For at least three years, U.S. adult entertainment entrepreneurs have eagerly anticipated the delivery of their product to mobile phones and other handheld devices. They’re still eager, and still anticipating. Although adult content has been available wirelessly in Europe, Asia, and Australia since the dawn of the 21st Century, Americans still are waiting for mobile smut to hit the U.S. airwaves in any sort of reasonable form or volume. Why? After all, isn’t the U.S. the country credited with the creation and development of the Internet? Hasn’t adult content on the Net fueled a great deal of its expansion? So what’s holding back wireless carriers from making the grand leap that enabled their wired-line brethren to finance the sorts of infrastructure upgrades that moved the fixed-line Internet from the status of "toy" to "gotta-have" fundamental?
The answers are complex, involving not only the fact that adult content sneaked onto the Net before anyone realized it, but also an intricate dance between consumers, producers, government, cellular carriers, and moral crusaders. Three primary factors have hampered the availability of adult content on the American mobile scene – culture, money, and technology – and they're all symbiotically and inextricably intertwined. Without the money that always seems to be produced by adult endeavors, carriers can't upgrade their systems to handle the spiffy new 3G technologies savvy adult consumers demand, but a sexually repressive American culture keeps the carriers leery of allowing enough adult content on their systems to generate the money they need.
Technology Costs
One of the primary reasons the U.S. has lagged behind other parts of the world in delivering mobile content of any kind is good old American capitalism. Unlike other parts of the world where cellular technology operates on a single, standardized platform (called "global system for mobile communication," or GSM, in most of Europe; code division multiple access, or CDMA, in Korea and South America), the U.S. cellular infrastructure is fragmented into several carrier-specific protocols. Much of that is because each U.S. cellco wanted to position itself as the biggest and best in its field: largest service area, best signal, most services, and so forth.
"If you’re not our customer," each seemed to be saying, "you can kiss goodbye any wild notion you may harbor that you’ll be able to communicate easily with other cellular users." As the U.S. cellular market heated up and cellular users began to shop around for better deals with carriers who gradually made incursions into other carriers’ geographical space, the cellcos began to see the wisdom (and the profit potential) of making their systems interoperable.
Unfortunately, by then they had invested such large amounts of money into one of the four primary platforms in the U.S. that it was no longer a simple matter of shaking hands and agreeing to play nicely together. Instead, they had not only created issues for themselves, but also for their customers, who had phones that operated very well on the network for which they were designed but often didn’t operate at all on the others.
"Europe’s always had the pan-European standards body [part of the Groupe Special Mobile of the Conference Europeanne des Posts et Telecommunications, organized in 1982]," notes Dr. Windsor Holden, a senior analyst with Juniper Communications. "In the U.S., commercial interests ruled. There was not even any commercial texting service realistically [in the U.S.] until late 2002." Now, he says, the cellcos may be ruing their initial power plays and rivalry, because while the rest of the world embraces the sorts of third-generation cellular services broadband wireless can provide, the U.S. is struggling to upgrade its infrastructure and catch up just to stay in the game.
U.S. cellcos had another issue to deal with as well. "In North America, we all became very [wired-line] broadband-centric, whereas in other parts of the world they went directly from dial-up to wireless broadband because the infrastructure was already in place," says L.R. Clinton Fayling, president of Brickhouse Mobile, a self-styled "mobile content agency" that reformats existing assets for the mobile space and then distributes them for its clients.
Most of the reason U.S. carriers didn’t jump on the wireless broadband bandwagon sooner was financial, he admits, but much of the reason for the financial burden was the sheer size of the country in which they provide services. "Land mass issues played a big part," he says. "The U.S. encompasses about 3.7 million square miles," and each U.S. cellco tried to cover the whole thing with its own specific protocol in an effort to emerge as the dominant player and force the others to capitulate to its model. Each of Europe’s cellcos, on the other hand, operated on a unified standard and had much less territory to cover, so their financial investment was much smaller.
