As fall gets closer and the days gets shorter, minds turn to the cold winter ahead and the end of the summer slowdown. While you were off catching rays with most of the porn-watching public, we here at Online were hunkered down in a meeting room analyzing and debating the current trends in the adult industry. The trends that address the changing landscape of today's adult digital media business. From where we sit, things are looking up.
Revenuers: Alt-Billing Models Come on Strong
As the adult Web matures, making money not only involves building the best mousetrap with the tastiest cheese, but also finding new ways to collect payment from the hungry mice.
Mice can be skittish creatures, and with tales of identity theft and privacy invasion making bold headlines in the U.S., they’re loath to hand their credit card or checking account details over to just any old pied piper. Some also are afraid Mrs. Mouse will discover what they’ve been doing in their spare time. Those are two of the reasons prepaid access cards are seeing a surge in popularity, according to PPPcard President and Chief Executive Officer Greg Moss. “Nineteen of 20 surfers say their biggest concerns are privacy and identity theft,” he says. Because traditional billing methods are essential to financial well-being—although they are seen by an increasing number of surfers as fraught with peril—“alternative billing is paramount to the future of this industry. It’s also important to look to alternative solutions to drive traffic.”
According to Moss, PPPcard (available at selected retail locations) not only alleviates surfers’ fears and provides an added layer of privacy, but also gives webmasters a new traffic source. All virtual merchants who accept PPPcard as payment are listed by genre on the product’s website at PPPcard.net. The company’s aggressive marketing has proved to be a welcome traffic generator for adult mainstays like Badpuppy, MaskTV, Hustler, ClubJenna, and Vivid, Moss says, because “it’s not just about retention anymore; it’s about conversion.”
Conversion is an especially vexing issue with non-U.S. traffic, according to Marc Jarrett, business development manager for Gibraltar-based Password-by-Phone.com. PbP offers an alt-billing solution designed to help webmasters in any country convert international surfers. When dialers disappeared from the Web as a result of the shady business practices associated with some of them, it left a hole in the billing landscape through which many potential European customers fell.
“PbP utilizes the same underlying billing mechanism as dialers, but without the associated headaches—like downloads, excessive billing, and the endless warnings about downloading third-party software,” Jarrett says. “Those are real turn-offs for the turned-on surfer.”
Like prepaid cards, PbP allows surfers to maintain their anonymity and dispense with credit cards by charging their adult-content fixes to their cellular or fixed-line phone bills. It’s a tried-and-true methodology with which many non-Americans are familiar and comfortable. “The majority of the world’s population has no credit card,” Jarrett says. “For example, in Germany, which is Europe’s largest market, credit card penetration is still relatively low. However, practically everyone has access to a landline or cell.”
In addition, PbP “geo-targets” traffic, presenting every client site’s sales message to every surfer in his or her own native language (36 at last count) and currency. According to Jarrett, geo-targeting is essential to success in the world’s first truly global medium. “Given the open architecture of the Web, webmasters should sell to surfers in their own language, especially when it comes to paying,” he says. “Money talks in every language.”
- Kathee Brewer
Broadcast Distribution: The Medium is the Message
When people talk about “broadcast entertainment,” most often they refer to the traditional media of television and radio. In the modern, connected world, however, the notion that broadcast media is a discrete zone unto itself rapidly is becoming outdated.
Of course, Internet entrepreneurs understand that already. The demigods of the adult digital world leap upon technological advances with more zeal than porn stars jump each other’s bones. It’s been only recently, however, that some of them have discovered the benefits of distribution channels most of them skipped over during their rush into the new millennium.
Statistics indicate that sales of erotic materials viewed on cable and satellite television contribute $2.5 billion annually to the world’s economy. Thirty-nine million American homes are capable of receiving pay-per-view adult content. In addition, according to the New York Times, 40 percent of American hotels offer in-room, pay-per-view erotic entertainment, and at least 50 percent of guests at major hotel chains take advantage of that.
