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Customers Key to Preventing NTN Buzztime’s Losses

NTN BUZZTIME INC.

CEO: Michael Bush.

Revenue: $6 million in first quarter 2011; $6.3 million in like quarter of 2010.

Net loss: $559,000 in first quarter 2011; $389,000 first quarter 2010.

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No. of local employees: 90.

Headquarters: Carlsbad.

Year founded: 1984.

Stock symbol and exchange: NTN, American Stock Exchange.

Company description: Creator and provider of interactive trivia, sports and card games to nearly 3,900 bars and restaurants via a cable network called Buzztime.

Like many services that depend on recurring payments, the business of NTN Buzztime Inc. owes much to retaining its customers and minimizing losing the same, also known as keeping churn rates low.

In the volatile restaurant industry, that’s asking a lot.

For its first quarter, the Carlsbad-based provider of trivia and sports games to restaurants and bars reported a churn rate of 8.3 percent, compared with 6.4 percent in the prior year’s first quarter.

With revenue coming in at $6 million, about the same as the 2010 like quarter, the net loss increased to $559,000, compared with a net loss of $389,000 in the prior year’s first quarter.

CEO Michael Bush said while the results were disappointing, the business is making headway in retaining customers, and finding new ones.

But Bush is a realist. “Our churn rate will never be at a 2 percent annualized rate or something like that. Bars and restaurants just go out of business too much. But we certainly can do much better than we’ve historically done,” he said.

Focus on Renewing Contracts

One solution has been to increase the rate of renewed subscribers by adding three people for that function, up from one earlier in the year. As a result, 180 contracts renewed in March-April vs. 77 renewals in January-February, Bush said.

Yet subscription terminations continue. In the first quarter there were 323 such endings, compared with 258 in the first quarter of 2010. As of March, NTN reported 3,925 subscribers, down 3.8 percent from the like quarter of 2010.

The company was unable to provide an average subscription price, but Michele Hincks, its chief operating officer, said pricing is generally based on the number of players, with the higher numbers paying more.

Founded in 1983, NTN is a creator of all manner of trivia, sports and card games aimed at engaging customers at eateries by seeing the results of their playing posted in real time. The business delivers the ever-changing games to subscribing outlets through a cable network called Buzztime. “We are a network and are running programming 15 hours a day, seven days a week,” Hincks said.

Players use wireless devices called playmakers to answer questions and make moves in games being played not only against patrons in the same bar, but in bars all across the country.

The company cites research that shows patrons tend to linger more over meals and drinks, and thus spend more money, when they’re playing NTN’s games.

Contest Aims to Attract Business

As the sluggish economy continues, many bars are experiencing higher levels of empty stools and looking for anything to lure business. NTN answered the bell recently by launching a systemwide competition called the Smartest Bar. The contest that begins next month and ends in November features questions in the typical trivia categories such as shows, the past, and games.

NTN would prefer announcements such as last month when one of its existing national subscribers, Buffalo Wild Wings Inc., committed to using Buzztime in all 750 restaurants, as well as any new outlets. NTN also has agreements with HOA Restaurant Group LLC, the operator and franchisor of some 455 Hooters restaurants, and with Native New Yorker, a 21-unit chain based in Gilbert, Ariz.

Among other efforts NTN is trying out to broaden its customer base is providing links to play its games via Facebook and to mobile smart phones. The Facebook connection was launched eight weeks ago, and downloaded 37,000 times, and averages some 2,000 players daily, Bush said.

NTN’s various campaigns created some new jobs, including more sales and market development people, but there’s churning again. Its most recent head count was 128, down from 168 it had three years ago. About 90 are in the headquarters in Carlsbad.

Investors in NTN can’t be too thrilled no matter how many new programs are rolled out, given the stock’s horrid performance. Shares have been below a buck for more than three years. After edging to 52 cents earlier this month, shares traded on the American Stock Exchange under NTN, fell back to 47 cents as of May 18, giving it a market capitalization of $28.6 million.

In its proxy filed in advance of its June 17 annual meeting, the board proposed a two-step reverse stock split with a 100 for 1 reverse split, and then a forward split on the shares with an exchange ratio of 10 for 1, with the net result a 1 for 10 reverse split.

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