by it and constitutes a valid obligation enforceable against it in accordance with the terms hereof.

b.Network represents and warrants to Affiliate that it will exercise [***] to assure that the Pleasure Service as supplied to Affiliate pursuant to this Agreement, if and when presented by Affiliate in the manner and at the times permitted in this Agreement, will contain no unprivileged libelous or

10

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

slanderous material and will not violate any copyright, right of privacy or literary or dramatic right or any other right of any person.

c.With respect to carriage of the Pleasure Service on a Demand Purchase basis:

(i)Network represents and warrants that it has, by the date this Agreement is fully executed, applied for a “[***]” music performance license from each of the major performing rights societies, ASCAP and BMI.  Network shall endeavor to obtain a “[***]” music performance license from those organizations to the extent they make such license available to Network on [***] terms.

(ii)If ASCAP or BMI refuses to make available to Network a “[***]” music performance license, or offers such license on [***] terms, Network shall not be required to initiate litigation to compel the music performing rights society(ies) to grant a “[***]” music performance license.

(iii)If, due to a court order or other governmental decree from a body of competent jurisdiction, or as a result of one or more of ASCAP’s or BMI’s refusal to make available a “[***]” license or failure to offer one on a [***] basis, such “[***]” license is not available to Network, Network shall continue to maintain a license “[***]” provided such license is available from ASCAP and/or BMI on [***] terms.

(iv)If and when Network obtains a “[***]” music performance license, Network shall maintain such license throughout the term of the Agreement, unless such license is no longer available due to a court order or other governmental decree from a body of competent jurisdiction or is no longer available on commercially reasonable terms in which event Section 11.c.(iii) above shall apply.

d.With respect to carriage as a Demand Purchase service, Network will defend, indemnify, and hold harmless the Affiliate for any breach of these representations and warranties.

e.Under no circumstances shall the Affiliate be responsible for any retroactive fees related to music performing licenses.

f.Subject to Section 11.h., Network shall indemnify, defend and forever hold Affiliate, its affiliated corporations and other entities, partners, officers, directors, employees and agents (collectively the “Indemnitees”) harmless from all liabilities, claims, reasonable (to extent in Affiliate’s control) costs, damages and reasonable (to extent in Affiliate’s control)

11

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

expenses (including without limitation, reasonable counsel fees) (collectively “Claims”) of third parties arising from (i) the content of the Pleasure Service (including music), (ii) the distribution of the Pleasure Service (including music) by Affiliate pursuant to this Agreement, (iii) the breach by Network of any representation, warranty, or agreement of Network hereunder, or (iv) the performance by Network hereunder, and Affiliate shall indemnify, defend and hold harmless Network and its Indemnitees from all Claims by any Demand Purchaser or any claim arising out of any breach of the Affiliate’s or Systems’ obligations, representations or warranties under this Agreement (except with respect to Claims relating to the content of the Pleasure Service excluding, however, to the extent such Claims arise out of distribution of the Pleasure Service to any person to whom the Pleasure Service may not lawfully be sold); provided that in each case where such indemnification is sought:

(i)the Indemnitee promptly notifies the indemnitor of the Claim to which the indemnification relates;

(ii)the indemnitor shall control fully any litigation, compromise, settlement or other resolution or disposition of such Claim and

(iii)the Indemnitee fully cooperates at no expense to the Indemnitee with the reasonable requests of the indemnitor in the indemnitor’s defense of such Claim.

g.Notwithstanding the above, Network’s indemnification of Affiliate will be valid in the event of a prosecution or Claim involving an allegation of violation of the laws insofar as the content of the Pleasure Service is concerned, only in the event each of the following conditions is met:

(i)Telephone contact be made with Network at a number specified by Network.  Such telephone notification should be followed with a letter containing copies of all papers that have been served and giving complete information then available regarding the incident.

(ii)Network shall have the right to approve Affiliate’s choice of counsel and to determine in advance the terms of retention.

(iii)Network will assist in defended actions only and will not be responsible in cases where there is any admission of guilt by anyone under control of Affiliate charged with violation of the law as to the content of the Pleasure Service programming.  Settlement or dismissal of any case will not be allowed, except with Network’s prior written consent.

