As any good comedian knows, “It’s all in the delivery.” If you’re an Adult entertainment content producer or distributor, chances are quite good that you spend a growing percentage of your time investigating creative new ways to deliver your products to consumers. After all, there’s money to be made at the forefront of any new technology – and that goes double for Adult.
Here, we look at four emerging distribution models we think have promise.
Peer to Peer
While not new, peer-to-peer networks haven’t exactly been embraced by Adult entrepreneurs, either. Feared and loathed by many Adult content owners as channels for piracy, P2P networks also can be a source of some surprising revenue if content providers learn to use them instead of allowing things to work the other way around.
Despite the efforts of the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA), P2P networks are not going to be gobbled up by the legal system. When Napster, the original P2P network, was forced off the grid by copyright holders, other, better systems sprang up to take its place. Today there are literally hundreds of P2P clients available to anyone who wants to share files with others around the globe. Most of the software is free – deriving income from adware or user donations – and all of it is viewed with a great deal of suspicion by the publishing industry (in all its many incarnations) because it allows end-users (who, darn them, won’t give up the notion that “information wants to be free”) to violate copyrights with reckless abandon.
Napster’s biggest sin, in the eyes of many, was that it used a centralized server architecture to connect users. Lists of available files and their peer locations were maintained on Napster’s servers; users found what they wanted in the lists, and then sent a request through Napster’s servers to downloaded it from the appropriate “node.” “Peer to peer” was something of a misnomer in Napster’s case, because users didn’t really connect directly to each other until after they’d connected to a Napster hub. The fly in the ointment was the server middleman, which made Napster a target for contributory copyright infringement charges. In the end, all that was required to “shut down” Napster was to force the company to turn off its P2P servers.
Contemporary P2P networks have dropped the centralized server component, becoming truly peer-to-peer systems. In today’s P2P world, the term “network” actually refers to the underlying software protocol that facilitates the interaction between peers. There is no network-owned server standing between clients: If User A wants a file on User B’s computer, he gets it directly from User B’s hard drive, as long as the two peers are using compatible software clients.
How big is the file-sharing phenomenon? Research by AssetMetrix (www.assetmetrix.com) found that 77 percent of the companies responding to a poll were plagued by employee file-sharing at work. Fifty-eight percent of the employees at those companies had P2P clients installed on their computers. In August 2001 alone, just after the demise of Napster, Webnoize discovered that more than 3 billion files were downloaded through four leading file-swapping services. That figure topped Napster at its peak, and has grown since according to all estimates, despite repeated lawsuits filed by the RIAA and the MPAA and their international confederates. Far from spelling doom for copyright owners, however, a study by Jupiter Research (www.jupiterresearch.com) found that frequent P2P users are 75 percent more likely to buy music than average Internet users; 34 percent of P2P users said they increased their spending after they used the services. Compare that to the 19 percent of music fans surveyed who use the Net but don’t engage in file sharing. Suddenly, the revelation that BitTorrent (www.bittorrent.com), possibly the world’s largest P2P network currently, reportedly devours one-third of the Web’s bandwidth all by itself seems more like an opportunity for savvy distributors than a curse.
They key to generating profits from P2P users, according to those in the know, is understanding their mindset and playing smart. P2P devotees aren’t completely averse to paying for what they want, but if they can get it for free, that’s better. Jason Tucker, managing partner of Playa Solutions (www.playasolutions.com) and one of the Adult industry’s foremost advocates of digital rights management, says DRM is the "killer app" for viral marketing. By wrapping content in a digital lock and then encouraging it to stray, copyright owners not only can increase their bottom lines as it drifts into the hands of people willing to pay for it, but also can spread their message to untapped markets.
One Adult entertainment company is encouraging that approach among its affiliates. VideoPass (www.videopass.com) incorporates into its marketing plan a technology it calls “self-selling files.” In VideoPass’ model, full-length Adult movies are secured by DRM technology that allows users to preview a portion of the flick for free, but then requires payment before any real action is revealed. Inside the DRM lock on each video package is a unique affiliate code that generates revenue for the distributor every time the package is purchased. The code sticks with the file forever, so no matter how far or how long it roams in the P2P underworld, it continues to drive money to the affiliate who created it. According to VideoPass co-founder Marty Sarkisov, “We’re getting a great response from people.”
