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This
page discusses online 'adult content' industry sectors
and players.
It covers -
introduction
As the preceding pages suggested, there's considerable
uncertainty about the shape and size of the adult content
industry - "they exagerrate everything, especially
the size" - and relationships between different sectors.
That reflects the social marginality of much consumption,
the evanescence of many enterprises and the lack of market
transparency. Few enterprises are publicly listed (of
value for insights into revenue and profitability) and
there are few agreed benchmarks.
It is probable that the industry involves a few large
enterprises (with some, for example, operating hundreds
or thousands of web sites) and a large number of very
much smaller (and more transient) enterprises. It encompasses
bodies that are directly involved in the production and
distribution of adult content. It also encompasses bodies
that provide services such as hosting and payment processing
or that exist to restrict access to industry services/products
(eg vendors/operators of content filtering systems).
The profitability of the industry is uncertain. Claims
of huge turnover and high margins have been questioned
by skeptics who note for example that Private Media Group,
supposedly one of the largest US operators (and unusual
in being listed on NASDAQ), claimed revenue of US$34 million
and profits of US$7 million.
Seth Warshavsky
of Internet Entertainment Group said that in 1998 IEG
made a US$15 million profit on US$50 million revenue;
both figures have since been questioned.
NASDAQ-listed New Frontier, supposedly one of the largest
groups, reported aggregate revenue of US$61 million in
2001. It had acquired Interactive Gallery Inc (IGI), supposedly
one of the largest content distributors for around US$27
million in 1999; IGI at that time forecast profit of around
US$6m on $21 million revenue. In February 2003 New Frontier
announced 3rd Quarter sales of US$8.6 million, with operating
earnings of US$1 million.
In 1999 German sex shop chain Beate Uhse forecast
internet and tv revenue of €50 million; actual sales in
2001 were €5 million. A year later Cyberotic Media, characterised
as Uhse's leading competitor in online content, went bust
after reporting €2.5 million sales from 150 sites.
arrivals, departures and concentration
A recurrent theme in popular writing about online porn
is that it is a quick way to make lots of money with little
expertise and even lower investment. Supposedly all you
need is a good domain
name, a server and what Peter Lorre described as "feelthy
pictures", with the latter bought/licenced from a
competitor or simply stolen.
Asia Carrera opined
that the net
is
giving the smaller players in porn - namely, the talent,
like myself, as opposed to company owners and distributors
- a chance to market themselves and to profit off the
marketability of their own names. One of the things
that always annoys me about making movies is that the
talent only gets paid once for a shoot, while some guy
behind a desk profits again and again, selling the movie
rights to hard-core distributors, cable channels, and
selling CD rights, DVD rights, compilation tapes, Internet
content, etc. It's hard for talent to rise to the level
of the guy behind the desk because launching a production
company is so prohibitively expensive. But starting
up a website costs virtually nothing for anyone who
owns a computer, and I can tell you firsthand that there's
money to be made as long as you're willing to invest
the time.
In
practice the industry appears more complicated, with considerable
demand offset by competition from established players
and new entrants (driving margins down) and difficulty
in cheaply sourcing some services. A 1998 Salon
item
noted that although "anyone can put together a rudimentary
adult site for under $1,000 by purchasing a CD-ROM of
pornographic photos and slapping up a Web page" (with
bottom-of-the-market cimage compilations priced at 5 cents
per snap), turnkey construction is more expensive:
A
rudimentary site with pictures and ad banners goes for
as low as $3,499; $4,999 will get you a video feed;
$34,999 will get you an e-commerce subscription service
An
indication of market saturation is provided by a name
search at DomainSurfer:
53,194 domains in the com/net/org gTLDs
with the word 'porn', 167,171 for 'sex', 3,288 for 'smut'
and quite a few for terms you wouldn't use in talking
to your mum, kids or dog.
Profitability appears to involve scale (securing high
traffic figures) or niche markets that often attract regulatory
attention. Contact with some practitioners and analysis
of the literature, such as it is, suggests that globally
there are around 150 to 400 major operators (often utilising
a large number of sites, many of which primarily point
to each other), with revenue derived from subscriptions,
advertising and provision of content - such as outright
sale or licensing of images on CD - to smaller operators.