12

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

(iv)Affiliate shall make no voluntary disclosure regarding support or lack thereof by Network under this Section without Network’s consent.

h.Notwithstanding any other provision in this Agreement, Network shall not have any liability to Affiliate or any other party with respect to any failure of Network and/or a Digital Provider to deliver the Pleasure Service if such failure is due to any malfunction or failure of the equipment or facilities of Network and/or the Digital Provider and/or any third party, any action or claim by an third party, any labor dispute or any other cause beyond Network’s and/or the Digital Provider’s reasonable control.

i.SUBJECT TO THE PROVISIONS OF THIS SECTION 11 GOVERNING INDEMNIFICATION WITH RESPECT TO CLAIMS ASSERTED AND PROCEEDINGS COMMENCED BY THIRD PARTIES, UNDER NO OTHER CIRCUMSTANCES WHATSOEVER SHALL EITHER PARTY OR ANY AFFILIATE OR REPRESENTATIVE OF EITHER PARTY BE LIABLE FOR ANY EXEMPLARY, OR CONSEQUENTIAL DAMAGES TO THE OTHER PARTY (INCLUDING WITHOUT LIMITATION, ANY PAYMENT FOR FUTURE PROFITS OR LOSS OF GOODWILL), WHETHER FORESEEABLE OR NOT, CLAIMS UNDER DEALER TERMINATION, PROTECTION, NON-RENEWAL OR SIMILAR LAWS, FOR ANY CAUSE WHATSOEVER WHETHER OR NOT CAUSED BY A PARTY’S NEGLIGENCE OR GROSS NEGLIGENCE, EXCLUDING ONLY ANY CAUSED BY WILFUL MISCONDUCT.  UNDER NO CIRCUMSTANCES SHALL ANY PROJECTIONS OR FORECASTS BY EITHER PARTY BE BINDING AS COMMITMENTS OR PROMISES BY EITHER PARTY OR OTHERWISE GIVE RISE TO ANY LIABILITY.

12.TERM OF AGREEMENT.

a.The initial term of this Agreement shall commence on [***] and shall end on [***].

b.On the expiration date of the initial term, this Agreement shall automatically be renewed for successive [***] renewal terms unless:

(i)Either party gives the other party notice electing to terminate this Agreement, and such notice is given at least [***] prior to the expiration of the then current term; or

(ii)This Agreement has otherwise been terminated in accordance with its provisions.

13

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

c.In addition to any other remedies it may have in law or in equity, Network or Affiliate may terminate this Agreement, by the giving the other at least [***] prior written notice, in the event that the other party has breached any of its obligations hereunder and such breach (which shall be specified in such notice) is not cured by the applicable party within [***] after such notice is given.

13.GOVERNING LAW.  This agreement shall be governed by and interpreted under the laws of the State of Delaware.

14.ASSIGNMENT.  Except by operation of law, neither party shall assign this Agreement without the express written consent of the other, which consent shall not be unreasonably withheld, delayed or conditioned, provided that, if, as a result of such assignment by Network the Pleasure Service shall no longer be generally identified as “Pleasure” by or through the use of the Network Marks thereon or the Pleasure Service shall no longer include any “Pleasure-identified” programming, Affiliate may cancel this Agreement on not less than [***] prior written notice.  It is acknowledged that this Agreement shall be binding on all successors and assigns of both parties.  Notwithstanding the foregoing, Affiliate and Network may assign this Agreement without consent to any parent, subsidiary, or affiliated entity.  No assignment shall relieve any party or guarantor from liability under this Agreement.

15.NOTICES.  All notices, requests, demands, consents, approvals, directions and other communications (collectively “Communications”) provided for under this Agreement shall be in writing and be either delivered by facsimile transmission (fax), with confirmed electronic receipt, or by means of U. S. certified mail, return receipt requested; and, if to Affiliate, with a copy to Affiliate’s General Counsel at Affiliate’s (not the Systems’) address set forth on the first page of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party.  All Communications shall, when mailed or faxed, be deemed effective on the date which is three (3) business days after deposited in the mail or on the date receipt of such fax is so confirmed.  A copy of all Communications addressed to Network shall be sent to the Network’s Director of Legal Affairs at the Network’s address set forth on the first page of this Agreement.