In recent years, CDMA has emerged as the dominant mobile platform in the U.S. and most consumers have cellular phones that can engage in at least remedial mobile communications using that protocol. U.S. networks still haven’t quite caught up with the broadband capabilities available in Europe—but they will soon. Wireless broadband is expected to be available fairly widely in the U.S. starting in 2006, thanks to infrastructure upgrades in which the carriers have cooperated rather uncharacteristically. Now, however, they face an even bigger challenge: How do they pay for those upgrades in the face of a fiercely competitive cellular price war that has lowered consumer bills and raised program minutes monumentally during the past two years in a market that is rapidly approaching saturation?
The answer, according to the experts, is to offer more content and services for which consumers are willing to pay premium fees. The content that has proven to be the most lucrative in older, more mature mobile markets? You guessed it: adult.
Content pays
As far back as 2002, a report commissioned by business-to-business consultancy Visiongain focused on wireless adult entertainment and delivered some surprising findings. Among them: A remarkable 77 percent of Japanese i-mode users ages 20 to 40 had elected to receive email from adult websites on their mobile devices. The same report noted that adult entertainment was the content most commonly mentioned by consumers worldwide as something for which they would be willing to pay. That didn’t surprise Brickhouse president Fayling. "When the Internet was young, everything was free, and everyone still expects everything to be free," he says. "In the wireless space, on the other hand, everyone expects to pay."
That’s a good thing for adult content owners who’ve become disgusted with the glut of free smut on the Web, especially in light of a February 2005 report from Juniper Research. In the white paper, entitled "Mobile to Adult: Personal Services," senior analyst Holden predicts that although mobile content delivery will not be the adult sector’s killer app, "the total value of mobile adult content will more than triple [worldwide over 2004 levels] … to nearly $2.1 billion by 2009." Strategy Analytics predicts the figure will be closer to $5 billion, according to Forbes.
That such august mainstream financial publications as the Wall Street Journal and Forbes have taken notice of porn’s mobile potential certainly seems to bode well for the industry. In a June article entitled "Miniature Porn," Forbes writer Erika Brown quoted Vivid co-founder Steve Hirsch’s prognostication that "cell porn could provide one-third of [Vivid’s] total revenue in five years." Hirsch’s company already provides mobile content to users in 20 countries, including, on a limited basis, the U.S.
"We see it as a huge, huge revenue stream for us," he told Forbes, despite the fact that Vivid’s initial foray into the U.S. mobile space, a game called Erotrix on AT&T Wireless, was scuttled during AT&T’s merger with Cingular earlier this year. The game was devoid of nudity and sexually explicit content, but Cingular still balked, as most U.S. carriers seem to do when the content comes from a company or personality already well known in the adult space. (Jenna Jameson’s "moan tones" have suffered "carrier shock" from her celebrity too.) Meanwhile, carriers seem to have no problem offering the sounds of bodily functions or explicit rap lyrics as ring tones, and Maxim magazine reportedly is doing quite well with its Hometown Hotties program that delivers a slide show of a different scantily clad babe to users’ phones daily.
Fayling says his company has achieved a modicum of success stateside with a handful of wireless carriers. "It’s glamour content only," he says. "We distribute it under a generic name in generic categories, but it’s all provided by recognized [adult industry] players. It’s been received well to date." But Fayling’s certain it would not have been had Brickhouse labeled the content with even so much as a recognized erotic star’s name.
There’s a reason for that, according to Holden: "[The carriers] want the money, but then do they want the seedy association with adult content? I don’t think they’re ready for that yet in the States." He thinks it’s only a matter of time, however, before U.S. cellcos develop the same kinds of regulatory systems established voluntarily by the major European operators, all of whom signed a widely publicized Code of Practice in January 2004. Among other things, the code requires cellcos to verify the age of consumers before allowing them access to adult content on portable devices.
"Whichever medium you go to, adult content will appear," Holden says. "If the services are available, people are going to buy them. What’s going to be interesting is to watch how adult services develop [in the U.S.] during the next three or four years. If they parallel the more sophisticated markets, American companies can expect to increase their revenues quite significantly. One European carrier recently said it has customers spending 100 pounds [almost $200 U.S.] on adult text-based services."
Harvey Kaplan, director of mobile operations for AEBN subsidiary Xobile, doesn’t find that difficult to believe. His company "allows content producers to realize another revenue stream with no extra work" by formatting and delivering adult content for mobile devices. Currently, Xobile utilizes wireless access protocol for content delivery, billing consumers’ credit cards via a secure, scaled-down-for-mobile version of a standard Web-based sign-up form. That way, content producers can make at least a bit of money in the mobile space by bypassing cellular carriers who aren’t yet ready to commit.