It is unclear whether the major operators are making significant
investments across regional borders. Many are reported
to pay the minors for directing traffic to them.
A 2001 paper on Censorship rules: The Topology &
Data Topography of Australian Adult Websites (PDF)
by David Harte & Mark Brogan suggested that as of
late 1999 Australia's online adult content industry was
highly concentrated, identifying 23 operators and around
250 sites. 98% of Australian sites were portals to offshore
hosts (principally located in the US). 67% used subdomain
or subdirectory domain names. 219 of the sites were hosted
in the US; almost all content for sale was hosted outside
Australia.
Jason Hendeles forecast
in 2001, on the basis of private information, that by
2003
the
number of adult webmasters - firms that operate at least
one adult-content site - will likely rise from the current
figure of between 30,000 and 45,000 to more than 110,000
... We believe the higher present-day figure to be the
more accurate. These webmasters range from very large
concerns (one, iGallery one of the top ten online adult
content providers, has registered approximately 1,500
second-level domains) to small, home-based operations
(registering on average between 9-18 domains each).
At the moment, about 25 webmasters dominate the field,
with the lion's share controlled by the top ten. By
2003, according to data from Forrester and NSI Registry,
our estimates suggest these webmasters, and others who
will emerge in the meantime, will likely have registered
an astonishing 2.1 million domain names worldwide, up
from approximately 640,000 in 2000.
It
would appear that churn at the bottom end of the industry
keeps pace wich churn among customers, many small sites
being dependent on relations with major operators or simply
going out of business - to be replaced by new hopefuls
- because they are uneconomical.
location
As we've suggested in discussing questions of space
and the 'death of distance', location matters in cyberspace
- with businesses and support services gravitating to
friendly jurisdictions, sites with advanced infrastructure
and places with managerial or other talent.
As yet no-one appears to have produced a comprehensive
geography of the online adult content industry. It is
clear that much content comes from Eastern Europe and
South East Asia, that management resides in traditional
entertainment entrepots such as Los Angeles (or Sydney),
and that depending on particular jurisdictional concerns
the servers are located in the US (reflecting free speech
provisions and technical expertise) or second/third world
nations.
Claims of large-scale involvement by the Russian mafia
or other organised crime haven't been substantiated. The
plethora of sites featuring images of Eastern European
boys, girls (and sundry livestock) may instead reflect
a weak economy, low cost expert labour after the disintegration
of the Soviet Bloc, outsourcing of content production
to a new cottage industry.
revenue models
Industry revenue embraces three spheres of activity
-
- retailing
of tangible products such as DVDs, videotapes, clothing
and things that buzz (ie the online version of mailorder
known as etailing)
- sale
to end-users of access to information such as erotic
stories, still images, webcams and interactive entertainment
(whether through subscriptions or on a pay per play
basis)
- advertising,
primarily by major industry participants rather than
entities such as Telstra, Ford or Coles Myer
Mailorder-style
retailing is primarily of interest through its
exposure of jurisdictional quirks and quibbles, such as
that which has made Canberra the X-rated video capital
of Australia (distributing tapes and disks to consumers
across the nation and overseas), and the migration online
of retailers such as Germany's Beate Uhse.
Most industry revenue appears to be attributable to end-users
who typically use a credit card to subscribe to a site,
with subscription on an annual or month by month basis
and priced at between US$10 to US$100 per month. Pricing
does not necessarily reflect the 'quality' or uniqueness
of content on the site and there appears to be considerable
churn between sites, with suggestions that 50% of subscribers
fail to renew (or cancel) the subscription to a particular
site each month and 90% have left after six months. The
US National Academies study noted claims that "the
average subscriber" uses the subscription 1.5 times
per month, with a single session typically involving 75
to 100 pages.
Advertising
is the second major revenue model for site operators.
Some advertisers simply pay a flat fee for display of
their content (eg a banner that's a link to a major site),
pay on a click by click basis or share subscriptions from
'conversions' through the site. Pricing is apparently
in line with mainstream cost per million (CPM) and cost
per acquisition (CPA) fees such as US$5 to US$45 per 100,000
clicks on an ad.