16.CONFIDENTIALITY.  Neither Network nor Affiliate shall disclose to any third party (other than its respective employees, in their capacity as such), any information with respect to the financial terms and provisions of this Agreement or any financial information reported or required to be reported to Network pursuant to this Agreement, except:

(i)to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event the party making

14

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

such disclosure shall so notify the other and shall seek confidential treatment of such information if confidential treatment is available;

(ii)as part of its normal reporting or review procedure to its parent company, its auditors and its attorneys, lenders and investment bankers, provided, however, that such parent company, auditors, attorneys, lenders, and investment bankers agree in writing to be bound by the provisions of this Section;

(iii)in order to enforce its rights pursuant to this Agreement; and/or

(iv)to prospective bona fide lenders, investment bankers, auditors, attorneys, purchasers, merger parties, consolidation and other reorganization parties, provided, that such prospective auditors, attorneys, lenders, investment bankers, purchasers, merger parties, consolidation and other reorganization parties agree in writing to be bound by the provisions of this Section.

17.ADHERENCE TO TELECOMMUNICATIONS ACT OF 1996.  By entering into this Agreement, Affiliate agrees to comply with the Telecommunications Act of 1996 and Section 504 thereof.

18.NON-INTERFERENCE.  Network shall not knowingly engage in any direct mailing or telephone solicitation, for any purpose, to Affiliate’s Basic Subscribers, unless such Basic Subscriber has previously initiated a communication with Network or unless Affiliate consents in writing to any such direct mailing or telephone solicitation; provided, however the foregoing shall not apply to information obtained by Network or an affiliate of Network in connection with sales of products or services other than the Pleasure Service.

In addition, Network shall not engage in communications which adversely interfere with Affiliate’s government or community relations, provided, however, that this provision shall not prohibit Network from advertising or promoting the Pleasure Service or responding to government inquiries, as long as any such advertising promotion, or response does not voluntarily single out or target Affiliate in a negative way. Notwithstanding anything to the contrary contained in this Agreement, there shall be no cure period under Section 12.c. of this Agreement for violation of this Section 18, and Network shall be in default hereunder if it does not immediately cease and desist upon notice from Affiliate of any such actual violation of the provisions of this Section 18.

19.SIGNAL DISTRIBUTION CAPACITY.  Affiliate retains and reserves for each System any and all rights in and to all signal distribution capacity contained within the bandwidth of the Pleasure Service as received at each System, including, without limitation, the vertical blanking interval (“VBI”) and audio subcarriers (and any other portions of the bandwidth that have been created as a result of the Pleasure Service’s use of digital technology).  Nothing herein shall

15

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

preclude Affiliate from exercising and exploiting such rights by any means and in any locations freely and without restriction; provided, however, that any such use by the Systems shall not degrade, or otherwise interfere with, the picture quality of the Pleasure Service or the audio portion of the Pleasure Service signal which is the principal audio carrier frequency of the Pleasure Service (or its digital equivalent).  The Pleasure Service shall not use any portion of the bandwidth other than as provided herein without the prior written consent of Affiliate, except that Network may use the VBI for closed captioning for the hearing impaired and simulcast foreign language audio or as required by applicable law.  Affiliate shall not be obligated to distribute any material or information contained or embedded in or around any portion of the primary video and/or audio feed (whether analog or digital) provided to Affiliate (the “Signal”) for the Pleasure Service that is not a part of the Pleasure Service programming (including On-Air Promotions and Network Commercials in accordance with Section 3.d. above).  Network further agrees that it shall not embed any material or information into or around any portion of the Signal that cannot be removed and/or blocked at any System headend.  Network agrees to provide Affiliate with at least [***] prior written notice in the event that Network embeds any material or information into or around any portion of the Signal.  Affiliate shall have the option to remove and/or block any such material or information or distribute any such material or information at no additional cost to Affiliate or Affiliate’s subscribers.

20.NO COORDINATION WITH THIRD PARTIES.  During the term of this Agreement, or in connection with any extension, renewal or new agreement with respect to the Pleasure Service, Network agrees that neither Network nor any party controlling, controlled by or under common control with Network shall require (or request that any third party require, or participate with or authorize any third party to require) (i) any carriage or other obligations with respect to the Pleasure Service as a condition to the receipt by any Affiliate system of any broadcast television station or other cable programming service, or (ii) distribution of, or agreement with, any broadcast station or cable programming service other than the Pleasure Service or other adult service owned and operated by Network, or agreement with any person or entity having a financial interest in any such broadcast station or cable programming service, as a condition to receipt of the Pleasure Service or as a condition to any more favorable rate, term or condition with respect to the Pleasure Service.  This provision shall survive the termination or expiration of this Agreement for a period of five (5) years.

