LodgeNet Interactive Corporation (Nasdaq: LNET) today issued the following comment regarding a research report dated January 19, 2011 by Craig-Hallum Capital Group:

Today an analyst reported that one of LodgeNet's largest hotel customers has implemented a policy regarding adult content, and raised concerns regarding the impact of such a decision on LodgeNet's Guest Entertainment revenues.  The Company was not aware of Craig-Hallum's report in advance, but believes that the following information should be considered in connection with the report in order to clarify the contents of the report and assure that the information contained therein is not inaccurate or misleading.

• LodgeNet has always offered hotels options to restrict mature content.  The customer in question has an option to restrict adult content, but only beginning in 2013.  The customer and LodgeNet have adjusted the economic model in such a way as to assure that the Company is economically indifferent to decisions made by the brand to offer mature content.
• No existing agreements are affected, and future agreements with this customer are expected to be structured in a manner that also do not have a material adverse impact on the Company's return on invested capital.  Similarly, there is no expected economic impact as a result of this agreement in either 2011 or 2012.  There is no change in programming expected at currently installed properties in 2011 or 2012.  
• The Company's ongoing relationship with the customer in question is good, and LodgeNet is actively engaged with the customer in discussions regarding the upgrade of their existing systems to high-definition and providing new services that would generate incremental revenues.
• It has been widely disclosed the Company has been diversifying its revenue base, and is less reliant on revenue from mature content than at any point in the past.  The Company's next-generation Envision system integrates in-room technology that connects the Company's interactive TV system to the "cloud" and permits streaming video and other applications that would generate incremental revenues.
• The Company stands behind its guidance, and has not adjusted its projections or outlook as a result of the agreement referenced in the report.  The information in the report is not expected to have any impact on the Company's covenant compliance.
• The report also states that another hotel chain plans to remove 50,000 rooms of video-on-demand over the next six months.  The decision of hotels in the economy sector to remove VOD systems and revert to free-to-guest programming only has also been widely reported.  The systems in question are nearly all tape-based systems at the end of their useful life, and which generate marginal VOD revenues.  The loss of these rooms has been anticipated, and will not have a significant impact on the Company's revenues or prospects.