Those figures haven’t gone unnoticed by adult brands that saw their genesis online, according to Marc Bruder, founder of Cable Entertainment Distribution Inc. Twenty-two-year-old CED, which Bruder calls “an international broadcast rights manager,” was one of the first companies to represent adult entertainment products to buyers in broadcast media. Today, the company’s customers include worldwide outlets like Time Warner, DIRECTV, Comcast, Sky Latin America, Globosat, and iN Demand, and the company represents about 80 percent of the adult industry—including Internet powerhouses like Adult Entertainment Broadcast Network, Matrix Content, Danni Ashe, Homegrown Video, and LGI Digital. CED has more than 50,000 actively trading titles in its catalog; it released 320 new titles to broadcast venues in March alone, and many of the new titles originated in the virtual realm.
Broadcast can be a powerful revenue generator, especially when cross-promoted with a content owner’s other holdings, Bruder says. “iN Demand, for example, can attract 40-80 million viewers [for a title],” he reveals. “Imagine that kind of traffic on your website!”
Broadband Internet is tearing down barriers to content distribution faster than a speeding gigabyte, too. The “digital home” initiative that’s been hyped by Microsoft, Sony, Apple, and other computer giants for a couple of years finally is on the horizon. Home networks that tie computers, televisions, stereos, DVD players, set-top boxes, and other electronic gadgets together into one whole-house, multi-purpose, mega-entertainment system are reality now in very basic ways, and consumers are adopting the concept in record numbers.
Set-top Internet protocol television boxes like those offered by Global Digital Broadcast and ITVN are among the ways consumers are predicted to be able to combine their media into a single source. Motorola, Scientific-Atlanta, and other manufacturers envision IPTV boxes that will let consumers download shows to their portable devices and program their digital video recorders using their cell phones (even while they’re away from home). Such devices will allow users to find the precise content they want, whether it’s available from broadcast providers, Internet-based services, or on physical media.
The near future, Bruder says, will belong to high-definition video-on-demand access any way and anywhere consumers want to receive their entertainment. Content will be transferable between devices easily—bi-directionally between cellular phones and wall-size home entertainment centers, for example. The technology already works in parts of Asia, and it will be de rigueur in the U.S. within three to five years; maybe sooner.
- Kathee Brewer
Hi Def: Putting the Kibosh on Standard Video
Technology has been and always will remain the rabbit for adult webmasters, who constantly find themselves in a dog race to be the first to capitalize on the next big thing, the ultimate traffic generator. With such advancements being made in the quality of video downloads, it seems only reasonable—if not expected—that the majority of video-on-demand sites would leap at the opportunity to provide their members and affiliates with the best, top-shelf content.
High-definition video has become the new brass ring for adult webmasters, and many sites not only offer a substantial amount of content in high definition, but some also design their entire sites around hi-def material. Programs Python and Mayor’s Money only offer HD video and claim to have better conversion rates than other sites that offer standard DVD-quality downloads or both standard and HD. Sites like HighDefBlowjobs.com and HighDefCumSwap.com (Python) provide up-close, crystal-clear detail of hot and messy action, while at BrookSkye.com (Mayor’s Money) viewers can see every mole, every hair, and even the bubbles in the, well, you get the picture.
“High definition was the next logical step in the evolution of digital media,” says Brent Stewart, director of new business development at Python/DollarMachine, an affiliate marketing program. “The potential in HD lies not in its conversion ratios—which are outstanding—but in its quality. The color and resolution of HD makes standard definition look like a pale imitation. Once you get used to looking at HD content, it is almost impossible to go back to SD and enjoy it.
“We watch it on our entertainment channels, we watch our sports channels in HD, and even our news is being broadcast in HD,” he continues. “Why wouldn’t we want our porn in HD, too?”
Mainstream media in HD is becoming commonplace, but HD porn may have some drawbacks for users who want content to look as real as possible. According to Zap2It News, all that clarity means that along with that so-lifelike-you-can-touch-it display, viewers could get a helping of a bad case of acne or a “questionable” flaw—which could eliminate the fantasy aspect of porn.