21.BANKRUPTCY.  The parties acknowledge and agree that this Agreement concerns as its material content a license of intellectual property consisting of trade secrets and works of authorship protected under Title 17 of the United States Code.  Accordingly, in the event that Network files a proceeding under the United States Bankruptcy Code, 11 U.S.C. § 101, et. seg., and this Agreement is determined to constitute an executory contract, the parties hereto agree that Network is a licensor of a right to intellectual property under this Agreement, and

16

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Affiliate shall have the rights afforded to a licensee under Section 365(n)(1) of the Bankruptcy Code in the event this Agreement is rejected in such bankruptcy case.  In such event, Affiliate shall have the right to elect either to treat this Agreement as terminated by such rejection or retain Affiliate’s rights under this Agreement as such rights existed immediately before the commencement of the bankruptcy case.

22.MISCELLANEOUS.

a.Affiliate shall pay and hold Network forever harmless from all taxes and any other charges now or hereafter imposed upon Affiliate or the Systems or based upon the rental, license, exhibition or possession for to or by Affiliate or the Systems of the Pleasure Service or any part thereof other than income, gross receipts or similar taxes on amounts paid to Network.

b.This Agreement constitutes the entire agreement between the parties hereto, and may not be modified or changed except in a writing executed by all parties hereto.

d.This Agreement supersedes all prior agreements under which Network and Affiliate have been operating (if written, whether fully executed or not, or oral).

e.Each party acknowledges that it is entering into this Agreement in reliance only upon the provisions herein set forth, and not upon any covenants, representations, warranties or other considerations not set forth in this Agreement.  The headings, captions and arrangements used in this Agreement are, unless specified otherwise, for convenience of reference only and shall not be deemed to limit, amplify or modify the terms of this Agreement nor affect the meaning thereof.

f.If this Agreement is terminated for any reason, the parties shall nevertheless remain liable for the fulfillment of all obligations which accrued prior to the effective date of termination, including without limitation intended, payment of all Pleasure Service Charges which accrued prior to the effective date of termination.

g.Either party shall have the right to terminate this Agreement by giving notice of termination if any of the following events or circumstances occur:  (i) the other party becomes insolvent, or voluntary or involuntary bankruptcy, insolvency, receivership or similar proceedings are instituted against the other party; (ii) the other party, for more [***], fails to maintain operations as a going business; (iii) the other party, or any officer, director, substantial shareholder or principal of the other party is convicted in a court of competent jurisdiction of any offenses substantially related to the business conducted by the other party in connection with this Agreement; (iv) the other party fails to comply with any applicable law,

17

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

including without limitation such statutes, laws, rules, regulations and orders enforced, administered, promulgated or pronounced by the Federal Communications Commission or any successor agency, as amended from time to time; (v) the other party falsifies any documents, records or reports required under this Agreement; (vi) the other party fails to renew, or loses, due to suspension, cancellation or revocation, for a period of [***] or more, any license, permit or similar document or authority required by law or any governmental authority having jurisdiction, that is necessary to successfully carry out the provisions of this Agreement and/or to maintain its corporate or other business status; (vii) the other party makes any representation or promise to a third party directly related to the Pleasure Service which is inconsistent with the representations or promises that other party may appropriately make to such third party consistent with this Agreement; or (viii) the other party commits any fraud, misrepresentation, or illegal action of any sort in connection with this Agreement or any action taken which is related to this Agreement.

h.Termination under Section (g) above shall be without prejudice to any other rights or remedies that the party terminating this Agreement might have under this Agreement, at law, in equity or otherwise.

i.Regardless of the nature and extent of the relationships between the Affiliate and the Systems, the Affiliate shall be wholly responsible for each and every System’s fulfillment of all of the obligations imposed upon the Affiliate by this Agreement, and any conduct on the part of any System which would have violated the provisions of this Agreement if the System were a party, shall be a breach of this Agreement as if such System actually were a party to this Agreement with whom the Affiliate were jointly and severally liable.

j.If any party engages an attorney in connection with any action or proceeding (including arbitration and bankruptcy motions and proceedings, and any appeals from any action or proceeding) to enforce or construe this Agreement, the prevailing party in such action or proceeding shall be entitled to recover its reasonable attorneys’ fees and disbursements, including without limitation intended and by way of example only, the costs and expenses of discovery and expert witnesses.  In the event different parties are the prevailing parties on different issues, the attorneys’ fees and disbursements shall be apportioned in proportion to the value of the issues decided for and against the parties.

k.The provisions of Sections 2, 6, 9, 11, 15, 16, 20 and 22 of this Agreement shall survive the expiration or earlier termination of this Agreement.

l.No Basic Subscriber shall be deemed to have any privity of contract or direct contractual or other relationship with Network by virtue of this

18

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Agreement.  No supplier of advertising or programming content or anything else included in the Pleasure Service by Network shall be deemed to have any privity of contract or direct contractual or other relationship with Affiliate by virtue of this Agreement.

