"I see it building. It's not prominent yet, but it's getting there." That's what Acid Rain owner Mitchell Spinelli said about digital distribution, which is the direction in which his company will focus the majority of its new-product energies for the foreseeable future. Spinelli is not abandoning DVD, but all of his company's new work will debut exclusively online, he said in November.
So will all content from Extreme Associates, which has abandoned DVDs and the expense and headaches owner Rob Black associates with them. Both men are convinced that within a few years, DVDs will disappear except as collectibles, and the only way consumers will be able to get their porn fixes is online or via broadcast media.
Spinelli said he thinks companies that continue to rely solely on DVDs do so at their own peril. "The window [to become an online player] is closing," he said. "If you don't jump in right away with at least a plan to make footage exclusively for your own pay sites, you're going to miss out. Within a year, you'll be too late."
He paused and then added, "Well, it's never really ‘too late,' but you'll be way behind."
Black is kicking himself because he "should have [made the leap to Web-only distribution] a year ago." He called the digital realm "a completely different animal" that takes a while to tame, and he offered some tips for others considering bearding the lion.
First of all, Black is a strong believer in forming partnerships with companies already successfully working in the space. Extreme signed an exclusive-distribution agreement with HotMovies, and that allowed Extreme to get a better-than-standard revenue split from the video-on-demand purveyor. "The VOD guys are more apt to make a better deal for exclusive content," he revealed. The deal removes all new content from the pool of material Black can post to his own membership websites, but the resulting income was worth the compromise, he said, in part because he finagled a premium promotional spot on HotMovies' "splash" page, making Extreme's content highly visible to consumers who visit the well-trafficked site.
"You've got to try to make a deal that works for you, and you've got to have something special to offer," he advised.
That comment was echoed by Vivid Chief Executive Officer Steven Hirsch, whose company successfully has replaced slumping DVD revenues with burgeoning online income. In any milieu, "it always comes down to creating unique content that nobody else has," Hirsch said.
Although "people are not as willing to criticize production values when they watch [a movie] online," quality still counts, according to Suzanne Knudsen, the marketing manager at Adult Entertainment Broadcast Network, another video-on-demand giant. She predicted that within five years, even high-gloss Hollywood features would be available in their entirety online. Right now, amateur, alt and gay content of any kind are AEBN's top sellers, but mature and MILF content are doing well and other categories are coming on stronger every day, she said. She expects international and ethnic content to be huge.
Knudsen also noted that although online distribution's reduced expense and fuss may make it attractive to traditional video producers, the DVD-focused should be aware that profit margins and revenue splits work entirely differently in the digital space and that may make the venture less profitable than traditional channels - at least in the short term. Eight cents a minute is an industry-standard price for Web-based VOD, she said, and by the time that's carved up, producers may see only a penny or two per minute. She added that at AEBN, each contract is different, and a producer's cut is determined by an arcane formula that takes into account variables like the number of films available, reputation, how in-demand the work is, whether exclusivity is an issue and the "star power" of a studio's performers.
"Talk to somebody who's a success in the business," Knudsen recommended. "Work with others with similar products and interests."
The bottom line? "Just get online," Knudsen said. "Just get used to the Internet. We're on the cusp of the wave right now, and we see a lot of things that could be possible in the future."