The model is heavily weighted towards high traffic volumes,
with 'winner takes all' characteristics. Site operators
seek to maximise the number of eyeballs and conversions,
which is why surfers encounter a very large number of
sites/links that direct them to a major site whose content
is only accessible on a payment.
Some of that direction involves unpopular practices such
as "selling exit traffic" (aka mousetrapping
or browserjacking). That is particularly problematical
when a visitor has unintentionally encountered an adult
site - eg its registrant has changed and an innocuous
site has "gone porn" (discussed in Ben Edelman's
paper
on Domains Reregistered for Distribution of Unrelated
Content) - and merely wants to leave without further
exposure to the content.
The more traffic through a site, the higher its advertising
rate, with operators seeking to maximise a new site's
traffic before the end of its halflife. Edelman notes
that 4525 distinct domains redirected traffic to a particular
site. Porn's Parallel Web Universe, a 2000
article in Upside magazine, advised
If
you spend $100,000 on ads and get $100,000 in 30-day
subscriptions, those subscriptions die at the end of
the month and the process must start again. On a typical
adult site, if that $100,000 is for recurring subscriptions,
70 percent will continue the next month, 50 percent
for the third month, and 30 percent will remain for
the fourth month. Provided you can continue to add $100,000
of new subscribers with a $100,000 ad expenditure each
month - given the vastness of the Net, this can continue
for many months - at the end of four months, $400,000
in advertising has generated $770,000 in revenue. But
without recurring billing, the balance sheet is just
break-even.
The
National Academies study notes that payment regimes "can
be (and usually are) adjusted on the basis of the value
of the user to the advertiser", with conversion of
particular demographics being rewarded through a bonus.
The report notes that the emphasis on raw numbers in some
remuneration schemes - the maximum number of hits, irrespective
of conversions - means that most operators have "few
incentives to refrain from differentiating between adults
and children" and that one operator allegedly earned
up to US$1 million pa from selling traffic.
content
What do adult sites contain? Typically they feature still
images and/or prerecorded video. Some consist also include
text (stories, chat) and live video or webcams, often
of the 'voyeur cam' variety.
Image collections comprise photos - generally in
colour - and other graphics such as drawings or cartoons.
Most collections involve one or more actors (animate or
otherwise), with content arranged by category or photosets
(ie sequences).
The major sites usually offer thousands of colour images,
often delivered from fast servers. Photosets are sometimes
exclusive to the site; categorised images are often sourced
from a range of online and offline locations (eg scanned
from magazines or repurposed from adult videos).
Prerecorded video encompasses everything from home
movies to ambitious studio productions (archival or new
features that are also distributed on tape and DVD). It
is delivered as streaming or downloadable formats (short
clips or full-length), with viewing quality affected by
factors such as the delivery format and broadband access.
It is often syndicated rather than exclusive to a particular
site. Two perspectives are provided by Robert Morse's
2000 thesis Streaming Media: The Technology & Business
of Short Films & the Internet (PDF)
and Michael Genovese's 2000 thesis Video on the Internet
- The Ultimate Promise of Global Communications? (PDF).
The past five years have seen a proliferation of voyeur
sites that deliver streaming video of feature ostensibly
live unscripted performances by individuals/groups.
For privacy advocates a
particular concern is the more recent emergence of webcam
sites that provide access to archival or real time still
and video surveillance images of individuals, eg activity
in elevators, toilets and change rooms.
filter services
A corollary of offensive content is institutions and businesses
that exist to restrict access to that content. Although
figures are uncertain, boasts by some vendors suggest
that suppliers and operators of content filtering software
and services may be the most profitable market sector.
Those products/services, discussed in more detail here
as part of our Censorship & Free Speech guide, have
achieved significant penetration among operators of institutional
and corporate networks. They are increasingly being promoted
as part of integrated IT management systems, including
firewalls and selective restrictions on access to particular
sites, categories of sites or classes of content. One
vendor for example claims that artificial intelligence
enables on-the-fly detection of improper images accessed
through email or browsers.
metrics, navigation and design services
The emphasis on monetisation of traffic has meant opportunities
for a range of metrics and navigation services.