Video-on-Demand
Web-based Video-on-Demand is another technology that isn’t exactly new, but only recently has begun to see widespread use among Adult studios that saw their genesis in the brick-and-mortar world. Initially, some studios worried that Web-based sales would detract from their bread-and-butter market: traditional, real-world retail. Others worried that making their content available online would subject them to a “dilution factor” as the content was victimized by digital pirates. For most however, VoD has provided a significant revenue stream they now wonder how they did without.
Metro Interactive is one such company. “Video on demand has been part of the larger picture for us for about a year now,” says marketing director Leonard Morales, Jr. “We launched MetroOnDemand.com in January 2004, and it complements our other sales very nicely.” The company is so fond of its VoD component, Morales reveals, that it’s already investigating ways to provide the service to mobile devices, though the realization of that delivery method won’t occur for quite some time because of wireless infrastructure issues.
Metro takes an interesting approach to Web-based VoD. Through a sister site, AmazingAdult.com, the company offers Adult entertainment in a more traditional fashion by making physical DVDs from their studios and others available for purchase. The Web site also includes links to VoD at MetroOnDemand.com for consumers who prefer to get their Adult entertainment “on the spot.”
At MetroOnDemand.com, customers can view entire videos online, or they can select individual scenes at a price of $1.99 each. According to Morales, giving users more viewing power in the form of customization options like that has contributed mightily to Metro’s bottom line. “Customers want it,” he says simply. “They can view one scene online, and if they like it, they’ll probably buy the whole movie [either on DVD or via download].”
One of Metro’s most compelling customization options, combining both real-world and virtual distribution models, is a system that allows online visitors to pick scenes from any number of Metro releases and combine them on a DVD, which the company then mails to the customer. Whether the consumer is interested in a certain type of action, a particular star, or a variety of material, the DVD creation process is immediate and intensely personalized – and intensely popular, Morales says. “We try to offer customers what they want in the way they want it,” he notes. “Downloading, customizing, physical product… whatever it is, they get it the way they want to view it.”
TLA Video (www.tlavideo.com), an online megastore that has provided products across the cinematic spectrum since 1997, recently joined the VoD movement with a product it calls TLA-Per-View. Usually an early adopter of new technologies and distribution methods, TLA Online Marketing Manager Brian Sokel says his company watched the development of VoD and investigated the technology thoroughly in order to make sure security issues were appropriately dealt with before diving into the fray. “Really, so many people jumped to the technology when it first started coming out that I’m not sure anyone really knew how to handle it,” he says. “So we tried to sit back and watch things develop; see which direction we wanted to go with it. Ultimately, we felt now was a good time. There are still only a few retailers out there who also offer VoD, but it’s the future of online distribution.”
Launched the second week in December for Adult consumers (mainstream and independent non-Adult offerings will follow in 2005), TLA-Per-View hasn’t established a track record for revenue yet, but Sokel is convinced it will complement what he calls “an already very successful retail program.” More than 100 studios were on board with the project at launch, representing thousands of VoD titles that were incorporated into the TLA retail interface alongside their physical-product counterparts.
Sokel said the big question for producers these days isn’t whether they want to distribute their content via VoD, but how they want to do it. For some it makes sense to create their own online theaters; others find it more beneficial to associate with a company that already has a strong presence in the space. TLA works with both types. “We have some of the strongest links into the industry,” Sokel says. “Coupling hard copy retail with on-demand per-view service provides a really strong offer to the customer.”
Another VoD model that’s just beginning to emerge doesn’t require consumers to watch the purchased content on their computer monitors. Most downloadable VoD is device-dependent: It must be played on the machine to which it is downloaded. In November, DivX (www.divx.com) began offering DivX Video-on-Demand, a new product that allows users to download high-quality video content from the Net and burn it to a compact disc or digital video disc for television viewing on a DivX-certified DVD player. The company says the addition of the certified player adds an extra layer of security to VoD delivery, because the machines themselves require activation for VoD use. Red Light District (www.clubredlight.com) is one Adult company using the technology.
