Playboy’s acquisition of Club Jenna, coupled with their recent purchase of adult.com and Cinema Play, positions the softcore giant to become a major hardcore player. Beginning with the purchase of four explicit DirecTV channels from Vivid in 2001 through these two more recent deals, Playboy’s embracing of explicit fare feels right. And I’m sure the Playboy stockholders are smiling today, knowing they own a piece of Jenna.
But is this just the beginning of consolidation in the adult business? The DVD market is, by all accounts, flat, and not just in the adult market. Reports from Video Store Magazine, Variety, Video Business and others show that the big studios and independents alike are struggling to match DVD sales of recent years, while embracing every new delivery system from video-on-demand to download-and-burn.
The adult studios are doing the same, but sometimes with diminishing results. Though reports of the industry’s revenues range from $8 billion to $15 billion, the number of releases keeps skyrocketing. This year alone, new releases and new-to-DVD tittles will likely exceed 12,000.
Retailers, hence, are faced with more stocking decisions than ever before, and while that represents a bonanza for the consumer, video companies are struggling to keep shelf space.
Further exasperating the situation is the increasing number of new production companies hitting the market with weekly product. And since many companies produce roughly the same type of titles, they have trouble distinguishing themselves among consumers.
When supply outlasts demand, something has to give. Playboy’s acquisition was a branding and content opportunity: Associate yourself with the most popular name in adult and you move to the top of the heap. For Playboy’s broadcast division, adding Jenna, her content and the wildly successful Club Jenna sites makes perfectly good business sense.
Other such acquisitions will occur throughout the industry, and they, too, will be out of one company’s necessity and another’s opportunity. More deals like Metro’s recent acquisition of Video Team and Hustler buying VCA a few years back are on the horizon. Those companies are vertically integrated right down to the retail level (Metro with 86 retail locations, Hustler with nine super stores), both having strong DVD and video-on-demand presence and Hustler with its fledgling broadcast channel. You can all but feel several companies with large libraries looking to sell.
Similarly, rumors persist that a few well-established video lines want to get out of distribution altogether. They are looking for distribution deals, that, if not as lucrative as the one Vivid has with LFP, are at least as popular as the successful models created by Evil Angel, Paladin, Pure Play, Exquisite Multimedia, or a stand alone deal such as the one Ninn Worx made with Red Light District. Overhead kills companies that struggle with new release numbers of 1,200 pieces or less, as some producers report.
Consolidation could be a good thing. Certainly it won’t affect the consumer, who will still have a plethora of choices. Nor does it affect the retailer, who still gets to cherry pick the best titles to stock. A smart retailer will always take the newest, fast-moving Evil Angel, Jules Jordan or Wicked title rather than lesser derivative product that won’t rent or sell nearly as well from companies that barely register a blip in the industry.
Content is king, and adult content will always make money for a smart producer who spreads quality across all delivery systems. Playboy knows that, grabbing Jenna, husband Jay Grdina, adult.com and its successful businesses and playing at the top of the explicit market. But it’s a crowded explicit market, and some of the producers who end up the most successful may not be the ones who sell the most pieces to IVD and General Video, but those who figure out the best way to get someone better to do the distribution while they simply create.
