The end may be nigh for the subscription-based business model, once considered the lifeblood of the industry. With community sites and user-submitted content taking the lead online, the subscription site soon may go the way of the adult theater. Adaptation is the key to survival in this industry, and if you’re planning on remaining in the adult Internet field, you’re going to have to broaden your scope in order to stay competitive and profitable.
Trouble in paradise
Although popular, subscription sites aren’t for everyone. Sure, you’ve got some happy customers on your subscription site, but the reason some consumers tolerate the subscription model is because there aren’t many other way to get good content.
Why do some consumers hate subscriptions?
Well, for starters, not every consumer likes recurring charges. Adult content often is an impulse purchase, and a one-handed porn surfer may not take the time to write down what he’s bought, nor will he necessarily remember to cancel after the trial period. As a result, a certain amount of subscription revenue comes from customers who no longer are aware they’re being charged. In fact, some may not even remember subscribing. In other words, subscriptions sometimes force consumers to pay for content they didn’t intend to buy, and that can backfire on webmasters.
Another repercussion to subscription memberships is that customers may dread the "second month" catch. In many cases, a trial membership allows downloading many gigabytes of content, while the first fully paid month only adds a small fraction of new material. If, for example, a five-day trial that costs $7.95 gives access to 80 gigs of content that has accumulated over a five-year period, that’s 10 cents per gigabyte. However, during the first fully paid month at $19.95, the webmaster only adds another gig of content. Consumers essentially are paying 200 times more for the 81st gigabyte of content.
There’s another issue, too: Nobody’s fond of pop-ups or spyware. The subscription model largely depends upon the affiliate’s ability to attract consumers to paying accounts. Unfortunately, affiliates (and many subscription sites, too) use pop-ups to generate traffic. Sometimes those pop-ups are accompanied by spyware that’s supposed to help direct traffic. While these techniques are effective in that they do result in paid subscriptions, the cumulative effect makes consumers deeply suspicious of adult websites in general, according to Frank Hu, president of XTube.com.
What’s more, consumers are sick of getting ripped off. Because consumers must subscribe before actually seeing the good stuff, they frequently end up buying inferior content at a premium price. While reputable webmasters go to great lengths to show consumers what they’ll be getting, there still are sites that offer substandard content. Indeed, there are many sites that haven’t been updated in years, but they claim on their tours to be updating constantly and they’re still taking subscriptions.
Finally, sharing credit card data may intimidate some customers. "With identity theft rampant, consumers don’t feel comfortable giving their card numbers to a large number of small, relatively unknown companies," says Greg Moss, chief executive officer of anonymous payment company Trustcash. This reluctance extends into the mainstream, where smaller firms often find it difficult to get customers to use credit cards.
Not all consumers hate the subscription model, but many tolerate it because of limited options. However, the proliferation of broadband, along with the sudden prominence of social-networking and video-sharing sites, is ushering in a new era in online adult erotica: Porn 2.0., in which the subscription business model may not play too big a role.
Cha-cha-cha-changes
The subscription model evolved during the days of dial-up access and bulletin boards. At that time, it was innovative, as was the concept of using affiliates as feeder sites. The business model drove rapid revenue growth—not because it was so wonderful, but because consumers liked it better than the alternative: buying non-returnable videos and DVDs by email or shopping at seedy adult video stores.
The technological environment of the Internet has changed since then. The proliferation of broadband into millions of homes, along with the availability of computers powerful enough to decode compressed streams of data quickly, now make it possible to use the Internet for more than just a repository of information. As a result, we’ve seen a rise in what pundits are calling "Web 2.0," where just about everything users consume—information, entertainment, news, weather, stocks, reference, podcasts, and (yes) porn—is distributed via the Internet, rather than stored on PCs for future use.
Increases in bandwidth and power have created a user experience that’s quite different from what was in place when the subscription model was invented. While there were primitive communities and bulletin boards back then, now there are the social phenomena of blogs, wikis, and complex networking communities like MySpace. The emerging Web 2.0 environment is big news in the mainstream and cause for much speculation, as shown by Google’s purchase of YouTube for a hefty $1.65 billion.
Fortunately for online erotica entrepreneurs, the mainstream realm remains somewhat estranged from porn. MySpace, for example, deletes any account that uploads pornographic imagery—essentially defined as anything too sexual to show on broadcast television. Online erotica is going through a similar evolution, with a sudden proliferation of streaming, pay-per-minute, pay-per-download, and adult-oriented social networking sites.
Spittin’ images
Streaming sites have been around for a while, but now they’re experiencing incredible growth, according to Scott Coffman, president of Adult Entertainment Broadcast Network, a company that very much embraces Porn 2.0. The company’s main site, AEBN.net, supports both pay-per-minute and video-download distributions methods. The difference, of course, is that consumers aren’t locked into a particular subscription but can retrieve just the content they want from a number of different content providers.
"Consumers only get what they want, when they want it," says Coffman, who also operates adult-oriented social networking site xPeeps.com. When amateurs on that site wanted to share their homegrown videos, Coffman added that capability, only to find the usage explode. "It was so popular that we spun it out in mid-2006 into a separate site, PornoTube.com," he says. Coffman insists that YouTube wasn’t an inspiration for PornoTube, but a cursory examination of PornoTube reveals that it has more than a passing resemblance to the popular video site.