COMCAST PROGRAMMING

A DIVISION OF COMCAST CORPORATION

By:	/s/ Alan S. Dannenbaum
Name:	Alan S. Dannenbaum
Title:	Vice President, Programming

COLORADO SATELLITE BROADCASTING, INC.

By:	/s/ Michael Weiner
Name:	Michael Weiner
Title:	Executive Vice President

PARTIAL GUARANTY OF PERFORMANCE

New Frontier Media, Inc., a Colorado corporation (“NFM”), hereby guarantees the full performance of each obligation of its wholly owned subsidiary Colorado Satellite Broadcasting, Inc., a Colorado corporation (“Network”), under Section 11 in the preceding agreement, to the same extent as if NFM were the Network in the preceding agreement, and waives any defense to the enforcement of this guaranty arising out of the bankruptcy or insolvency of CSB, any change in the terms or conditions of the preceding agreement, any extension of time for performance or similar surety defense, and notice of acceptance of this guaranty.

NEW FRONTIER MEDIA, INC.

By:	/s/ Michael Weiner
Name:	Michael Weiner
Title:	Executive Vice President

19

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

ATTACHMENT A

LIST OF SYSTEMS

ATTACHMENT B

PROGRAMMING SCHEDULE

[Programming Schedule by Time and Title Omitted]

[***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

AMENDMENT ONE
TO THE PLEASURE SERVICE LICENSE AGREEMENT
BETWEEN
COLORADO SATELLITE BROADCASTING, INC.
AND
COMCAST CORPORATION

This amendment (“Amendment One”) amends the Pleasure Service License Agreement dated November 16, 2000, and all attachments, riders and addendums thereto (collectively the “Agreement”), between Colorado Satellite Broadcasting, Inc. (“CSB”) and Comcast Programming, a division of Comcast Corporation (n/k/a Comcast Holdings Corporation), a Pennsylvania corporation with offices at 1500 Market Street, Philadelphia, Pennsylvania 19102-2148.

Whereas, Comcast Holdings Corporation hereby assigns the Agreement to Comcast Cable Communications, LLC (“Affiliate”); and

Whereas, the parties desire to allow the Agreement to apply, at Affiliate’s discretion, to other pay-per-view services provided by CSB;

Now, therefore, the parties hereby agree to amend the Agreement as follows:

1.     Additional Services

The term “Pleasure Service” and/or “Service” shall, in addition to referring to CSB’s pay-per-view service currently known as “Pleasure,” also shall mean and refer to each of those CSB pay-per-view services currently known as TENTM, TENClipsTM, TENBlueTM, and TENBloxTM (the “Additional Services”), to the extent each such Additional Service, respectively, is distributed by Affiliate, for all purposes of the Agreement other than Section 8, Free Subscriptions and Carriage, and those other Sections that pertain to determination of the fees related to the Pleasure Service.  All programming broadcasts on the Additional Services will be in the “[***] Editing Standard” which depicts [***] and [***] situations and [***] among consenting adults.  These Services do not depict [***].  These Services are [***] (or [***]) to the degree of explicitness of programming currently featured on the competing adult services such as [***].

2.     TENTM, TENClipsTM, TENBlueTM, and TENBloxTM Rates

Demand Purchase Rates:  For carriage of any of the Additional Services, Affiliate shall pay [***].

3.     System Qualifications

The second sentence of Section 1 is hereby deleted in its entirety and replaced by the following:  “Affiliate represents and warrants that all Systems are at least [***]

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

percent ([***]%) owned by or are managed by Affiliate or an entity controlling, controlled by, or under common control with Affiliate.”

4.     System Technologies

Notwithstanding anything to the contrary contained in the Agreement, Affiliate shall have the right to distribute the Service via any technology, now existing or hereafter created, used by a System to deliver the Service to Basic Subscribers.

