Regarding the supposedly imminent demise of the online subscription model as the main method of accessing porn sites, Mark Twain may not have quipped, "The rumors of its death have been greatly exaggerated," but he might very well have were he alive to comment on the state of adult commerce. Though he also might have said that if subscription models don't adapt to the times, they should die, for such was the great man's understanding of the ebb and flow of the markets.
Online subscription models made sense the moment technology allowed them, not least because people recognized them from their offline dealings. It was a proven form of interaction, which is why content-based businesses began replicating their offline subscription models online right from the start, with middling success.
Adult had its own notable failures. The premier brands at the time were also the major consumer magazines — Playboy, Hustler, and Penthouse. Like everyone in publishing, they assumed that it would be a smooth transition moving the established print model online. What they failed to realize was that the immediacy of the Web had instantly raised the expectation of consumers, which meant everyone was playing catch-up from the get-go. Or almost everyone.
The move online was smoother for those already providing impulse-purchases. The owners of some of the early success stories came out of the phone-sex business and immediately identified the Internet as a multimedia telephone on steroids, a goldmine handed to them for the abusing.
And abuse it they did, in increasingly devious ways. The methods of consumer abuse and fraud are too many and legion to mention, but suffice to say the cat-and-mouse game between online porn consumers and merchants that continues to this day is one of the main reasons why the subscription model is considered under siege.
Of course, so-called "friendly fraud" by consumers also has escalated as surfers have become more sophisticated and cynical. More than a decade on, the proliferation of Tube sites and other free content combined with a bad economy and deteriorating credit has created a “perfect storm” of negative forces that have led some to predict the end of subscriptions as a sustaining model for the industry, and the inevitable outcome that a cohesive porn "industry" also will cease to exist.
The problem with such a blanket prediction, however, as AVN Online quickly learned when it asked a number of adult Internet veterans for their take on the future of the subscription model, is that too many people do not believe it is going anywhere anytime soon, as long as merchants meet the evolving needs of consumers. We also spoke with a newcomer to the industry who sees exciting (and inevitable) new types of consumer engagement models available to the industry, if it is willing to loosen its grip — just a little — on the tried-and-true methods.
The Tried and True
"The subscription model is not dying and is still vital," insists Colin Rowntree, who has helmed the BDSM website Wasteland for 14 years. "Not as vital as years ago, but it remains the core way that people purchase content outside of video chat, dating, and video-on-demand services."
Not so fast, says Brad Estes, director of operations for Video Secrets, a leader in the live-video chat market, who says subscriptions are in fact an integral part of their model.
"Our subscription model is intimately tied to our live-video chat offerings, giving our VIP members some added perks when they maintain a monthly subscription," Estes told AVN Online. "In this sense, we are much different than a stereotypical membership site."
Not so fast, says Q Boyer, marketing coordinator for TopBucks, who says subscriptions are not only still an important part of TopBucks, but have a clear role in a burgeoning market they are aggressively pursuing: mobile.
"In essence, we're adapting the subscription model and deploying it in a modified form for the mobile market," said Boyer. "Our flagship mobile sites, iPinkVisualPass.com, iPornoPass.com, and iMaleSpectrumPass.com, are all structured as subscription sites, and if you look at the details of the subscription offers, you'll see some very familiar aspects from the Web subscription model — like the low price, short-term trial, recurring billing, and clearly labeled cross sales. We're not necessarily 'tying ourselves down' to the subscription model with respect to mobile, and we will likely offer other payment options in the near future, but within the domestic market, the subscription model is working quite well for us, currently."
Indeed, according to Kathee Brewer, who has written extensively about the industry for AVN Online and other publications, the monthly subscription model is so entrenched in the adult online business model that it pretty much sustains itself.
"Consumers also have been conditioned to expect that kind of arrangement with paysites, so they accept it," she said. "Comfort plays a role, too. People resist change unless they’re forced into it. As long as affiliate programs and their affiliates are making some money, neither has an overwhelming motive to try something new."
But consumer/producer roles are changing, and the rise of social networking and virtual, gaming, and other communities, as well as the various tools and devices that enable both intimate and collective communication across a myriad of platforms, has only further shifted the conversation away from traditional types of marketing and merchandising. No one denies this fact. The question is whether subscriptions are in decline, and if so, what comes next?
What Comes Next?
No matter what they do in the business, people seem to agree that adult's future will not be like its past, and that, starting today, successful adult websites will have to become more creative and engaging — i.e. sticky — whether they use micro-transactions or subscriptions.
"One useful way to think about digital content is that we are moving from the economics of scarcity to the economics of attention," said Jeff Random, who operated Throb, a consulting and development firm. "It's a terrible time to be trying to hold onto an old-school adult network, but it's a great time to be connecting with an audience that enjoys what you want to do [in adult], with more platforms and tools than ever before at your disposal.
"These days, whether it's music, porn, or whatever, the main reason people are willing to pay/subscribe/micro-pay/pay attention or interact," Random added," is because they want to reward the producer of the content and encourage them to make more."
