Feb. 07, 2007 - Contrary to the popular maxim, what happens in Vegas doesn’t always stay there. Like the two big stories that emerged from the Adult Entertainment Expo in Sin City last month: 1) the adult film industry is large enough to potentially be the deciding factor in the battle for format dominance between Blu-ray and High Definition (HD)-DVD, and 2) the adult film industry may be in its worst sales slump in recent memory. Taken together, the two just don't add up.
The reason may well lie in the lack of confirmable information about the porn industry’s true size. These numbers—specifically that the sales and rental of pornographic videos and DVDs are a $3.6 billion industry—have been repeated so often in industry and mainstream news outlets that they have acquired the patina of fact. Throw in cable and satellite television, the Internet, magazines, strip clubs and novelties, and the oft-bandied estimate balloons to nearly $13 billion.
In January alone, both The New York Times and Fox News took those numbers at face value, citing as their source the Adult Video News trade magazine.
But observers both inside and outside the industry have increasingly been calling that figure into serious question. "It's bogus," says Luke Ford, a lone-wolf industry gossip columnist, former investigative journalist and failed pornographer. "AVN is exaggerating by sevenfold on DVD sales and rentals." Steven Hirsch, cofounder of Vivid Entertainment, one of the world's largest adult film studios, with an estimated annual revenue stream of $100 million, concedes, telling NEWSWEEK that "I think that's a justifiable position to take."
AVN Publisher Paul Fishbein has heard all of this before. He cites the familiar truism that the vast majority of companies that produce pornographic content are privately held—and have little incentive to accurately report their earnings. Luke Ford and Vivid's Hirsch assert that it's probably impossible to put an exact number on the industry. But every year AVN tries. "Everybody lies about their numbers," Fishbein tells NEWSWEEK. "Almost every year I want to abandon our survey [of the industry]. It's a lot of work for an estimate." Among the sources cited in the latest AVN survey are “internal research,” Kagan Research and JupiterResearch. The only problem: spokespersons for both Kagan and Jupiter tell NEWSWEEK that they don't track adult DVD sales. (Kagan does estimate that cable operators took in about $282 million in adult video-on-demand and $199 in pay-per-view sales in 2005—still far less than the combined $1.3 billion estimated by AVN.) Fishbein responds that he has "no reason" to mistrust his head researcher.
XBiz, a rival adult trade journal, and Luke Ford have both recently made independent attempts to assess the worth of the porn industry and have come up with totals amounting to less than half of AVN’s widely circulated estimates. Ford estimates there were no more than 14,000 adult DVD releases in 2006, based on data from International Video Distributors and the Video Software Dealers Association (VSDA). “Then we have to ask what would be the median number of units sold and at what price.” Assuming that compilations of previously released material sell for a median price of $5 and new DVDs sell for $20 and that “most distributors are thrilled with moving 1,000 pieces per unit, you’re looking at something around $136 million” in annual sales without rentals. Based on VSDA’s July 2005 estimate that adult sales and rentals account for just 2 percent of the whole $24.3 billion DVD pie, adult DVD sales and rentals combined for 2005 would have been just $486 million. When feeling generous, Ford will fudge his numbers enough to estimate that the industry earns, at the very most, $1.33 billion in DVD sales and rentals annually—less than the worldwide box office gross of James Cameron's "Titanic." “There’s no way it’s twice that,” Ford says.
These estimates of course don’t account for the elephant in the Web: Internet porn. It’s nearly impossible to get any reliable data on how much people are making online, but anecdotal evidence suggests that it’s much less than the $2.8 billion business AVN makes it out to be. The adult industry is suffering from the same pirating woes that have increasingly been bedeviling the recording industry. “When I was younger, you found your dad’s Playboy; but at least your dad paid for that Playboy,” says Allan MacDonell, who recently recapped his 20 years working for Larry Flynt’s Hustler empire in his memoir, “Prisoner of X.” “Now you’ve got Google and you type in ‘amputee sex’ or whatever you want. You’re conditioned now that you don’t have to pay for that stuff.”
As a result of all the free (and now, thanks to home studio technology, amateur) content circulating online, there is a glut of increasingly graphic supply and stagnant demand, according to numerous porn producers. “Never has so much porn been released,” writes director/producer James (Jimmy D.) DiGiorgio in an e-mail. “It has become harder and harder for a (newer) manufacturer's product to stand out, and that has resulted in harder and more extreme content being produced. Like many others in the adult industry, I've seen my personal income take a hit as a result of all this ... If the adult industry produces so many billions of dollars, where are the billionaires among its ranks?”
Which leads us to the Blu-ray myth. If people aren’t buying adult DVDs in the numbers the “official” estimates suggest—and, in fact, if cable and free online porn is driving the demand for physical product even lower—how does it make sense that porn will be the deciding factor in the battle for supremacy between Blu-ray and HD-DVD formats? It’s been received as conventional wisdom for a generation that VHS beat out Betamax as the dominant videotape technology because the adult industry threw its lot in with the former. That may even be true, but times have changed. Sony, a leading manufacturer of Blu-ray Discs, has all but publicly refused to license the technology to adult film companies, leading to breathless speculation that HD-DVD will emerge as the mainstream standard. But already Vivid Entertainment has announced it has found a way to replicate the technology and is simultaneously re-releasing the golden porn oldie “Debbie Does Dallas” on Blu-Ray and HD-DVD next month.
“I'm not sure porn will play too big a role in determining which standard rules,” e-mails DiGiorgio. “In the past, porn embraced new technologies that were just gaining a foothold. DVDs are not new, and I don't think consumers perceive Blu-Ray and HD-DVD as new technologies. Instead, they see them as an evolution of an existing technology.... With Blu-ray [versus] HD-DVD, porn will go where the masses go.” In other words, porn is not driving the bus—it’s riding shotgun.
Where is porn driving the bus? “The most profitable area in porn is still the Internet,” says Ford. Despite the flood of free online content, Vivid still derives 30 percent of its roughly $100 million annual income from the Web, according to cofounder Hirsch. And momentum is building toward services like video-on-demand—both online and through satellite television. The current starlet of do-it-yourself Internet porn is Joanna Angel, who has built a boutique brand around her tattooed self. She launched her business, Burning Angel, when DVD sales were already beginning to slump four years ago—today she says she turns a small profit and nets a million hits a day. “We are an Internet company,” she says. “Even the DVDs we make are just to promote the site. I do think it’s harder now—the market’s a bit saturated—but it’s still porn and there’s always going to be people who watch it. We have a really unique product that only we make,” she points out, noting a similarity to the much larger Vivid Entertainment group, which operates like the bygone Hollywood studio system—Vivid’s stars are under exclusive contract to Vivid.
“It’s like Tiffany’s,” says Angel. “You can’t get a Tiffany’s diamond anywhere else.” Perhaps. But for so many people, the cheap knockoffs clearly look just as good.
http://www.msnbc.msn.com/id/17033892/site/newsweek/
I have to say, despite its 3 page length, this was a very good read and perhaps one of the only times i have ever seen somewhere trying to debunk the myth that everyone in the adult industry is a million/billionaire!
Its also good to see some mean average figures of sales volumes, although as the article mentions, these couldnt be verified.
Also interesting is the part about people using the search engines to find 'free' porn because we [the online sector of the industry] have conditioned surfers to think they should get whatever they want for free. Something i have been saying has been wrong for many years. In addition to what imentioned a few months ago about it being harder to make money, so individuals are producing harder, more extreme content and offering that for free.
Regards,
Lee
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Originally Posted by Lee
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