Mobile-Wireless
Venture capitalists are beginning to eye the wireless market as another promising investment avenue, which bodes well for the technology as a future delivery mechanism for all sorts of content. "I think he Internet's largest opportunities are in bringing new services, ones that we barely imagine, to billions of people around the world, wirelessly," John Doerr, one of Silicon Valley's most renowned venture capitalists and a partner at Kleiner Perkins Caufield & Byers, told the The Washington Post in November.
Although delivery of rudimentary video content to mobile devices has been possible in Europe, Asia, and Australia for some time, it’s still an elusive commodity in the United States. Third-generation wireless networks to support broadband mobile content distribution began to appear Stateside during the last quarter of 2004, and Adult entrepreneurs now are beginning to exhibit some genuine excitement about the technology’s potential. “Mostly when we talk about mobile porn, we mean mobile streaming porn, like mobile movies,” says Alexander Reus, managing director of Mobile Bridges (www.mobilebridges.com). “However, because many mobiles are not able to receive streaming media and data transfer is expensive, most of the end consumers are not able or willing to use these kind of services… yet. Within 24 months, we believe, this market will explode.”
How long it will take for American wireless services providers to warm up to the idea of transmitting Adult content is anybody’s guess, although European carriers seemed to realize the financial value of transmitting Adult entertainment early on. In January 2004, six of Europe’s largest mobile phone operators, along with government and child-welfare groups, agreed to a Code of Practice that allows an independent classification board to categorize content as suitable or unsuitable for the under-18 set. Among the terms of the code: Mobile customers must verify their ages with their carriers before they are allowed to access material classified “18,” minors are not allowed in unmonitored chat rooms, and parents can apply smut filters to their children’s phones.
While such an arrangement doesn’t answer all the questions U.S. carriers and content providers are likely to have about delivering Adult entertainment wirelessly (other concerns include viable payment mechanisms), Adult entrepreneurs are hoping the European capitalist mindset washes across the Atlantic – sooner rather than later. A few have dipped their toes in American waters with modest success, but for the most part, the delivery and payment mechanisms remain anything but seamless – and that doesn’t even begin to address consumers’ perceived reluctance to view Adult products on screens so small they make eyestrain a legitimate concern.
Some of that is changing. Manufacturers are enlarging screens on mobile devices as consumer demand for high-quality content increases. After-market companies are designing larger screens that will plug into cellular phones. Portable media centers, or PMCs – devices with screens as big as four inches diagonally – began to emerge in the fourth quarter of 2004, but were still finding their niche at this writing. Even auto manufacturers are getting into the act, as evidenced by companies like Ford, Daimler Chrysler, and General Motors partnering with electronic giants like Pioneer and Thomson to offer in-car viewing devices complete with hard drives, wireless LANs, and screens as big as seven inches in high-end sedans and sport-utility vehicles during the 2006 model year.
What may be more encouraging for Adult video producers is that there seems to be some weakening in the mobile carriers’ hard-line stance against pornography on their networks. Although universally tight-lipped about the reasons for their optimism, companies like Metro Interactive are forging ahead with plans to enter the mobile arena as soon as the infrastructure supports what they want to do. “Video on demand for mobile devices is the next logical step in our ‘big picture’ strategy,” reveals Metro Marketing Director Morales, who says his company already is engaged in research and development in the field.
VideoSecrets (www.videosecrets.com) President Greg Clayman says his company has kept an eye on mobile potential for some time and is working on a variety of products for early adopters of the delivery method, many of whom will be looking for Adult content. “We strive for the ultimate interactive experience, because that’s our core competency,” Clayman says, noting that despite his prediction in mid-2004 that mobile streaming was most likely three to five years in the future, he now thinks multimedia delivery to mobile devices may be possible in as few as six months. “We’re all set to go with it,” he says. “We’re just waiting for the technology to catch up.”
Set-Top Boxes
Coming to the forefront of the digital delivery realm most recently is a new variation on an old theme: the set-top box. Building on technologies pioneered by the cable and satellite television industries and combining those with Internet protocol magic, the new-generation of set-top boxes embody a variety of distribution promises. Spearheaded by the TV-Anytime Forum (www.tv-anytime.org) – a group of hardware and software manufacturers, broadcasters, and others involved in digital media delivery – the IP digital set-top box (IP-DSTB) movement seeks to provide end-users with more choices for their viewing pleasure, any time and almost anywhere, while giving content owners more outlets for their products.