Some metrics providers operate on a fee for service basis,
supplying information about click paths (useful in tuning
the site or predicting whether a casual visitor will convert
to a subscriber) and other data. Others provide those
services without direct cost, particularly to smaller
sites, in return for a share of any revenue when traffic
is redirected to another site or an opportunity to place
advertisements on the site (with rights to those ads being
licenced to a third party).
The chief executive of Seattle-based metrics, hosting
and design specialist Flying Crocodile, provider of the
SexTracker metrics service, is described
as commenting
while
conventional brands spend considerable effort and resources
to establish customer loyalty, when it comes to adult
entertainment, user loyalty is about as common as chastity.
"When you come online for adult entertainment,
your mood is different every time" ... With about
five seconds to win a customer, he adds, "it's
awfully difficult to brand a mood."
... simply offering an orgy of choices would probably
confuse and hurt sales. "We have to whittle down
250 fetishes and make it a no-brainer for the user to
get through the site and consume the product,"
says Edmond. Thus, in addition to the ubiquitous free
teaser samples, graphically worded slogans and targeted
banner ads, which when clicked send users to specific
pay sites, SexTracker and its subsidiary, YNOT, organize
and categorize their library of back-end and front-end
of adult entertainment suppliers much like the yellow
pages. "The users feel like they are opening a
magazine," says Edmond of the banners. "By
the fifth click, we know the users price range and how
likely they are to buy."
SexTracker
is claimed as tracking several hundred million impressions
per day - if you do some exploratory surfing you're likely
to encounter its cookies - and covering several hundred
thousand sites.
Navigation services offer specialist directories for consumers
that direct traffic to particular sites. Most cover between
a thousand and 80,000 links.They operate on the basis
of paid placement, ie paid by site operators rather than
consumers, inclusion or ranking in a directory does not
necessarily reflect quality.
the verification sector
Age Verification Services (AVS), also known as Adult
Verification Services, are located at the intersection
of business and regulation.
Several regulatory regimes require site operators to implement
regimes that restrict access by minors. Those schemes
typically involve verification of a visitor's age, determined
through use of a password or other identifier assigned
after the the AVS operator has received a credit card
payment from that visitor. As we've noted in discussing
AVS in the Censorship & Free Speech guide, AVS schemes
are open to abuse: the visitor using the AVS identity
might for example be a child using a parent's AVS identifier.
AVS are operated as businesses, not charities. Fees to
consumers vary - from US$25 per month to US$20 per quarter.
Typically those fees are shared between the AVS operator,
the operators of sites using the AVS (with payment on
a flat or per visit basis) and third parties such as payment
processors. Many AVS operators offer differential access:
a standard access and premium access - whether to 'better'
sites or to quarantined 'superior' content within sites.
The structure of the AVS sector reflects that of the industry
as a whole, with around ten major AVS operators such as
AdultCheck claiming to cover between 60% to 80% of AVS-protected
sites and a large number of smaller operators covering
a smaller proportion of sites. Some adult sites have an
exclusive relationship with a particular AVS operator;
others allow access through several AVS schemes.
payment services
Difficulties with payments for online access (or for other
services and goods) is a particular problem across the
industry.
Major banks and credit card groups are discomforted by
criticisms from some advocacy groups, trouble with short-lived
businesses and denial of liability by holders of their
cards. As with online gambling, some have accordingly
stopped all direct involvement - an Australian industry
spokesperson lamented in 2000 that "you can buy a dildo
with your Amex but you can't watch a dildo video" paid
for using that card - and instead rely on third-party
billing processors. In 2000 Visa and MasterCard announced
industry-specific policies, indicating that if disputed
transactions exceeded 1% the groups can require a bank
to drop the site operator and imposing penalties of up
to US$100,000.
Consumers have expressed concern about privacy and about
fee structures, with suggestions for example that some
form of micropayment, namnopayment or alternative digital
currency - discussed in our Money guide
- would meet their needs. There has been low-key interest
among some operators in digital cash schemes, potentially
useful in channelling revenue without oversight by tax
agencies or other parts of government.