Another site that closely imitates YouTube is XTube.com. Unlike PornoTube, XTube allows both professional and amateur adult-content providers to charge money for access to their material. "Contributors set a threshold level from $50 to $1,000 and get paid when their consumer charges reach that level," says Lance Cassidy, XTube’s director of sales and marketing.
This business model raises some interesting questions relative to 18 U.S.C. §2257, which requires two forms of photo ID to be on file for each performer who appears in a scene. The need to comply with 2257 can be debated when the content is free, because it may fall under the 1998 Sundance ruling. Charging for content, however, is another matter entirely, which is why XTube requires all payable content contributors, even amateurs, to provide 2257 documentation. "We also police the free areas of our service to be certain there isn’t any illegal or copyright-infringing content," says Cassidy.
Usage of PornoTube, XTube, and the more traditional streaming and pay-per-minute sites has been growing on a month-by-month basis, according to James Seibert, president of HotMovies, a site similar to AEBN. "Consumers are flocking to these sites because they’re sick of hassling with subscriptions when there’s a clear alternative—paying only for the content that you actually want to view," he says.
Layman’s terms
The benefits of abandoning the subscription model don’t apply only to consumers. Content providers benefit, too, because Porn 2.0 increases the net value of their existing assets. Because the subscription model typically gives subscribers access to all existing content, the charge per unit of content is unnaturally low, which radically reduces potential revenue. For instance, if backlogged content was selling for 10 cents a gigabyte through the subscription model, by contrast, the same content in a Porn 2.0 environment may sell for as much as $10 per scene—or roughly $50 per gigabyte.
In other words, just by changing distribution channels, an adult webmaster can make content 500 times more valuable. Still, that increase in value does come at a price. "With the subscription model, almost all the money comes directly to the webmaster, but with other distribution models, revenue must be shared with the distributor," points out Colin Rowntree, CEO of Wasteland.com. In addition, the subscription model tends to lock the consumer into paying only for one particular site, whereas other distribution methods encourage consumers to jump to other content providers.
There’s another aspect of Porn 2.0 that makes it attractive to content providers. Moving away from the subscription model positions porn to take advantage of what Wired editor Chris Anderson calls "the long tail" in his best-selling book of the same name. Anderson points out that because the Internet makes the cost of distributing media negligible, it’s now possible to satisfy the demand of increasingly smaller communities of consumers. He uses the example of obscure jazz artists whose works fell out of print because there wasn’t enough demand to legitimize manufacturing and distribution; now, however, those works generate online income, even though a very small number of people download them.
This means once you’ve converted to a Porn 2.0 model, even content that may appeal to a very small audience still can find a market. This would include shoots with models who are less attractive but appeal to certain people, or various fetishes that don’t have a broad enough interest base to support a subscription site. Basically, what the industry gains from Porn 2.0 is the ability to make more money from existing and future content. What the industry avoids are wary subscribers who don’t like paying for services they may not use and getting inundated with pop-ups and spyware.
Marketing 2.0
As you can imagine, being a successful content provider in a Web 2.0 world means a major change in marketing strategy.
Traffic remains a priority, of course, but the source of that traffic changes. With the subscription model, the bulk of traffic typically comes from affiliates, whose function, essentially, is to "recommend" your pay site to prospective consumers. With Porn 2.0, consumers turn to other consumers for recommendations as part of the social networking experience. By looking at download counts or "viewer picks" lists, consumers quickly can determine which videos are popular and thus feel secure they are purchasing highly desirable content. This fundamental shift in acquiring traffic requires that you focus your marketing efforts away from affiliates and toward cultivating consumers who are likely to drive other consumers to view your content. The basics are pretty simple.
First, locate potentially influential consumers based upon the popularity of those consumers’ social-networking page. If a consumer has a lot of "friends" and a profile that garners hundreds of views, it’s likely that a recommendation from that consumer will send significant traffic to your content. Cultivate these individuals in exactly the same manner you would cultivate an influential reviewer: by supplying them with attention, respectful emails, and even free content.
Also, make full use of the free-download areas. These play the role of the "tour" in the subscription model, giving consumers a taste of what they’ll get if they actually buy content. However, you should limit the amount of free content that you distribute, because it takes less free content to get a consumer to pay $1 to check out a real scene than it does to get that consumer to pay $20 for a subscription. It’s better to post 1,000 very short, free clips than to post 10 really long ones. What’s important here is to get consumers to download the first paid video. If your content is good, you’ve got a customer who will help drive other customers to your site.
Nevertheless, all the social networking in the world will be entirely useless if your content is crap. That is true for the subject matter and for the production quality. If you’re reviving old content, don’t bother to post ancient, low-resolution video files that have been hanging around in your archives; go back to the original master tapes and create hi-res versions.
Even though Porn 2.0 forces adult content providers to learn new marketing skills, ultimately it can work for the industry. As consumers get used to the idea that they won’t be ripped off, they’re likely to purchase more content. Since consumers will be getting exactly what they pay for, there likely will be few, if any, chargebacks. This, in turn, may eliminate any perceived notion that the industry is a financial pariah. Finally, the social-networking aspect of Porn 2.0 will help legitimize porn by creating consumer communities that will advocate for their right to purchase their favorite adult material.
In the end, the subscription business model may become, like the adult movie theater, an obsolete method of distributing adult content. And it’s quite possible neither consumers nor content providers will mourn its passing.
Jack Morrison is a frequent contributor to AVN Online.