Essentially, IP-DSTBs enable the sharing of data, voice, and video services between networked and mobile devices in the home using emerging software codecs that compress TV-quality video and audio enough to transmit it over broadband Internet connections. The platform plays a key role in IP-TV and VoD over broadband and may become a popular option for online gaming, Voice-over-IP, interactive video, and other services that can provide recurring revenue streams. The boxes provide regularly scheduled entertainment not available via standard broadcast television, cable, or satellite, expanding the lineup of viewable options into areas like “classic TV,” religious programming, and re-releases from movie studios’ archives, as well as innovative original programming. Both Microsoft and Intel support the initiative; in fact, a collaborative venture (www.digitaljoy.com) involving Microsoft, Intel, and Comcast represents one of three major players emerging in the mainstream field. The other two are Akimbo (www.akimbo.com) and DAVE Networks (www.dave.tv), both of which include Adult channels among their offerings. A fourth player, XTV (www.xtv.com), plans to cater strictly to the Adult market, at least initially.
The boxes connect to broadband Ethernet and to a television set and offer ports for other peripherals like cable or satellite receivers, VCRs, and DVD players. The manufacturing and broadcast industries are understandably wound up about them, due to a recent report from New York-based ABI Research (www.abiresearch.com) that predicts the market for cable and satellite STBs will grow at a rate of 14 percent over the next five years, while the market for IP-DSTBs – which can be deployed by any broadband Internet service provider as well as independent manufacturers – will grow more than four times as much during the same period.
Red Light District (www.clubredlight.com) is already moving toward distribution via IP-DSTB. At this writing, the company was “in negotiations with a couple” of IP-DSTB companies, including Akimbo, according to director of Internet operations Richard Naimy. Red Light expects to have its own channel built and available on IP-DSTB within three to six months, Naimy says, noting that the front-runners in the IP-DSTB arena are “very aggressive toward [pursuing] Adult.”
“It’s another revenue stream we can generate,” he comments. “We want to be one of the leaders in that area. We don’t want to be a follower.”
VideoSecrets’ Clayman says his company is exploring IP-DSTB, as well. Among other things, he envisions providing live, interactive chat channels that tie in with special events or scheduled Adult movie broadcasts. Says Clayman: “Imagine this in a hotel room or living room: ‘Want to participate in a live chat about what you’ve just watched? Go to this channel and interact now.’”
Even more ambitious, perhaps, is the plan put together by newcomer XTV. Brainchild of David Koenig, president of Holio.net (www.holio.net), XTV is scheduled to launch in January with more than 50 niched channels of Adult entertainment, an interactive component featuring “thousands of exclusive libraries, including Pornholio Interactive,” and a pay-per-view service offering “more than 30,000 Adult movies, including the latest studio releases, all-time favorites, and hard-to-find titles,” according to company literature. Scheduled for launch in Summer 2005 is XTV Live, which will allow users to talk to on-screen talent and control the action by calling a toll-free telephone number.
An on-screen channel guide similar to the ones with which cable TV and satellite viewers are familiar will let XTV subscribers select what they want to watch 24 hours a day, everyday. According to XTV Director of Marketing Fabian Citraro, “Holio is married to the product, so of course we’ll have the products Holio’s already famous for – amateur, teen, big boobs, cum shots, etc. – but we’ll also be adding channels from some of the biggest, most popular names in Adult that we’re partnering with.” Citraro declined to name the potential partners, as contracts were still in progress.
The entire XTV lineup will be delivered to the television from the Net via a proprietary XTV set-top box, projected to retail for $169 with a 30-day money-back guarantee. In addition, users will pay a $29.95-per-month subscription fee. The XTV system requires a broadband Ethernet connection with throughput speeds of at least 300K; upgrades planned for future versions of the box include a DVD burner. Of course, in the grand tradition of the Adult Web, XTV will offer Webmasters an incentive to help the company promote the service: “We’ll be paying Webmasters a generous per-signup fee, and we’ll put all the latest promotional tools at their disposal,” Citraro says.
