Sex is a contact sport, a reality reflected by the current state of the adult entertainment business. Adult media revenues, from DVD to online, are falling rapidly. Some businesses are suffering, while others are failing. There are two camps: one laments the birth of the Tubes, and the other searches for answers that turn into money.
The latter, it seems, may have found a solution with a “human touch.” Put people back into the mix, and sex becomes a contact sport again. Cams and dating sites are showing the promise of still photos of naked people back in 1995. There’s demand, and there’s money.
Since inception, the porn business has cashed in on the need for fantasy. Whether you measure the industry from its roots in silent film a century ago, its entry into the public mind in the 1970s, or the emergence of something systematic in the 1980s, the result is decades of expertise accumulated to help people sell the unreal.
Now, customers are demanding that the industry bring the fantasy into the real world. They don’t want to watch hotties fuck — they want a piece of the action. Porn consumers are now looking for the impossible, and they might actually get it.
Websites that connect fantasy with reality by bringing the human element into the equation – i.e., dating and webcam sites — result in interaction. Webcams provide the validation of a real fantasy object, and dating sites enable you to turn wish to deed (though there are no guarantees). For the demanding, tactile consumer, these services provide a reason to open the wallet. A guy who wouldn’t spend $19.95 on a DVD or a paid content subscription would likely pay it to hear some stunning babe tell him how manly he is … not to mention the chance to hook up with a willing participant. It’s cheaper than drinks and a cab ride!
The future of the adult industry lies in lies, namely in making the known lies of fiction become the truth of interaction. As content becomes commoditized and loses its lure, cams and dating sites convert libido to revenue.
From Fantasy to Reality
Porn, as we all know, is fantasy. You watch a movie, look at a picture or, hell, read a book and imagine yourself in that situation. It’s your knob getting polished. You’re the guy with the cut abs and puffed chest, railing away at a thin girl with outsized tits and a distinct lack of inhibition. And then, as the proverb goes, you wake up … ostensibly with a sticky hand. The perpetual failing of porn has been that it’s not real. By definition, it can never be real.
For years, the fantasy has been good enough. You buy into the fantasy because you can — all the while realizing that you can’t bang the girl on the screen in front of you (or her equally hot, less famous equivalent working at the local grocery store). Since there was no chance in hell that you could shack up with a girl of that caliber, you settled for fiction. It’s no different from your girlfriend’s going to a romantic comedy and fantasizing that you were as suave, sweet and well scripted as the sensitive guy in the film.
But, the good ol’ days came to a close. Brad Estes of Video Secrets said, “The static content markets have been hit by a ‘perfect storm’ of a weak economy and the proliferation of Tube sites over the past 18 months.” The industry, he believes, is mature, and the business model changes we’re seeing are natural. It’s hardly surprising that reality is gaining ground relative to scripted fantasy.
The wide reach of dating and cam sites, however, increases your chances of interaction with a fantasy object simply through the “law of large numbers”: If there’s a big enough population, essentially, you’ll find one of everything. That includes size-2 models who are dying for some back-door action with fat, middle-aged bald guys who live in Duluth with their mothers.
So, what are these miraculous innovations?
Simply, cam sites are live versions of the traditional porn you’ve come to know and love. A viewer clicks over to a particular girl’s live session. They interact either by microphone or chat-room. At its most mundane, the performer, well, performs. She may follow instructions or respond to requests, or she may set her own agenda. One-on-one sessions, celebrity performances (by top-shelf talent) and other hooks make the dynamic more interesting and give paying customers a reason to pay a little more. The experience is more real because the action is live. And, the girl is engaged in a give-and-take.
Dating sites really don’t require much explanation, do they? Just in case: You pay for the chance to list yourself as available and look for others who may be interested in meeting with you. Niches vary from fetish to hookup to long-term to ethnic. With niche, purpose varies. If you’re looking for foot fetishists on jDate, you may get lucky, but the odds aren’t in your favor. And, this is important. As a user, the community you choose should increase your chances of getting what you want. Otherwise, you’re better off rolling the dice at the local bar — or tipping the hell out of a stripper.
The goal of both cam and dating sites is to get customers to pay for something they find valuable, particularly in a brutal economic climate. Think about it: Most horny and unattractive people will sacrifice any number of meals to pay for a bit of sexual bliss. A website that can deliver the desired experience — not just long odds or fantasy — claims a fairly resilient share of the consumer’s wallet.
Ground-Level Intelligence
The cam and dating markets appear to be withstanding the effects of the wretched recession in which we currently find ourselves. Several of the companies with which I spoke have reported strong performances in 2008 and 2009 — in stark contrast with the traditional online and DVD sectors. Of course, all refused to provide their revenues, so this is impossible to verify (an unfortunate norm in this industry). But, the comments from the industry suggest that these interactive online businesses are strong and growing, even in a depressed environment for consumer spending.
According to Brad Estes, “It is our policy not to comment on specific revenue numbers or even ranges.” That being said, Estes did indicate that prudent decisions over the past year and a half – including “committing to the live video chat space” — have had “a positive impact” for Video Secrets, its affiliates, and its performers.