Xobile’s success rate is impressive: According to Kaplan, the company’s conversions stand at 1:11, representing 5,000 to 6,000 new customers per month who spend an average of $20 each. "Food, shelter, clothing, sex … people will always pay for those," Kaplan says. "Adults 22 to 35 spend the most money on adult. They always have. We didn’t suddenly start sending this stuff to cell phones; cell phones suddenly started being able to access the content."
As Kaplan sees it, things are poised to get much better in the near future, as the carriers themselves cave to the demand for adult content or mobile networked virtual operators – companies that buy and resell chunks of bandwidth from the big cellcos – become more willing to fade the heat. "The mobile marketplace now is what the Web market looked like in 1998 but compounded in growth rate. In ’98, the growth rate for the Web was 29 percent [annually]; in 2005, the mobile space stands to grow at [an annual] rate of 45 percent. It’s happening right now, twice as fast as you think."
Fayling agrees. "It was not a surprise that adult content would drive the whole content space," he says. "U.S. carriers realize they’re going to have to address the adult content issue." The problem, he says, is that "no one wants to jump first. The cellcos worry about being labeled by the [social] conservatives." Right now, he said, U.S. carriers are taking a close look at what’s working in Europe – and what’s selling best there is hardcore content. In the U.S., movement toward delivering hardcore content to mobile devices will be gradual, Fayling avers, for a variety of reasons, but it will come.
Cultures Clash
It will come, that is, if stateside adult entrepreneurs don’t try to rush things. "The carriers always scream they don’t have enough money," Holden says, but they’re not yet ready to push the cultural envelope in a society that has seen the Federal Communications Commission slapping other media wrists with fines amounting to hundreds of thousands of dollars for things as innocuous as "a few seconds of a naked nipple" broadcast during a SuperBowl halftime performance. (In Europe, Holden dutifully notes, the debacle surrounding Janet Jackson’s bare breast was reported with a great deal of humor. Of course, he also notes, England’s The Register newspaper engages in ribald humor and routinely publishes photos U.S. readers would consider scandalous if they encountered them in their own mainstream press.)
In the U.S., "the FCC’s conservative stance gets in the way of adult content on carrier portals," Holden says. One of the keys to moving adult forward on American airwaves will be "operators convincing the FCC that under-18s are not going to be able to access it."
The approach, via the carrriers’ Code of Practice, has worked well in Europe for the most part. There, consumers must verify their ages with their carriers in writing – usually at the time service is initiated – before the carriers will "unlock" their phones so they can receive anything rated by the carriers and their regulatory bodies as appropriate only for adults. Cable companies have accomplished a similar goal successfully in the U.S., and according to Fayling, their model is one U.S. cellcos are now examining closely to see how it might be adapted.
"[U.S. cellcos] are going to have to do a better job than [fixed-line providers] did in the Internet space," Fayling says. "Right now the industry is leaning toward carrier controls on content and age verification." The problem with that, he notes, is that "each market [and] carrier has a different standard," and none of them wants to be the one whose logo is on the first cell phone to mistakenly display adults-only content to the wrong person.
"In [the U.S.], it’s going to take some time," Fayling continues. "I can’t emphasize too much that all of us in [the adult industry] need to avoid being rogues and renegades. We need to be patient and work at the carriers’ speed. If we try to push them too hard or circumvent them in any way, we’re just going to mess things up for all of us. As my grandfather used to say, ‘You gotta measure twice and cut once.’ The cable industry started out slowly, too, and look where it is today."
Kaplan doesn’t necessarily agree that the industry needs to refrain from working around the cellcos where that opportunity exists. Like many young guns in the adult space, he’s adamant that the responsibility for shielding children and other unwilling viewers from salacious material rests squarely with parents and the adults who choose to view the content. He’s equally adamant, however, that there’s lots of money to be made delivering adult material to mobile devices, and he thinks the adult industry needs to take an active role in making that possible—sooner rather than later. "Help grow the category," he urges, "and everybody will get rich."