The overall benefits of HD (and the returns for webmasters who use it) far outweigh any physical shortcomings of the models, says Stewart. “The only possible ‘con’ I see for HD Web distribution is that if a consumer is using a computer that is more than three years old—an arbitrary number, of course—they won’t be able to view the content at its fullest potential,” he says. “The percentages of people that have this issue are statistically insignificant based on the stats for the Python.com HD sites. However, there is one other con: When someone is ugly in hi-def, they really are HD-UGLY.”
Is it worth it to see the pores on a sexy vixen on your computer screen?
“It is absolutely worth it” says Stewart. “Computer costs are down. Broadband usage is over 200 million worldwide and is expected to double in the next four years. Bandwidth prices have stabilized and the increased cost of hosting high-definition video content is not significant when compared to the difference in quality.”
Plus, just because content is shot in HD does not necessarily mean that it must be distributed in the same format, Stewart asserts. HD cameras can shoot up to three times the resolution of standard-video cameras, but the content can be edited or encoded in either standard or HD, he says. Even then, Stewart adds, the standard format version will “still have higher-quality than you would get from an SD video camera.”
Adjusting to new methods and technical conditions during production—such as lighting and shutter speed—also may be an obstacle for adult webmasters who steadfastly cling to standard-quality content, Stewart says, but webmasters pass through that adjustment phase easily.
“HDV is not a very forgiving format to shoot in,” he admits. “However, once you are used to shooting in HDV these aspects are planned for and are no longer an issue.”
- Natalie Martin
Beyond Pay Sites: the Road to Successful Diversification
Diversify or stick to what you know? That’s the eternal business question.
For a growing list of companies, it hasn’t been a hard one to answer: Diversify, but don’t stray too far from what you already do well.
“Vertical markets is one thing—it made sense for us to have DVDs, but you won’t see me opening a hamburger franchise,” says Lightspeed Media owner Steve Lightspeed, who branched his pay site operation out to a DVD line and a chat board. “I’ve told this to friends who were trying to have a little piece of lots of different pies. It becomes ’di-worse-ification’: Instead of doing one thing well, you end up doing lots of things poorly.”
Looking at companies that have been able to make waves outside of their natural environment, it’s apparent they have some things in common. They’ve reached the upper echelon in their primary business, and they haven’t strayed too far from their core competencies. In addition to Lightspeed, look at TopBucks with PlugInFeeds; Pink Visual and its Video-on-Demand sites; Platinum Bucks with Adult Rental, Platinum Feeds and some tech-based mainstream ventures; Naughty America with DVD, VoD, mobile, and Naughty America: The Game, and Adult.com with GFY, Spice Studios, and the Webmaster Access shows. These companies certainly didn’t need to take a risk on any new ventures. They just as well could have stuck to pay sites.
“Most of the things we’ve branched off to have been without a real need, but rather due to an opportunity to boost our company’s income,” says Naughty America’s Mark (aka Ace). “The videogame was just an opportunity that we saw. Videogames and the culture in the videogame industry are evolving. We saw that as an opportunity to offer something other than adult entertainment. It was a fresh idea and something we thought we would do well at.”
Platinum Bucks has followed a similar formula, jumping at both the obvious vertical markets and taking chances on trends. “We diversify into other areas when we see synergies in our business with other businesses. For example, shooting our own content for years led us to create plug-in feeds for pay sites,” says the company’s owner, Dave K. “We entered the Video-on-Demand area with Adult Rental because we saw a trend not only in adult, but in mainstream also toward VoD. Trends and synergies are what made us diversify outside of the pay-site arena.”
Another commonality between these companies is that none of their principals uses his or her full or real names anymore. Success has its privileges.
- MJ McMahon
DRM: End of the Line?
Digital Rights Management used to be one of those adult-industry buzzwords. Today, the content protection and management system seems to have dropped off the map, but is it dead?