Mickey Bojcsik, director of program operations, Adult Webmaster Empire (AWE), agrees with this assessment. “Adult video chatting is still on the rise,” he said by e-mail, with the driver being that “people want to get an experience as close to the real thing as possible.” He sees the introduction of three-dimensional technology on live cam sites – along with refined teledildonics and other innovations — as the next steps in advancing this industry. “People want better,” he believes. “It’s human nature.” Ultimately, this is why today’s adult entertainment consumer “demands more interactivity” if he’s going to “pull out his credit cards and keep buying (or rebilling).”
AJ of LoadedCash reports mixed conditions. While he revealed that the company’s dating product revenue was up 40 percent from 2007 to 2008, 2009 is looking much different. “Our industry has a whole new host of market issues we haven't seen before,” he said, “along with a difficult economic landscape that businesses globally are trying to weather.” So, he’s a bit more cautious about the current year.
Success, doubtless, attracts attention, and both the cam and dating website businesses have drawn plenty of competitors. The broader adult industry is still reeling from several years of eroded revenues, strategic missteps, and a changing landscape that few have embraced. Once a concept has been proved, the market fills quickly.
Though the space is filling up, Estes does not believe that it is saturated yet — instead calling it “extremely competitive.” Gerard Della Porta of NeedLive agreed, “The market has plenty of quality cam sites.” Both cite the time and capital needed to enter the interactive space as barriers to excessive competition. As a live content provider, you have to be ready to commit some serious capital. If you can’t attain margins of 35 percent and repay any start-up debt in two to three years, he advised, stay out of the space.
Of course, there is always room for better ideas — “smarter, faster, more cost-efficient and more adaptive competitors who solve difficult end-user problems,” according to AJ. “From that perspective,” he continued, “no market, including ours, is ever ‘full.’”
Like his peers, AJ does cite the typical barriers to entry but also emphasizes the need for both product and talent quality. New entrants “won’t become serious contenders by accident or by treating it [i.e., their businesses] like a hobby.”
As usual, niche content providers gain an advantage, as the move toward commoditization – which will happen, as we’ve learned from other sectors of the porn industry – squeezes margins and puts pressure on the market shares of even established businesses. One manager of Cashdorado has seen advantages in going overseas, recently launching his company’s international sites. Increased interest is generated by an overwhelming commitment to reality.
“The tanning studio,” he said of site SpyTanning.com, “is a real one, with real people from the street.” The guests get to spend time in the tanning booths free, as long as they agree to have their experiences streamed on the Internet.
Hey, this is Internet Marketing 101: Never underestimate the power of the free offer!
Not the End of Porn
The ascent of interactive live content is evident, but is not going to replace the paid, prerecorded content market completely. Most live content purveyors agree that there will always be consumers looking for traditional porn. This makes sense, if for no other reason than variety. Bojcsik does not see major brands and paysites disappearing –as a result interactive content company growth — or, for that matter, because of the “tube” websites.
In fact, he sees room for both live and prerecorded markets to contribute to the same top line. “If you’ve been following some of the large pay sites,” he observed, “you may have noticed that they are making significant changes to what they offer their members, and in many cases, that includes adding live cams to fully monetize the power their brands hold.”
“There will always be surfers who prefer prerecorded porn,” according to Della Porta, and they’ll pay a fee for niche content. Estes concurs, “Live video chat and dating fill voids in people’s lives, not necessarily in markets.” Paid, prerecorded content, on the other hand, addresses a market need.
“If I operated static content sites, I would focus on how best to integrate and offer these lucrative services to my customer base, apart from traditional ad placements,” Estes said. Essentially, this simply speaks to a skill that the better online adult operators already have: cross-promotion to make the most of their traffic. If you have a committed customer base, simply having something else to offer is likely to lead to some bump in revenue.
The emerging online play is diversification. The notion of blending prerecorded physical media with online content has yielded to a mix of scripted and live material as the formula for optimizing the value of every visitor to the site. Simply chasing the latest dream isn’t enough, especially if you have a content library in which you have invested substantially. The goal should be to adapt to a changing marketplace while maximizing the value of investments already made.
Recession-Proof Is Bullshit
Remember when people would proclaim porn recession-proof to chants of “Sex sells! Sex sells! Sex sells!” Yeah, that’s clearly in the past and unlikely to return. Even the interactive space is not a bulletproof way to protect your balance sheets for the long term. Eventually, costs to enter will come down further, more and more companies will pop up, and we’ll find ourselves living the DVD market of 2005 once again. Success comes from constantly looking to the future and adjusting to the rhythms of consumer preferences … and spending.
The gains made by live interactive content — specifically cams and dating sites – signal a hope for the industry’s partial recovery. But, we have to be realistic: These businesses are not going to offset fully the market losses sustained by prerecorded content. The adult revenue pie is shrinking. Business growth will come from seizing not just market share but wallet share. Customers are spending less, and you’ll have to pull in more of less to win.
And, while you’re doing all this, you’ll have to keep an eye focused on what’s coming next. The market does not stand still, and the price of missing the next wave is substantial. We’ve seen it already. Innovation will continue, customers will remain fickle and even a return to economic growth will challenge prevailing assumptions on consumer behavior. Beyond recession-proof, adult entertainment (and every other industry) isn’t even change-proof.
Bojcsik puts it best, “there’s always room for improvement, especially in a segment that evolves so rapidly,” he said of the intersection of technology and adult. “We can’t rest on our laurels.”
This article originally appeared in the July 2009 issue of AVN Online. To subscribe, visit AVNMediaNetwork.com/subscribe.