5.     Notice

The address listed for CSB in Section 6(f) shall be changed to:
7007 Winchester Circle
Suite 200
Boulder, Colorado 80301

Capitalized terms used in this Amendment One and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement.  To the extent that this Amendment One contains additional terms or terms that conflict with the Agreement, the terms of this Amendment One shall control.  Other than the addition of the changes above, the terms and conditions of the Agreement remain unchanged and in full force and effect.  The Effective Date of this Amendment One is February 28, 2005.

Comcast Holdings Corporation
Comcast Cable Communications, LLC		Colorado Satellite Broadcasting, Inc.
By:	/s/ Alan S. Dannenbaum	By:	/s/ Karyn Miller
Name:	Alan S. Dannenbaum	Name:	Karyn Miller
Title:	Senior Vice President Programming	Title:	CFO

2

EX-10.36

Exhibit 10.36

FIRST AMENDMENT TO THE
SATELLITE CAPACITY LEASE

This First Amendment, effective as of October 4, 2007 (“Effective Date”) hereby amends the Satellite Capacity Lease that was entered into by and between COLORADO SATELLITE BROADCASTING, INC. a Colorado Corporation (“Network”) and TRANSPONDER ENCRYPTION SERVICES CORPORATION (“TESC”) as of the 24th day of October, 2006 (the “Agreement”).  Except as otherwise indicated herein, capitalized terms used in this Second Amendment shall have the same meaning as set forth in the Agreement.

In consideration of the mutual covenants set forth herein, and for other valuable consideration, the sufficiency of which is hereby acknowledged, Network and TESC agree as fellows:

1.Amendments to Agreement.  The following provisions amend certain provisions set forth in the Agreement and such provisions shall govern the parties’ relationship with respect to the lease of encoded-video-file-server storage and streaming.

Rent and Residual Revenues.  Section 3.1.5 of the Agreement is hereby modified by inserting the following at the end of such Section, “Single Purchase Revenues, shall include but are not limited to revenues associated with the lease of encoded-video file-server storage and streamlining capacity by TESC to Network. Encoded-video file-server(s) shall be owned, maintained, and hosted by TESC and shall be dedicated for content delivery use only by and for TESC for the purpose of delivery of content to TESC Customers.”

Telephone Charges.  Section 3.3 of the Agreement is hereby modified by inserting the following at the end of such Section.  “Notwithstanding the foregoing, in the event that New Frontier Media, Inc. and EchoStar Satellite Operating Corporation enter into that certain “EchoStar Services Agreement” pertaining to the delivery of teleport services, this Section shall no longer apply and no charge will be due from Network as a result of an interruption of service or other transmission failure that is directly attributable to said transport services including the failure of Network to meet technical metrics provided by TESC that result in an inability to deliver service to TESC.”

Reports.  Section 4.1 of the Agreement is hereby modified by inserting the following as new subsection (e), “any viewership information with respect to server-delivered encoded-video-files that TESC provides to other similarly-situated lessees in the ordinary course of business.”

2.All of the terms and conditions set forth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this First Amendment, in which case the provisions of this First Amendment shall prevail.  Subject to the foregoing, this First Amendment and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one and the same

document, and references in the Agreement to the “Agreement” shall be deemed to refer to the Agreement as amended by this First Amendment

ACCEPTED AND AGREED:

TRANSPONDER ENCRYPTION		COLORADO SATELLITE
SERVICES CORPORATION		BROADCASTING, INC.
By:	/s/ Mark Jackson	By:	/s/ Scott A. Piper
Name:	Mark Jackson	Name:	Scott A. Piper
Title:	President TESC	Title:	Chief Information Officer

2

EX-10.37

Exhibit 10.37

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

SECOND AMENDMENT TO THE
SATELLITE CAPACITY LEASE

This Second Amendment, effective as of March 13, 2008 (“Effective Date”) hereby amends the Satellite Capacity Lease that was entered into by and between COLORADO SATELLITE BROADCASTING, INC. a Colorado Corporation (“Network”) and TRANSPONDER ENCRYPTION SERVICES CORPORATION (“TESC”) as of the 24th day of October, 2006, as amended (collectively, the “Agreement”).  Except as otherwise indicated herein, capitalized terms used in this Second Amendment shall have the same meaning as set forth in the Agreement.

In consideration of the mutual covenants set forth herein, and for other valuable consideration, the sufficiency of which is hereby acknowledged, Network and TESC agree as fellows:

1.Amendments to Agreement.  The following provisions amend certain provisions set forth in the Agreement and shall govern the parties’ relationship with respect to the Agreement.