“In adult, DRM seems to have slowed down because of bad press, poor solutions, and cumbersome implementation methods,” says Oystein Wright, chief executive officer of Mansion Productions and a partner in the now-defunct Playa DRM. “Webmasters just don’t want to deal with it.”
DRM providers now seem to be re-envisioning the technology for feeds and Flash-based content, and are focusing on mainstream, where—in addition to online video—DRM is being used for music.
“Demise? Not even close,” says Christopher Levy, chief executive officer for BuyDRM. “Every major [mainstream] program, site, or movie portal is using it. It’s the sole technology driving every major content play on the Web.” Admittedly, BuyDRM operates mostly in the mainstream realm, but Levy says the company has seen an increasing number of adult-industry clients lately. Of course, that begs the question: Who is their competition? Other than CCBill’s DRMNetworks, no one we talked to for this piece could name a DRM company serving the adult industry.
For DRM companies trying to make it solely on adult-industry revenues, the picture doesn’t seem quite as rosy. “With the exception of DRMNetworks, which has a model set up for pay sites...DRM companies have realized that you need a lot of clients to make real money,” says Jason Tucker, president of Falcon Enterprises and a former partner in Playa DRM. “Most DRM companies in our business realized that it wasn’t going to make sense from a financial point of view and closed shop. The result is less people are using it. They just figured they didn’t need to seek out a new provider and went back to basics.”
There also have been rumblings from pay-site owners that DRM-ed content doesn’t convert or retain as well as unprotected content. Jeppe, owner of AdultReviews.net (which reviews adult websites) says although he wouldn’t pinpoint DRM as the only reason, sites without DRM-ed content consistently perform better.
“I’m sure lots of people choose not to join a DRM site if there is a similar non-DRM site available, especially if they read review sites and know what DRM does,” Jeppe says. “This goes especially for the experienced surfers. I don’t think it’s because they are looking to share the videos they download, but simply because DRM is too much of a hassle and doesn’t allow surfers to view videos as they please—at least not nearly as easily as non-DRM video.”
Clearly, DRM has faded to the background in the adult realm for numerous reasons. Among those was the in-your-face nature of the technology in its early days. For instance, although it was a proponent of the technology, SmashBucks elected to drop DRM in early 2005 when its Microsoft client began prompting surfers to enter passwords each time they wanted to view a movie. The company is again using DRM now that cleaner, less-intrusive solutions are available, but problems like these have left the technology in a quieter, adaptation phase.
“DRM has transitioned. I see that it is still used, but more silently than before,” Wright said. “Companies use it, but let it go unnoticed by the end user.”
If the adage “adapt or die” is true, then DRM has slowly followed course—but don’t expect there to be a flat line just yet.
- MJ McMahon
Going Mainstream: Thinking Outside the Box
For many adult webmasters, mainstream attention eludes them. A small percentage, however, have made successful bids for mainstream coverage, which leads some to surmise that perhaps the attitude toward adult content might be relaxing.
“I think to a certain degree the media is open to discussing adult websites,” offers WantedList.com founder Anh Tran, who has seen his domain recently promoted on websites for such adult-friendly mainstream publications as Maxim and Stuff. “The media has finally gone away from saying that, although the adult business is really big, they don’t know anything about it because it’s closed off, to more stories on what it is the adult industry is doing to differentiate itself and become a market leader in certain niches.”
Certainly, the success of adult-themed movies (Boogie Nights, The People vs. Larry Flynt), TV shows (Showtime’s The Family Business, HBO’s Pornucopia), and crossover stars like Traci Lords and Jenna Jameson has something to do with the media’s sudden interest in covering adult topics. But since Hollywood is loath to invest in anything that doesn’t have a shot at making money, the green-lighting of those projects suggests a certain relaxing of cultural values and morals. “It’s more culturally OK to use porn as a medium for jest or even just sexiness,” explains Tran.
A possible reason for the increased attention to adult could be product packaging. “I think the mainstream hasn’t really changed in their openness to promoting adult brands,” says Naughty America Sales Manager Mark. “I think [adult brands] are changing to more of an openness to mainstream.”