Third-party billing services such as iBill
have proved attractive to operators without merchant accounts
and to some consumers. Typically they manage secure funds
transfer, billing and record keeping on the basis of a
per-transaction fee.
infrastructure
Delivery of video, audio and still images imposes hardware,
technical support and bandwidth costs. Major internet
service providers and internet content hosts (eg businesses
that specialise in the operation of server farms) have
been averse to large-scale hosting; in Australia it appears
that many ISPs charge a premium for hosting and ancillary
services to reflect concerns about liability or merely
perceptions that the client can afford to pay. It has
been claimed that the two largest individual US buyers
of bandwidth are from the adult online industry. However,
most bandwidth is used downstream by visitors, many of
whom have non-commercial access to graphics on free teaser
or demo pages.
From an Australian perspective a significant issue is
the Broadcasting Services Amendment Act, discussed
in the Censorship & Free Speech guide
on this site, which has driven hosting of much commercial
adult content overseas (and may have substantially crimped
amateur publication) but is unlikely to have tangibly
affected consumption.
wetware
What of the people in the industry: the people in front
of the lights and those behind the cameras or the digital
cash registers?
Information about careers, recruitment patterns and remuneration
is particularly anecdotal. The production of online content
(and more generally work practices in the production of
erotic images and texts) has received less academic attention
than that focussed on sex workers. It is thus difficult
to assess with any confidence claims that people behind
the camera in Australia and overseas have a steady income,
that male performers receive better pay than female performers
but have a shorter career, or that most personnel are
self-recruited.
Does the online industry liberate employees? Asia Carrera
claimed that
It
has been a real boon for me in countless ways, but building
and maintaining a successful site that stands out in
a vast sea of cyber-smut requires unimaginably long
hours in front of a monitor, intensive cyber-education,
and a lot more dedication than people would imagine.
I used to try to convince other starlets that the Internet
was a ticket to financial freedom, control over their
own images and personae, maintaining and expanding their
fan bases, etc., but I've given up. Unfortunately, most
porn stars just don't have the time to dedicate to the
task.
A
hosting specialist similarly claimed
that the industry embraces
students
and retirees, attorneys, accountants, bankers, and bums.
Single mothers who want to work from home while raising
their children, and disabled people who are unable to
function in a more traditional work environment. White
collar, blue collar, or no collar ... We all have our
reasons; we all have our dreams. The challenge before
us is to transform our dreams into reality. All it takes
is knowledge, effort, faith, and persistence
and,
perhaps in an ironic echo of rhetoric about homesteading
the digital frontier, that
the
adult marketplace on the Web is an underdeveloped cottage
industry, which gives entrepreneurs the opportunity
to participate in a true free market. ... Most industry
participants are individual webmasters or exhibitionists
who work out of their homes rather than big offices.
Since the market isn't dominated by a shrinking number
of conglomerates with huge market caps, many small businesses
can compete effectively for their own small share of
the marketplace. These small businesses are able to
compete due to the taboo that surrounds pornographic
content. Most major companies won't engage in the production
or export of adult content because their shareholders
won't allow them. This provides individuals and small
businesses the unfettered opportunity to service the
large demand for such content all by their lonesome.
primers and other publications
Guides on how to be a pornmeister exist but largely aren't
available through mainstream outlets such as Borders or
Amazon.com. We've noted titles such as Sex Sells: How
to Build an Adult Website by AMD Inc. or Logging
In: An Ethical Guide to Building and Marketing Your Adult
Web Site by Magdalene Meretrix & Robert Furtkamp.
Much expertise is presumably tacit and experiential, passed
on by word of mouth or on the job, rather than academic
works and certification.
Would-be pornmeisters can also consult more traditional
primers such as Adult Video Business: How You Can Find
Attractive Women to Star in Your Own Adult Films, Make
Money, and Quit Work in 7 Weeks by Ray West, Sex
& Camcorders: The Complete Guide To Producing Low-Cost,
High-Profit Adult Videos & DVDs by Benjamin Cool or
1-2-3 Be a Porn Star! A Step-By-Step Guide to the Adult
Sex Industry by Ana Loria.
My Year in Smut: The Internet Escapades Inside Danni's
Hard Drive (New York: 1stbooks 02) by Taylor Marsh
is an account of the Danni Ashe site.
Industry groups in most countries produce newsletters
and other publications of varying quality, often on a
restricted distribution basis. Other publications such
as AVN
Online and XBiz
are more readily available.
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