Section 3.1.2 “Rent” is hereby amended by deleting the two references to [***] in subsections (a) and (b) and replacing the same with [***].

Exhibit A “Programming Schedule” is hereby amended by deleting the second numbered paragraph that currently states, “2. The [***] Channel which has an [***] rating” and replacing such paragraph with, “2. The [***] Channel which has an [***] rating.”

2.All of the terms and conditions set forth in the Agreement shall remain in full force and effect, except to the extent that such terms and conditions are modified by or in conflict with the provisions of this Second Amendment, in which case the provisions of this Second Amendment shall prevail.  Subject to the foregoing, this Second Amendment and the Agreement (including all other amendments, addenda, schedules and exhibits thereto) shall be deemed one and the same document, and references in the Agreement to the “Agreement” shall be deemed to refer to the Agreement as amended by this Second Amendment

ACCEPTED AND AGREED:

TRANSPONDER ENCRYPTION		COLORADO SATELLITE
SERVICES CORPORATION		BROADCASTING, INC.
By:	/s/ Mark Jackson	By:	/s/ Ira Bahr
Name:	Mark Jackson	Name:	Ira Bahr
Title:	President ETC	Title:	COO

EX-21.01

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Exhibit 21.01

LIST OF SUBSIDIARIES

1)

Colorado Satellite Broadcasting, Inc., a Colorado corporation, d/b/a The Erotic Networks

2)

MRG Entertainment, Inc., a California corporation, d/b/a Mainline Releasing and Lifestyles Entertainment

3)

Lightning Entertainment Group, Inc., a Colorado corporation, d/b/a Lightning Media, Lightning Home Entertainment and Lightning Entertainment

4)

SG Productions, Inc., a California corporation

5)

New Frontier Technologies Corporation, a Colorado corporation

6)

Ten Sales, Inc., a Colorado corporation

7)

NF Technologies BV, a Netherlands corporation

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LIST OF SUBSIDIARIES

EX-23.01

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Exhibit 23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We have issued our reports dated June 5, 2009, with respect to the consolidated financial statements and schedule and internal control over financial reporting included in the Annual Report on Form 10-K of New Frontier Media, Inc. for the year ended March 31, 2009. We hereby consent to the incorporation by reference of said reports in the Registration Statements of New Frontier Media, Inc. on Forms S-8 (File No. 333-26479, effective May 5, 1997; File No. 333-92081, effective December 3, 1999; File No. 333-57554, effective March 23, 2001; File No. 333-102694, effective January 24, 2003; and File No. 333-147314, effective November 13, 2007) and Forms S-3 (File No. 333-75733, effective on or about August 13, 1999; File No. 333-90803, effective on or about November 22, 1999; and File No. 333-64786, effective on or about August 7, 2001).

/s/ GRANT THORNTON LLP
Denver, Colorado
June 5, 2009

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Exhibit 23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-31.01

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Exhibit 31.01

CERTIFICATION

I, Michael Weiner, Chief Executive Officer of New Frontier Media, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of New Frontier Media, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: June 12, 2009

/s/ MICHAEL WEINER
Michael Weiner
Chief Executive Officer
(Principal Executive Officer)

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CERTIFICATION

EX-31.02

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Exhibit 31.02

CERTIFICATION

I, Grant Williams, Chief Financial Officer of New Frontier Media, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of New Frontier Media, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: June 12, 2009

/s/ GRANT WILLIAMS
Grant Williams
Chief Financial Officer
(Principal Financial Officer)

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CERTIFICATION

EX-32.01

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Exhibit 32.01

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

        The undersigned, the Chief Executive Officer of New Frontier Media, Inc., a Colorado company (the "Company"), hereby certifies that, to his knowledge on the date hereof:

(a)

the Form 10-K of the Company for the fiscal year ended March 31, 2009, filed on the date hereof with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL WEINER
Michael Weiner
Chief Executive Officer
June 12, 2009

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WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

EX-32.02

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Exhibit 32.02

WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

        The undersigned, the Chief Financial Officer of New Frontier Media, Inc., a Colorado company (the "Company"), hereby certifies that, to his knowledge on the date hereof:

(a)

the Form 10-K of the Company for the fiscal year ended March 31, 2009, filed on the date hereof with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ GRANT WILLIAMS
Grant Williams
Chief Financial Officer
June 12, 2009

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WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)