To that end, websites like Naughty America and SugarDVD have “softened” their content. “We try to ease into the minds of the masses,” explains SugarDVD’s Jax. “People want adult products, but they want to be discreet about it. Our message isn’t ‘Hey, look at my pussy!’ We named our service SugarDVD as a subtle way to signify our erotic sweetness. We then took this brand into the mainstream by purchasing any mainstream ads we were allowed to. This strategy repeatedly worked for us.”
Says Tran, “The mainstream business looks at how far they can push that white line without going over it and getting fined by the FCC. We kind of take the opposite approach. We look to see how far we can push sex within our medium, but edit it down a little bit so that it’s acceptable to [mainstream outlets]. That’s kind of the way we look at branding ourselves to the mainstream industry—with a bit of humor and with a bit of grace.”
All agree that offering a product that is non-offensive but still has hardcore sex will get adult webmasters exposure in the mainstream—as long as the venue promoting the product doesn’t suffer any losses as a result. “The mainstream is more open, and will continue to be more open to promoting adult-branded websites—as long as they are able to do it in a way that feeds their audience information and drives people to the publication, TV show, etc. without alienating both their audience and their advertisers,” says adult publicist Brian Gross, who represents not only Wanted List, but also BurningAngel.com and Booble.com. “If they can fit the content into those parameters, they will try and do so.”
- Ken Knox
Gay Content: Microniche Movement
If you’re looking for a hot new trend in the adult Internet, look to the gay webmasters. They’re cleaning up with sites devoted to microniches, which combine fetishes within fetishes to appeal to the most specific of desires.
“Consumers have gotten more sophisticated in what they want, and the days of the one-site-fits-all mega-site approach are gone,” says CJ, co-owner of affiliate program ZBuckZ.com. ZBuckZ is home to Boykkake.com, a pay site featuring Asian models in bukkake scenes.
From hairy bears that play in dungeons (DungeonBears.com) to the seduction of sleeping straight guys (SleepingMen.com), the potential to find a particular fetish is limitless—as long as you’re offering something new. “I actually think these kinds of sites have been around for a long time,” offers ZBuckZ’s Danny Z. “Now more than ever, webmasters are realizing that in order to make a buck, they have to not only give surfers what they want, but also something really unique that they can’t find elsewhere.”
That includes unique, amateur-style content that doesn’t mimic the slickly produced porn of the majors. “[We] find that people really appreciate finding something that’s more of a mom-and-pop operation—or, in our case, a pop-and-pop operation,” says Dungeon Bears’ Steve.
Having knowledge of a chosen microniche is essential to a site’s success, as is a wealth of updatable content. “Even if the customer is there just on a whim to explore the microniche, you still want to have enough content to keep them busy for more than a few visits,” says Steve, who adds that “sites with a well-thought-out structure of up-sells to other microniche sites have done particularly well.
“In the pre-Internet days you would have to go into a video store and be limited to what was on the shelf,” Squirt adds. “Now, our variety is only limited to what someone takes the time to shoot and make available online. The new gay microniche trend caters to the online consumer who wants exactly what they want now.”
- Ken Knox
Product Placement: Web of Interactivity
If you’ve ever seen an adult star using a sex toy in a scene and thought, “Man, I wish I knew where I could buy that,” you just might want to cruise on over to your favorite adult website, because you may be in luck. The adult Internet industry always has been revered for exploiting technological advances. With interactivity and product placement becoming increasingly commonplace on adult sites, adult webmasters again are shining a spotlight on the industry’s knack for utilizing new tools.
While websites like Video Secrets are hooking up with adult product companies like OneUp Innovations (whose Liberator sex cushions often are prominently featured in Video Secrets’ Flirt4Free.com live shows) to offer product placement opportunities, others—like the makers of Virtually Jenna (a game that allows users to manipulate a virtual Jenna Jameson into various sexual acts including masturbation with virtual toys)—give users the chance to “sample” products before purchasing. “Any time you can try a product virtually, that’s pretty cool,” says Brad Abram, president of xStream3D Multimedia, developer of the game. “The whole idea with the toys is that we can show you how to have fun with them in 3D, sort of as a tutorial. It’s unheard of in the mainstream business.”
