The adult industry has a skewed sense of reality on the financial crisis. The rest of the world started to feel the squeeze in late 2007, with true mayhem erupting last September. The porn recession, on the other hand, traces its roots back to 2005.
Since we’ve been living with it longer, it’s easy to think that our problems are different. Maybe they were worsened by the worldwide financial crisis, but our set of concerns is not the same as those in the mainstream. This may have been true in 2006, but porn is part of a bigger debacle now — and not one of its own making.
The nasty little secret in all this is that blame is immaterial. We’re living mainstream’s nightmare, and we have no choice but to fix our own corner of the commercial world.
Until the financial crisis unfolded, the porn industry suffered from sluggish DVD sales and competition with free online content. Revenue thinned as a result, but a solution did exist. Disciplined management practices, strategy formulation, and execution had the potential to separate the winners from the losers … a fact that’s evident when you take a look at who’s on top these days.
Little of this matters today, though. Cash is drying up, but the bills aren’t slowing down. Hell, they’re probably speeding up, with nervous vendors desperate to claim every last dime they are owed.
If you look outside the adult entertainment business, the situation is no different. Websites, magazines, and other content companies are shutting their doors. Layoffs have become the norm, and the survivors are more than happy to take on the extra workload, as the alternative is an unpleasant silence. Sit back and watch the Twitterstream for @themediaisdying to get a sense of what’s happening in the mainstream. It’s grim, and it’s only going to get worse.
And it’s not just print that’s getting smacked around.
Online content providers are trimming their staffs, ceasing operations, or hoping for a benevolent (or any) acquirer. How’s that going? Well, the fact that Gawker folded Valleywag and Defamer into the mother ship absent a problem-solver with deep pockets tells the whole story.
Once upon a time, content was king. Remember those days? Well, that’s not the case any more. Content is still important, but it’s no longer a competitive advantage. Rather, it’s the price of admission. Just ask any of the several major online players rumored to be calling it quits (and not by choice) this year.
I know you’re used to doom and gloom from me by now, but this probably seems excessive … even by my demented standards. Well, the reality is that adult companies share one fatal flaw with the mainstream media: We keep doing the same things over and over with the sincere expectation that it will work eventually.
It won’t.
Every online player that has the bright idea to peddle DVDs … every intermediary that wants to produce content … every wealthy investor who believes that sex sells … change your thinking. Take a look at the carnage around you and realize that, as the Wall Street guys have always cautioned, “Past performance is not a guarantee of future success.”
Normally, the adult industry would be able to hobble along — as it did from 2005 to 2007 — and find a way to make it all work. When the rest of the world is making (and spending) money, porn is able to participate in its success. With the world pushed into financial turmoil last year (personally, I blame Iceland), unfortunately, mainstream action is no longer turning into porn revenue. Mainstream media’s collapse has exacerbated the situation for our industry.
But unlike the mainstream media, adult has potential.
Think back to the glory days of the mid-1990s. While newspapers where planting their thumbs firmly up their asses, the porn business latched onto a new fad called the “Internet.” We made it work. Some would say that porn made the Internet … though the market values of eBay and Amazon (not to mention such fantastic failures as TheGlobe.com) suggest that the mainstreamers made some money, too. However you spin it, we were there early, and we made it work. Mainstream print media, on the other hand, relied on faulty logic to tell themselves that they were doing just fine, and they are currently paying the price.
We have the ability to adapt. For the past decade and a half, though, the market did all the work for us. People flocked to the Internet and realized that they could enjoy adult entertainment privately. They didn’t have to step into a local retailer. A few clicks of the mouse would lead to a DVD in the mailbox or instant gratification. The monetary value of this discovery has been absorbed, and the revenue has shifted from tangible media to online content. Now, it’s shifting again … probably to groceries and the mortgage.
The good news is that people will still pay for porn, even if they have to cut back on the grocery bill. We’re seeing it with other luxuries. Reports of increased spending at bars is well documented. A few months back, I had the opportunity to sit in on an interview that Health.com conducted with my local tobacconist, De La Concha, and its customers. Consumers will find a way to scratch their favorite itches, as long as there’s a reason for it.
For the mainstream media, the reason is lacking. There really is no substitute for free content. If you can pay for the New York Times in print or read it free on the Web … well, do the math. No amount of innovation is likely to change the consumer dynamic.
This is where the adult industry has a shot. Innovation can make a difference for us. Whether it’s finally finding a viable, fee-based approach to landing on the iPod/iPhone, adding value to the viewing experience (e.g., RealTouch), or creating brands around content or performers that justify the extraction of a credit card, we have ways to make consumers pay.
Adult entertainment has a history of taking mainstream innovation as an early adopter and making money on it. The VCR and the Web are prime examples. They gave consumers reasons to open their wallets. At this point, we need to rekindle the spending public’s love affair with porn. It won’t be easy, but it will yield results.
Of course, the advice is easy. Execution is not. Ironically, adult entertainment companies need to look to the companies that are failing for the answers. The reason that newspapers and magazines survived as long as they did is because they focused on knowing their readers and delivering the exclusive information that would justify a financial commitment. In simple terms: “We have what you want and nobody else does. And, we really know you want it.”
By refocusing on the niches that excite consumers and eschewing the commoditized bullshit that they can get anywhere else, the leading adult companies will separate themselves from the masses. In fact, they’ll stand to gain. As competitors give up — by choice or not — the pool of potential customers will effectively grow. When a company disappears, its customers become free agents. You have a shot at making them yours. Capitalize on it.
So, are we as fucked as mainstream? Not at all! A combination of business discipline and the exploitation of new technologies gives adult a chance to rise again. Unlike the mainstream, we do have control of our fate. The missing link is the decision to act on it. The smartest people in our industry will use the downturn to firm their positions in the marketplace, snatch up some market share, and find those new angles that will reengage customers. As a larger class of failures emerges, they’ll be on hand to pick up those new customers and add to the top and bottom lines.
This article originally appeared in the July 2009 issue of AVN Online. To subscribe, visit AVNMediaNetwork.com/subscribe.