"What surfers really want, I think, is for adult producers to follow the trends in entertainment media that are playing out in mainstream entertainment — meaning that they want their porn to be readily accessible to them anywhere and everywhere they go, they want it to be cheap, and they want to buy it on their terms," said Boyer. "If that means purchasing it a file at a time at a low price, then we may see increased demand for the iTunes model to be applied to porn. We're already seeing some producers and distributors move in that direction.”
Brewer is a fan of a la carte pricing and micro-payments; as a consumer, she appreciates being able to pick and choose what she wants from a menu of options, and not feeling forced to buy things she doesn't want in order to get the things she does. Sound familiar, music industry?
"That’s not to say an 'all-you-can-eat' menu shouldn’t be available, as well," she adds. "In some situations and for some consumers, that model makes sense. However, the success of sites like iTunes and the proliferation of sites offering video clips on a 'pay-as-you-go' basis indicate to me that people really like to be offered that choice."
Rowntree has no problem with micro-payments, but he warns that some membership sites are inherently subscription-friendly. "I think subscription models are tailor-made for community-based sites, like Wasteland. I'm sure a lot of people like incremental purchases, but remember the consumer mentality we are dealing with. A lot of people, once they find something they like, will subscribe to it.”
For Estes, the dividing line is between static and live content. He says that while some "static content" businesses may move to micro-payment solutions, other owners are holding their own with the membership model. Live content, on the other hand, is situated to take advantage of any engagement model.
"We feel that live-video chat is positioned to continue growing strong into the future due to its 'Tube-proof' nature and the increasing number of customers who want a completely customized erotic experience by directing their own live show with a performer of their choosing," he said.
Al Wells, CEO of CPAWins, a managed-offer platform recently introduced to adult, sees micro-transactions as a definite growth area within the industry, not just for its direct benefits to users and producers, but also because it provides a necessary stepping stone to the introduction of a universal adult virtual currency, which he says will be a natural a fit for adult, as it is for gamers (and casinos). Publishers, he says, will be able to use it to either replace or augment their current subscription models. [Disclosure: The author works with CPAWins in an advisory capacity.]
"We believe publishers will increasingly look for creative ways to monetize users and new ways to make users want to purchase a publisher’s service," he said. "We believe that the adult space is ripe for micro-transactions and for finding creative ways to monetize those micro-transactions. For instance, a lot of publishers complain about all the free adult content on the Web. While that problem may need to be addressed, publishers should make their content effectively free, too."
Wells concedes that micro-transactions make some publishers nervous because it is a risk to abandon a recurring subscription model in favor of a model that has none of their users on the hook. "But if the publisher is able to make the site really sticky and get the users deeply engaged, we believe that adult publishers will find out what their game counterparts have already discovered — revenue from micro-transactions dominate anything that a subscription model can produce."
Whatever the Consumer Wants, the Consumer Gets
Ultimately, all agree, it will be the consumer who decides which engagement models will prevail and predominate, if any, and the merchant who will need to, as Random succinctly puts it, "deliver content that 'speaks/connects' with an audience on terms that they prefer."
Still, as has always been the case, adult entertainment is a grand experiment in narcissism in that it always reflects the viewer's desire. It is one of the beauties of an industry whose sole purpose is to allow expression and inspire reaction, both of which are inherently personal and individual.
"Surfers want to be wowed," said Wells. "They want to be addicted to the site before they are going to plop down money. You have to engage users. It’s hard to do in a few join pages. Give the user a community to join, instead of a product to buy, and they will buy more of the product."
"I do not believe that surfers necessarily 'want' anything different than they did 3 to 5 years ago … what they 'expect' is another matter," cautioned Estes. "More and more consumers want a simple experience, one site they can visit that caters to their erotic needs. Our live-video chat white-label solution fits in well with this trend."
"The key is knowing what consumers want," said Brewer, "and for that content producers need to solicit user input. The days of 'this is what we have; take it or leave it' and 'this is hot — take our word for it,' are long gone. Innovation, creativity, dedication, and integrity – combined with a significant amount of elbow grease — are the keys to success in any endeavor. They always have been. Consumers can tell when producers are working for their money, and those are the producers they’ll patronize."
Ever the realist, Rowntree agrees that while the new models seeking a home in adult are useful and probably inevitable, there is a generation gap currently at play in adult's sea-change.
"My guess," he said, "is that virtual currency will be for the 'younger market' — because people over 35 years old tend to like subscriptions to things they respond to, like a comfortable old pair of slippers. It's just a lot less complicated a decision-making process than, 'What should I spend my little tokens on today?'"
Each to his/her own. Whatever gets you through the night.
Tom Hymes is a writer and editor, and the publisher of DailyBabylon.com, a news and opinion website he recently launched with Kathee Brewer. He can be reached at [email protected].
This article originally appeared in the August 2009 issue of AVN Online. To subscribe, visit AVNMediaNetwork.com/subscribe.