Abram says that such an opportunity may be more beneficial to manufacturers whose products are featured on adult sites, but acknowledges that building relationships with other companies can lead to good things for everyone. “We figure we’ll probably get more reviews and more people trying out our software from links and banners that are featured on their sites,” he clarifies.
“I think you’re going to see more of [this] as companies collaborate together,” offers Video Secrets’ Greg Clayman. “I see it happening more and more with companies—whether online or offline—that are not competitors, but that complement each other.”
Take Pink TV, the 24-hour adult television network whose show “The Dungeon” features an underground sexual playroom that is fully stocked with products from fetish novelty company JT’s Stockroom. As Pink TV models frolic in the room, viewers are given an option to click on a link to a shopping cart where they can purchase an assortment of Stockroom products. “The convergence of Internet and television makes [product placement and interactivity] a major thing in adult,” says Pink TV President Jan Verleur, who acknowledges the prevalence of product placement but cautions against its gratuitous use. “I don’t think that just by mentioning ‘We use this dildo’ product placement will be successful. I think it’s when you merge the e-commerce component with the product that you’ll have success.”
Verleur, who says product placement and interactivity will account for 15 to 25 percent of Pink TV’s total gross revenue, says it’s important to choose companies whose products have potential. “I get a percentage of the tangibles sold through our system, so by default I only select companies that I know are going to sell,” he explains.
Because of the immediacy and convenience of purchasing products online, product placement works best on adult sites, and that interactivity is yet another example of how adult webmasters are one step ahead of mainstream companies in exploiting retail and revenue trends. “I see it as another evolution of e-commerce,” offers Clayman. “Adult almost always tends to lead the way with new and creative ideas, and I think this just shows forward thinking of companies in the e-commerce marketplace.”
- Ken Knox
Networking: The X Connection
The Internet always has provided people with easy, convenient ways to make personal and business connections. From BBS boards in the early 1990s to the message boards and Yahoo! groups that followed, to popular community sites like MySpace, people have had no shortage of forums. One of the latest trends is adult-specific resource and networking sites.
Started in 1999 as the brainchild of Rick Muenyong, YNOT.com is perhaps the oldest site of its kind, offering message boards, industry directories, news, blogs, and other services. Says YNOT President Connor Young, “We have people who just want information to keep their finger on the pulse of the industry and monitor trends. We have people who just want to get into the business and don’t know where to start. It gives them a means to research the information they need and connect with people who know the information they want to receive.”
Sites like xPeeps.com and qPeeps.com were created when MySpace did a massive sweep of adult-oriented user profiles, and they give adult industry players a place to mingle. “I think the important thing about xPeeps and qPeeps is that they are for adults, so it’s definitely an adults-only space that provides a chance to talk about topics and issues and share photos that are not MySpace-friendly,” says AEBN Webmistress Suzanne Knudsen.
Of course, many adult players still are finding ways to do business on MySpace. “As long as you follow the rules, it’s easy to stay on there,” says OC3 Networks’ Ycaza Thrush, who says he’s made many personal and business contacts via MySpace, Friendster, hi5, and dating sites like AdultFriendFinder. “[Since] my whole business is on the Web, it’s nice to have your personal life on the Web, too. All my business is based upon friendly referrals, so it’s just another way for me to meet my clients.”
Thrush says he appreciates the casualness of networking sites as opposed to the more business-oriented webmaster boards. “When it’s under the guise of meeting as friends, for me to say, ‘So, what are you guys doing for your hosting?’ is a lot easier.”
Knudsen concurs, adding that ultimately, networking sites like xPeeps and MySpace offer a more personal experience. “I think sometimes when you’re just clicking away on a mouse and buying DVDs, you forget that there are people behind the business,” she posits. “I think that people still want to feel a sense of community, whether it’s online or it’s in their own hometown, so they look for connection
